<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1998
REGISTRATION NO. 333-61519
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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SAMSONITE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 3161 36-3511556
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation or Classification Number)
Organization) Code Number)
11200 EAST 45TH AVENUE
DENVER, COLORADO 80239
(303) 373-2000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrants' Principal Executive Offices)
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D. MICHAEL CLAYTON
SAMSONITE CORPORATION
GENERAL COUNSEL AND VICE PRESIDENT--LEGAL
11200 EAST 45TH AVENUE
DENVER, COLORADO 80239
(303) 373-2000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copy to:
GREGORY A. FERNICOLA, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
<TABLE>
<CAPTION>
PRIMARY STANDARD
INDUSTRIAL I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME OF ADDITIONAL REGISTRANT INCORPORATION NUMBER NUMBER
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<S> <C> <C> <C>
Samsonite Holdings Inc.*...... Delaware 9999 84-1469898
</TABLE>
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* Address and telephone number of principal executive offices are same as
Samsonite Corporation.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration
statement.
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If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended ( the
"Securities Act"), please check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum
Title of each Class of to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Unit Offering Price(1) Registration Fee
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<S> <C> <C> <C> <C>
13 7/8% Senior
Redeemable Exchangeable
Preferred Stock of
Samsonite
Corporation(4)........ 175,000 shares $1,000 $175,000,000 $51,625(2)
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13 7/8% Senior
Redeemable Exchangeable
Preferred Stock of
Samsonite
Corporation(4)........ 175,000(3) (3) (3)
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13 7/8% Junior
Subordinated Debentures
due 2010 of Samsonite
Corporation(4)........ (4) (4)
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13 7/8% Senior
Debentures due 2010 of
Samsonite Holdings
Inc.(4)............... (4) (4)
</TABLE>
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(1)Estimated solely for purposes of calculating the registration fee.
(2)Previously paid.
(3) Represents shares of 13 7/8% Senior Redeemable Exchangeable Preferred
Stock that may, at the option of Samsonite Corporation, be issued as
dividends on the 13 7/8% Senior Redeemable Exchangeable Preferred Stock.
No additional registration fee is payable in respect thereof.
(4) The 13 7/8% Senior Redeemable Exchangeable Preferred Stock is exchangeable
at the option of Samsonite Corporation for 13 7/8% Junior Subordinated
Debentures due 2010 of Samsonite Corporation or at the option of Samsonite
Corporation for 13 7/8% Senior Debentures due 2010 of Samsonite Holdings
Inc. No additional registration fee is payable in respect of the 13 7/8%
Junior Subordinated Debentures of Samsonite Corporation and the 13 7/8%
Senior Debentures of Samsonite Holdings Inc.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
In addition to the preferred stock and debt securities being registered by
Samsonite Corporation, a Delaware corporation (the "Company"), hereby, this
registration statement also relates to the possible issuance, at the election
of the Company, of debt securities of Samsonite Holdings Inc. ("Holdings") in
redemption of and in exchange for the preferred stock being registered hereby.
If such election were made, it is currently contemplated that Holdings would
become a holding company of the Company through a merger transaction pursuant
to Section 251(g) of the Delaware General Corporation Law and, accordingly,
the Certificate of Incorporation and By-Laws of Holdings immediately following
the effective time of the merger would contain provisions identical to the
Certificate of Incorporation and By-Laws of the Company immediately prior to
the effective time of the merger and the directors of the Company immediately
prior to the effective time of the merger would become or remain the directors
of Holdings upon the effective time of the merger. In addition, if such
election were made, pursuant to the Certificate of Designation filed with the
Secretary of State of the State of Delaware on June 23, 1998, the sole
material asset of Holdings would be the capital stock of the Company, and
immediately prior to and at the date of election, Holdings would have no
material liabilities other than in respect of the debt securities being
registered hereby. Holdings is currently a wholly owned subsidiary of the
Company with no business operations and no material assets or liabilities.
<PAGE>
PROSPECTUS
OFFER FOR ALL OUTSTANDING
13 7/8% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK IN EXCHANGE FOR
13 7/8% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK, WHICH HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
OF
SAMSONITE CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER
28, 1998, UNLESS EXTENDED.
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Samsonite Corporation (the "Company") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange one share of its 13 7/8% Senior Redeemable Exchangeable Preferred
Stock, liquidation preference $1,000 per share (the "New Senior Preferred
Stock"), which has been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for one share of its issued and outstanding 13
7/8% Senior Redeemable Exchangeable Preferred Stock (the "Old Senior Preferred
Stock" and, together with the New Senior Preferred Stock, the "Senior
Preferred Stock"). The terms of the New Senior Preferred Stock are identical
in all material respects to the Old Senior Preferred Stock, except for certain
transfer restrictions and registration rights relating to the Old Senior
Preferred Stock and except for certain provisions for Additional Dividends (as
defined herein) on the Old Senior Preferred Stock under certain circumstances
relating to the timing of the Exchange Offer, which rights will terminate upon
consummation of the Exchange Offer. As of the date hereof, there are 175,000
shares of Old Senior Preferred Stock outstanding.
On June 24, 1998, the Company issued 175,000 units consisting of
$175,000,000 aggregate liquidation preference of its Old Senior Preferred
Stock and warrants to acquire an aggregate of 1,959,000 shares of the common
stock, $0.01 par value per share, of the Company (the "Common Stock"). The Old
Senior Preferred Stock was issued pursuant to an offering exempt from, or not
subject to, registration under the Securities Act and applicable state
securities laws.
The Old Senior Preferred Stock was issued as part of the financing necessary
to effect the Recapitalization (as defined herein) which included the
repurchase in a tender offer (the "Tender Offer") of 10.5 million shares of
Common Stock at a price of $40.00 per share ($420 million in the aggregate).
Concurrently with the consummation of the offering of the Old Senior Preferred
Stock, the Company and its principal European subsidiary entered into the New
Credit Facility (as defined herein) to obtain funds that, together with the
net proceeds from the offering of the Old Senior Preferred Stock and a
concurrent offering (the "Concurrent Offering") of $350,000,000 aggregate
principal amount of the Company's 10 3/4% Senior Subordinated Notes due 2008
(the "Notes"), were used to finance the Recapitalization.
Holders of the Senior Preferred Stock are entitled to receive, when, as and
if declared by the Board of Directors of the Company out of funds legally
available therefor, dividends on the Senior Preferred Stock at a rate per
annum of 13 7/8% of the liquidation preference per share of Senior Preferred
Stock, payable quarterly in arrears on each March 15, June 15, September 15
and December 15 (each, a "Dividend Payment Date"), commencing September 15,
1998. Dividends may be paid, at the Company's option, on any Dividend Payment
Date occurring on or prior to June 15, 2003, either in cash or by the issuance
of additional shares of Senior Preferred Stock with a liquidation preference
equal to the amount of such dividends; thereafter, dividends will be payable
in cash. If any dividend payable on any Dividend Payment Date subsequent to
June 15, 2003 is not paid in full in cash, or if, at any time, any of the
events described in clauses (ii) through (vi) of the definition of the Voting
Rights Triggering Event (as defined herein) shall have occurred, the per annum
dividend rate will be increased by 2% from such Dividend Payment Date or
during the continuance of any such Voting Rights Triggering Event, as the case
may be. See "Description of Senior Preferred Stock and Exchange Debentures--
The Senior Preferred Stock--Dividends" and "--Voting Rights." The New Credit
Facility contains certain limitations on the ability of the Company to pay
cash dividends on the Senior Preferred Stock. In addition, the Notes Indenture
(as defined herein) contains certain limitations on the Company's ability to
pay cash dividends on the Senior Preferred Stock. See "Risk Factors--
Restrictions on Cash Dividends on the Senior Preferred Stock; Restrictive
Covenants," "Concurrent Offering" and "New Credit Facility."
(continued on the following page)
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SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS WHO TENDER THEIR OLD SENIOR
PREFERRED STOCK IN THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 26, 1998.
<PAGE>
(continued from the cover page)
The Company is required, subject to certain conditions, to redeem all of the
Senior Preferred Stock outstanding on June 15, 2010, at a redemption price
equal to 100% of the liquidation preference thereof, plus, without
duplication, all accumulated and unpaid dividends to the redemption date. The
Senior Preferred Stock is redeemable at the option of the Company in whole or
in part, at any time and from time to time on or after June 15, 2001, at the
redemption prices set forth herein, plus, without duplication, all accumulated
and unpaid dividends to the redemption date. In addition, the Company, at its
option, may redeem up to an aggregate of 35% of the shares of Senior Preferred
Stock (whether initially issued or issued as a dividend payment) at any time
and from time to time prior to June 15, 2001, at a redemption price equal to
113.875% of the liquidation preference thereof plus, without duplication, all
accumulated and unpaid dividends to the redemption date, with the Net Proceeds
(as defined herein) of one or more Equity Offerings (as defined herein);
provided that at least $113.75 million aggregate liquidation preference of the
Senior Preferred Stock remains outstanding immediately after the occurrence of
any such redemption. Any such redemption will be required to occur within 90
days after the receipt by the Company of the proceeds of such Equity Offering.
See "Description of Senior Preferred Stock and Exchange Debentures--The Senior
Preferred Stock--Optional Redemption." Upon the occurrence of a Change of
Control (as defined herein), each holder of the Senior Preferred Stock will be
entitled to require the Company to purchase such holder's Senior Preferred
Stock at a purchase price equal to 101% of the liquidation preference thereof,
plus, without duplication, all accumulated and unpaid dividends to the
purchase date. See "Description of Senior Preferred Stock and Exchange
Debentures--The Senior Preferred Stock--Change of Control."
The Senior Preferred Stock, with respect to dividend rights and rights upon
liquidation, dissolution or winding-up of the Company, ranks as the most
senior class or series of preferred stock issued by the Company. The Company
may not issue shares of any other class or series of common stock or preferred
stock ranking, with respect to dividend rights and rights upon liquidation,
dissolution or winding-up of the Company, senior to or on a parity with the
Senior Preferred Stock without the approval of the holders of at least two-
thirds of the Senior Preferred Stock outstanding, voting or consenting, as the
case may be, as a single class. See "Description of Senior Preferred Stock and
Exchange Debentures--The Senior Preferred Stock--Ranking."
The Company, at its option, on any Dividend Payment Date may from time to
time exchange, in whole or in part, on a pro rata basis, the then outstanding
shares of Senior Preferred Stock for 13 7/8% Junior Subordinated Debentures
due 2010 of the Company (the "Company Exchange Debentures"); provided that
immediately after giving effect to any partial exchange, there shall be
outstanding shares of Senior Preferred Stock with an aggregate liquidation
preference of not less than $75 million and not less than $75 million
aggregate principal amount of Company Exchange Debentures or (ii) exchange all
of the outstanding shares of Senior Preferred Stock for 13 7/8% Senior
Debentures due 2010 of Samsonite Holdings Inc. (the "Holdings Exchange
Debentures" and, together with the Company Exchange Debentures, the "Exchange
Debentures"). The Notes Indenture (as defined herein) and the New Credit
Facility restrict the Company's ability to exchange the Senior Preferred Stock
for Company Exchange Debentures. The Exchange Debentures when, as and if
issued, will bear interest at the same rate as the dividend rate on the Senior
Preferred Stock and will contain covenants substantially identical to the
Senior Preferred Stock. The Company Exchange Debentures when, as and if
issued, will rank subordinate in right of payment to all Senior Debt (as
defined herein) of the Company to the extent set forth in the Exchange
Indenture (as defined herein). The Holdings Exchange Debentures will
constitute general unsecured obligations of Samsonite Holdings Inc.
("Holdings"). The Exchange Debentures, when, as and if issued, will also be
effectively subordinated to the obligations of the issuer's subsidiaries and
will not be guaranteed by any of the issuer's subsidiaries. See "Description
of Senior Preferred Stock and Exchange Debentures--The Senior Preferred
Stock--Exchange."
Holders of the Senior Preferred Stock have no voting rights with respect to
general corporate matters, except as provided by Delaware law or as set forth
in the Certificate of Designation (as defined herein). The Certificate of
Designation provides that if the Company: (i) after June 15, 2003, fails to
pay cash dividends on the Senior Preferred Stock for two or more quarterly
dividend periods (whether or not consecutive); (ii) fails to redeem the Senior
Preferred Stock on or before the redemption date thereof; (iii) fails to make
an offer to purchase upon a Change of Control or fails to purchase shares
validly tendered in such offer; (iv) fails to comply with certain covenants
described herein or make certain principal or interest payments in respect of
certain indebtedness, then the holders of a majority of the then outstanding
shares of Senior Preferred Stock, voting separately and as
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<PAGE>
a class, will have the right to elect the lesser of two directors and that
number of directors constituting 25% of the members of the Board of Directors
of the Company, in each case until such failure is remedied or cured. See
"Description of Senior Preferred Stock and Exchange Debentures--The Senior
Preferred Stock--Voting Rights."
For each of the shares of Old Senior Preferred Stock accepted for exchange,
the holder of such shares of Old Senior Preferred Stock will receive shares of
New Senior Preferred Stock having a liquidation preference equal to that of
the surrendered shares of Old Senior Preferred Stock. The shares of New Senior
Preferred Stock will accrue dividends from the last date on which dividends
were paid on the Old Senior Preferred Stock or, if no dividends have been paid
on the Old Senior Preferred Stock, from June 24, 1998. Old Senior Preferred
Stock accepted for exchange will cease to accrue dividends from and after the
date of consummation of the Exchange Offer. Holders of Old Senior Preferred
Stock whose Old Senior Preferred Stock is accepted for exchange will not
receive any payment in respect of accrued dividends on such Old Senior
Preferred Stock.
The New Senior Preferred Stock is being offered hereunder in order to
satisfy certain obligations of the Company contained in a Registration Rights
Agreement (the "Registration Rights Agreement") entered into in connection
with the offering of Old Senior Preferred Stock. Based on interpretations by
the staff of the Securities and Exchange Commission (the "Commission"), as set
forth in no-action letters issued to third parties, the Company believes that
New Senior Preferred Stock issued pursuant to the Exchange Offer in exchange
for Old Senior Preferred Stock may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act),
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Senior Preferred Stock is acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Senior Preferred Stock. However, the Commission has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each holder
of New Senior Preferred Stock, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage in, a distribution of
such New Senior Preferred Stock and has no arrangement or understanding to
participate in a distribution of New Senior Preferred Stock. Each broker-
dealer that receives New Senior Preferred Stock for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Senior Preferred Stock. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Senior Preferred Stock received in exchange for Old Senior
Preferred Stock where such Old Senior Preferred Stock was acquired by such
broker-dealer as a result of market-making activities or other trading
activities. For a period of 180 days after the Expiration Date (as defined
herein), the Company will make this Prospectus, as amended or supplemented
from time to time, available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
shares of Old Senior Preferred Stock pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Senior
Preferred Stock, the Company will promptly return the Old Senior Preferred
Stock to the holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Senior Preferred Stock, and
there can be no assurance regarding the future development of a market for the
New Senior Preferred Stock, or the ability of holders of the New Senior
Preferred Stock to sell their shares of New Senior Preferred Stock or the
price at which such holders may be able to sell their shares of New Senior
Preferred Stock. CIBC Oppenheimer Corp. (the "Initial Purchaser") has advised
the Company that it currently intends to make a market in the New Senior
Preferred Stock. The Initial Purchaser is not obligated to do so, however, and
any market-making with respect to the New Senior Preferred Stock may be
discontinued at any time without notice. The Company does not intend to apply
for listing or quotation of the New Senior Preferred Stock on any securities
exchange or stock market.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "Forward-Looking Statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934 (the "Exchange Act") concerning, among other things,
increases in revenue and cash flow and reductions in operating expenses and
discussions of the Company's business strategy and expectations concerning the
Company's future operations, liquidity and capital resources. When used in
this Prospectus, the words "anticipate," "believe," "estimate," "intend,"
"plan" and "expect" and similar expressions are generally intended to identify
forward-looking statements. Prospective investors are cautioned that any
forward-looking statements, including statements regarding intent, belief or
current expectations of the Company or its management, are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ materially from those in the forward-looking statements.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports and other information with the
Commission. Reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048 and at Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois
60661. Copies of such materials also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission. The address of such site is http://www.sec.gov. The Company's
common stock is listed on the Nasdaq Stock Market, and reports, proxy
statements and other information concerning the Company may be inspected and
copied at the offices of the Nasdaq Stock Market, Reports Section, at 1735 K
Street, Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement on Form S-4
filed by the Company and Holdings with the Commission under the Securities
Act. This Prospectus omits certain of the information contained in the
registration statement, and reference is hereby made to the registration
statement and to the exhibits filed or incorporated as a part thereof for
further information with respect to the Company, Holdings, the New Senior
Preferred Stock, the Company Exchange Debentures and the Holdings Exchange
Debentures offered hereby. Any statements contained herein concerning the
provisions of any documents are not necessarily complete, and, in each
instance, reference is made to such copy filed as an exhibit to the
registration statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The registration
statement and the exhibits thereto may be inspected without charge at the
office of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies thereof may be obtained from the Commission
at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference documents which are not presented
herein or delivered herewith. Copies of any such documents relating to the
Company, other than exhibits to such documents (unless such exhibits
specifically are incorporated by reference in such documents), are available
without charge, upon written or oral request, from Samsonite Corporation,
11200 East 45th Avenue, Denver, Colorado 80239, Attention: D. Michael Clayton,
Esq., General Counsel and Vice President-Legal. In order to ensure timely
delivery of the documents, any request should be made no less than five
business days prior to the expiration of the Exchange Offer.
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated in this Prospectus by reference and made a
part hereof:
1. The Company's Annual Report on Form 10-K, as amended by Form 10-K/A,
for the fiscal year ended January 31, 1998;
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<PAGE>
2. The Company's reports on Form 8-K dated March 24, 1998, May 13, 1998,
May 20, 1998, June 17, 1998, June 19, 1998, July 7, 1998 and August 12,
1998;
3. The Company's Quarterly Report on Form 10-Q for the three months ended
April 30, 1998;
4. The Company's definitive proxy statement for the 1998 Annual Meeting
of its stockholders; and
5. All other documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the Exchange Offer.
Any statement contained herein or in a document, all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is, or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
-iv-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus or
incorporated herein by reference. Unless the context otherwise requires all
references herein to the "Company" and "Samsonite" are to Samsonite
Corporation, a Delaware corporation, and its consolidated subsidiaries. The
Company's fiscal year ends on January 31 and references to a fiscal year denote
the calendar year in which the fiscal year ended (for example, "fiscal 1998"
refers to the 12 months ended January 31, 1998).
THE COMPANY
Samsonite is one of the world's largest manufacturers and distributors of
luggage. The Company markets its products primarily under the Samsonite(R),
American Tourister(R) and Lark(R) brand names. The Samsonite brand enjoys
worldwide recognition and is the leading brand of luggage products in the
United States and Europe. American Tourister is the second most recognized
brand of luggage in the United States. Following the Company's acquisition of
American Tourister, Inc. ("American Tourister") in 1993, the Company introduced
the American Tourister brand in Europe. The Lark brand is well-recognized in
the United States and competes in the premium segment of the luggage market.
Samsonite and American Tourister luggage products have been manufactured and
sold continuously since the 1930s.
The Company is a major factor in the worldwide luggage market, with net sales
of $736.9 million for fiscal 1998. Competition in the luggage market is highly
fragmented with the vast majority of individual competitors having less than
10% of the Company's annual luggage sales. Samsonite offers the broadest range
of products in the luggage industry, including hardside suitcases, softside
suitcases, garment bags, casual bags, hardside and softside business cases and
other travel bags. Many of today's most successful luggage products and
features--such as suitcases on wheels, suitcases with a built-in luggage cart,
full-featured structured garment bags, ultra-light softside suitcases and
innovative new wheel systems--were introduced or popularized by Samsonite.
The Company benefits from its large size through scale driven purchasing and
manufacturing economies. The Company's products are sourced through a global
network consisting of 14 Company-operated manufacturing facilities and various
third-party suppliers throughout the world. By operating its own facilities to
produce hardside luggage and more complex softside products, the Company is
better able to control manufacturing quality and achieve shorter product
introduction lead times and lower delivery costs. In addition, the Company
takes advantage of its global sourcing capabilities by buying less complex
products from various countries when their product costs or currency exchange
rates are favorable.
The Company's marketing and distribution strategy focuses on the broad middle
segment of the luggage market as opposed to the more commodity driven low end
of the market or the premium priced high end. In the United States, the
Samsonite brand has historically been positioned as high quality, innovative
luggage, targeted at frequent business travelers. The American Tourister brand
has been positioned as quality luggage at an affordable price, and the Lark
brand has been positioned as premium luggage targeted at first and business
class travelers. In Europe, the Samsonite brand enjoys more of a premium image
than in the United States, and is targeted at first class and frequent business
travelers. The Company's marketing theme centers around the Samsonite
"Worldproof(TM)" brand image which represents strength, durability, quality and
style.
The Company's products are sold throughout the world in more than 100
countries through approximately 23,000 retail outlets, including department and
specialty stores, catalog showrooms, mass merchant retailers, warehouse clubs
and Company-owned retail stores located primarily in factory outlet malls in
the United States. In addition, Samsonite licenses its trademarks for use on
non-luggage products, such as travel accessories, personal leather goods,
handbags and furniture. These products are made and sold primarily by
independent licensees which pay royalties to Samsonite.
1
<PAGE>
COMPETITIVE STRENGTHS AND NEW GROWTH INITIATIVES
Management believes that the Company's leading position in the global luggage
industry is due to its widely recognized brand names, broad range of innovative
luggage products and global manufacturing and distribution network.
Brand Names. The Company markets its products primarily under the Samsonite,
American Tourister and Lark brand names. The Company commits substantial
resources to aggressive brand advertising programs that promote the features,
durability and quality of the Company's products and target particular segments
of the luggage market based on consumer demographics. For each of the last five
fiscal years, the Company has invested, either directly or through co-op
advertising programs, approximately $50 million in television and print
advertising and related promotional activities. A 1994 market survey, the most
recent Company sponsored survey conducted by an independent surveying
organization, indicated that approximately 93% and 79% of travelers surveyed in
the United States recognized the Samsonite and American Tourister brand names,
respectively, compared to less than 15% for the next most recognized luggage
brand. Similar surveys show that recognition of the Samsonite brand name in
most major Western European countries ranges from 60% to 80%.
Innovative Products. The Company is the industry leader in offering
innovative products that meet travelers' needs. The Company has spent over $40
million on product design and development during the last five fiscal years.
Many of today's most successful luggage products and features--such as
suitcases on wheels, suitcases with a built-in luggage cart, full-featured,
structured garment bags, ultra-lightweight, softside suitcases, and innovative
new wheel systems--were introduced or popularized by Samsonite. Sales of
products that were introduced or substantially redesigned by the Company in the
last three years accounted for approximately 60% of the Company's fiscal 1998
sales. The Company currently holds approximately 730 patents worldwide and has
over 300 patent applications pending worldwide.
Global Manufacturing and Distribution Network. The Company's global sourcing
network consists of 14 Company-operated manufacturing facilities and various
third-party suppliers located principally in the Far East, Eastern Europe and
the Dominican Republic. By operating its own facilities to produce hardside
luggage and more complex softside products, the Company is better able to
control manufacturing quality and reduce lead times and delivery costs. The
Company's global sourcing network also enables it to opportunistically source
less complex products from countries with low product costs and favorable
currency exchange rates. The Company has one of the largest and most
technologically advanced luggage distribution networks in both the United
States and Europe. Its pan-European distribution network is capable of billing
customers in their local currency and delivering products within five days
after an order is placed. The Company also has significant distribution
relationships in Asia, Australia, Latin America and the Middle East.
In May 1996, the Company appointed Richard R. Nicolosi as Chief Executive
Officer and shortly thereafter announced a strategic plan intended to further
strengthen the Company's leadership position in the worldwide luggage market
and to improve its financial performance. The plan included a series of
initiatives designed to broaden the product and pricing architecture in the
U.S. and position products and brands on a consistent basis in the U.S. and
Europe; to streamline the organizational structure by adopting a structure
based on channel management instead of brand management which relied upon
separate organizations to manage each of the Company's three principal brands;
and to improve the Company's cost structure by reducing SKUs, standardizing
components and instituting global sourcing.
As a result of the plan initiatives, net sales, EBITDA (as defined herein)
and Adjusted EBITDA (as defined herein) increased from $675.2 million, $78.7
million, and $78.3 million, respectively, in fiscal 1996 to $736.9 million,
$126.2 million and $112.4 million, respectively, in fiscal 1998. During this
period, the Company's European operations posted increases in local currency
sales and operating income of 23.9% and 58.6%, respectively. Samsonite's U.S.
retail business also recorded significant sales and operating income growth
2
<PAGE>
during this period; however, the Company's U.S. wholesale business experienced
difficulty implementing certain of the plan initiatives, and began to perform
below expectations commencing in the third quarter of fiscal 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In February 1998, Mr. Luc Van Nevel, a 23-year Samsonite veteran, who
previously had responsibility for Samsonite's successful European and
International operations, was promoted to President of Samsonite. In May 1998,
Mr. Van Nevel was appointed to succeed Mr. Nicolosi as Chief Executive Officer
and was elected to the Company's Board of Directors. Mr. Nicolosi will continue
to serve as Chairman of the Board of Directors.
Since the beginning of fiscal 1999, Mr. Van Nevel has continued to refine the
successful strategies initiated in 1996 and has taken aggressive action to
address the issues facing the Company's U.S. wholesale business, as described
below.
. Emphasize Growth Oriented Product Offerings and Channels of
Distribution. The Company plans to introduce more entries in casual bags
and business cases in the U.S. in order to expand the Company's sales in
these two growth categories. This strategy has already proven to be
successful for Samsonite in Europe and Japan. The Company also plans to
increase its presence in channels of distribution where it believes it
is under-represented by using targeted marketing and sales efforts
tailored to each channel. In addition, the Company intends to exploit
its manufacturing and sourcing leverage by aggressively pursuing
opportunities to sell American Tourister and retailer-labeled products
to mass merchant retailers and in other high volume-potential channels
throughout the world.
. Strengthen Marketing and Product Innovation. Samsonite plans to continue
to expand its presence in the worldwide luggage market from both a
consumer and trade standpoint. The Company's marketing program is
expected to include more consumer-preferred products, styles and
features, more effective advertising at higher investment levels,
strengthened point-of-sale support and better customer service. Recent
successful product introductions include the updated ultralite product
line in the U.S., the second generation Oyster(TM) product line in
Europe, and products incorporating the innovative Big Wheel(R) system
worldwide. In addition, other product launches are scheduled for fiscal
1999. For example, the Company's best selling U.S. line, Silhouette(TM)
with sales of approximately $64 million in each of the last two fiscal
years, will be reintroduced as Silhouette 6 in the second half of fiscal
1999. The Company believes Silhouette 6 will have improved aesthetics
and performance and an improved price to value relationship at
competitive price points. Silhouette 6 will include separate designs
targeted at business travelers, women, and "road warriors"--the ultimate
business travelers.
. Continue Worldwide Expansion. The Company plans to continue expansion
worldwide in countries where growing economies and reduced political and
trade barriers provide opportunities for long-term growth. Samsonite
currently has operations in a number of emerging foreign markets,
including China, India, South America and the Pacific Rim. Since the
beginning of fiscal 1997, the Company has: (i) acquired luggage
distribution companies in Hong Kong, Singapore and South Korea;
(ii) established manufacturing and distribution joint ventures in India
and China; and (iii) established a new venture partnership with a former
Samsonite distributor to distribute Samsonite products in Brazil and
other major South American markets. During fiscal 1999, the Company
intends to take over distribution operations in Taiwan from the
Company's current distributor whose contract has expired and also to
form a joint venture with the Company's current Argentinian distributor.
The Company is currently considering the possible disposal or
liquidation of its investment in its manufacturing facilities in China,
although the Company intends to maintain its sales and distribution
presence in China. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Recent Events and
Recapitalization."
. Resolve U.S. Wholesale Issues. In fiscal 1998, the Company's U.S.
wholesale operation (which accounted for 37.2% of the Company's fiscal
1998 consolidated sales) produced significant increases
3
<PAGE>
in operating income of 89.4% as compared to fiscal 1997. However,
commencing with the end of the third quarter of fiscal 1998, this
operation began to perform below expectations causing U.S. wholesale
sales for fiscal 1998 to be 7.4% below fiscal 1997. This decline was due
to various factors including the adverse impact of price increases and
other pricing strategies adopted by the Company, market disruptions and
retailer discounting taken in connection with various forms of cross
distribution-channel selling. In addition, forecasting and production
scheduling errors, along with the reduced level of sales, resulted in
product availability constraints, significant negative production
variances and excess inventory both at the Company and in certain of the
Company's distribution channels.
Since the beginning of fiscal 1999, the Company has taken aggressive
action to resolve these issues. These actions have included: (i)
replacing the management team responsible for U.S. wholesale operations
with experienced luggage industry veterans; (ii) improving customer
relationships by eliminating cross distribution-channel selling and by
modifying the Company's strategy for its retail operations; (iii)
modifying the Company's pricing and co-op advertising strategy by
reducing prices from 4% to 6% on certain products with corresponding
reductions in co-op advertising allowances and sale promotion costs;
(iv) reducing production levels, particularly in the Denver hardside
plant, to bring volume into line with expected sales, and working in
conjunction with the Company's trade customers and Company-owned stores
to reduce excess working capital by approximately $45 million over the
next 18 months; and (v) rightsizing the cost structure of the Company's
U.S. wholesale operations, including implementation of a plan to further
restructure its U.S. manufacturing operations. The restructuring plan,
which is intended 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, 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 has
recorded 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 substantially
completed by July 31, 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 information
and involves known and unknown risks, uncertainties and other factors
that may cause actual cost savings to be materially different from the
foregoing estimate. See "Risk Factors--Implementation of Business
Strategy; Forward-Looking Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Recent Events
and Recapitalization."
Notwithstanding these corrective actions, the Company expects sales and
operating results in U.S. wholesale operations through at least the
first two quarters of fiscal 1999 to continue to be adversely affected
by the factors which adversely affected U.S. wholesale operations in
fiscal 1998.
4
<PAGE>
THE RECAPITALIZATION
The Old Senior Preferred Stock was issued as part of the financing necessary
to effect a recapitalization of the Company (the "Recapitalization") involving
the repurchase pursuant to the Tender Offer of 10.5 million shares of Common
Stock at a purchase price of $40.00 per share ($420 million in the aggregate)
and the refinancing of certain existing indebtedness. Concurrently with the
consummation of the offering of the Old Senior Preferred Stock, the Company and
its principal European subsidiary entered into the New Credit Facility to
obtain funds that, together with the net proceeds of the offering of the Old
Senior Preferred Stock and the Concurrent Offering of Notes, were used to
finance the Recapitalization. See "Concurrent Offering" and "Description of New
Credit Facility."
The following table sets forth the sources and uses of funds in connection
with the Recapitalization (in millions):
<TABLE>
<S> <C>
SOURCES:
New Credit Facility--Term Loan Facilities............................ $ 110.0
Proceeds from sale of Old Senior Preferred Stock and warrants ....... 175.0
Proceeds from sale of Notes.......................................... 350.0
-------
Total.............................................................. $ 635.0
=======
USES:
Tender Offer......................................................... $ 420.0
Repayment of existing indebtedness................................... 180.0
Estimated fees and expenses(a)....................................... 25.9
Working capital...................................................... 9.1
-------
Total.............................................................. $ 635.0
=======
</TABLE>
- --------
(a) Includes discounts and commissions payable in connection with the offering
of the Old Senior Preferred Stock and the Concurrent Offering, fees payable
in connection with the New Credit Facility and investment banking, legal,
accounting, printing and other miscellaneous fees and expenses in
connection with the Recapitalization.
5
<PAGE>
THE EXCHANGE OFFER
Issuer...................... Samsonite Corporation.
Securities Offered.......... One share of New Senior Preferred Stock in
exchange for one share of issued and outstanding
Old Senior Preferred Stock. The terms of the New
Senior Preferred Stock and the Old Senior
Preferred Stock are identical in all material
respects, except for certain transfer
restrictions and registration rights relating to
the Old Senior Preferred Stock and except for
certain provisions providing for Additional
Dividends on the Old Senior Preferred Stock under
certain circumstances relating to the timing of
the Exchange Offer, which rights in each case
will terminate upon consummation of the Exchange
Offer.
The Exchange Offer.......... One share of New Senior Preferred Stock is being
offered in exchange for one share of Old Senior
Preferred Stock. The issuance of the New Senior
Preferred Stock is intended to satisfy
obligations of the Company contained in the
Registration Rights Agreement. See "The Exchange
Offer."
Expiration Date; Withdrawal
Rights..................... The Exchange Offer will expire at 5:00 p.m., New
York City time, on September 28, 1998, or such
later date and time to which it is extended. The
tender of shares of Old Senior Preferred Stock
pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. Any
shares of Old Senior Preferred Stock not accepted
for exchange for any reason will be returned
without expense to the tendering holder thereof
as promptly as practicable after the expiration
or termination of the Exchange Offer. See "The
Exchange Offer--Terms of the Exchange Offer;
Period for Tendering Old Senior Preferred Stock"
and "--Withdrawal Rights."
Procedures for Tendering
Old Senior Preferred
Stock...................... Holders of shares of Old Senior Preferred Stock
wishing to accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with either stock certificates for such
Old Senior Preferred Stock or a Book-Entry
Confirmation (as defined herein) of such Old
Senior Preferred Stock into the Book-Entry
Transfer Facility (as defined herein), if such
procedure is available, and any other required
documentation to BankBoston, N.A., acting as the
exchange agent (the "Exchange Agent") at the
address set forth herein. By executing the Letter
of Transmittal, each holder will represent to the
Company, among other things, that (i) the New
Senior Preferred Stock acquired pursuant to the
Exchange Offer by the holder and any other person
is being obtained in the ordinary course of
business of the person receiving such New Senior
Preferred Stock, (ii) neither
6
<PAGE>
the holder nor such other person is participating
in, intends to participate in or has an
arrangement or understanding with any person to
participate in the distribution of such New
Senior Preferred Stock and (iii) neither the
holder nor such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act,
of the Company. Each broker-dealer that receives
New Senior Preferred Stock for its own account in
exchange for Old Senior Preferred Stock, where
such Old Senior Preferred Stock was acquired by
such broker or dealer as a result of market-
making activities or other trading activities,
must acknowledge that it will deliver a
prospectus in connection with any resale of such
New Senior Preferred Stock. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker or dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--
Procedures for Tendering Old Senior Preferred
Stock" and "Plan of Distribution."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Old Senior Preferred
Stock is registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and who wishes to tender should contact
such registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Old
Senior Preferred Stock, either make appropriate
arrangements to register ownership of the Old
Senior Preferred Stock in such owner's name or
obtain a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering Old
Senior Preferred Stock."
Guaranteed Delivery Holders who wish to tender their Old Senior
Procedures.................. Preferred Stock and whose Old Senior Preferred
Stock is not immediately available or who cannot
deliver their Old Senior Preferred Stock or any
other documents required by the Letter of
Transmittal to the Exchange Agent must tender
their Old Senior Preferred Stock according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Certain U.S. Federal Income
Tax Considerations.........
The exchange pursuant to the Exchange Offer
should not result in the recognition of income,
gain or loss to the holders of Old Senior
Preferred Stock for U.S. federal income tax
purposes. See "Certain U.S. Federal Income Tax
Considerations."
Use of Proceeds............. There will be no proceeds to the Company from the
Exchange Offer.
Exchange Agent..............
BankBoston, N.A. is serving as Exchange Agent in
connection with the Exchange Offer. See "The
Exchange Offer--Exchange Agent."
7
<PAGE>
CONSEQUENCES OF EXCHANGING OLD SENIOR PREFERRED STOCK
Holders who do not exchange their Old Senior Preferred Stock for New Senior
Preferred Stock pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Senior Preferred Stock as set forth in
the legend thereon as a consequence of the issuance of the Old Senior Preferred
Stock pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the Old Senior Preferred Stock may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Old Senior Preferred Stock under the Securities Act. Based on
interpretations by the staff of the Commission, as set forth in no-action
letters issued to third parties, the Company believes that New Senior Preferred
Stock issued pursuant to the Exchange Offer in exchange for Old Senior
Preferred Stock may be offered for resale, resold or otherwise transferred by
holders thereof (other than any holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Senior Preferred Stock is acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Senior Preferred Stock.
However, the Commission has not considered the Exchange Offer in the context of
a no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Senior Preferred Stock and has no arrangement or
understanding to participate in a distribution of New Senior Preferred Stock.
Each broker-dealer that receives New Senior Preferred Stock for its own account
in exchange of Old Senior Preferred Stock must acknowledge that such Old Senior
Preferred Stock was acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Senior Preferred Stock. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Senior Preferred Stock may not be offered
or sold unless it has been registered or qualified for sale in such
jurisdiction or an exemption from registration or qualification is available
and is complied with. See "Risk Factors--Consequences of Failure to Exchange
and Requirements for Transfer of New Senior Preferred Stock" and "The Exchange
Offer--Consequences of Exchanging Old Senior Preferred Stock."
8
<PAGE>
SUMMARY DESCRIPTION OF THE NEW SENIOR PREFERRED STOCK AND EXCHANGE DEBENTURES
The terms of the New Senior Preferred Stock and the Old Senior Preferred
Stock are identical in all material respects, except for certain transfer
restrictions and registration rights relating to the Old Senior Preferred Stock
and except for certain provisions under the Registration Rights Agreement
providing for Additional Dividends on the Old Senior Preferred Stock under
certain circumstances relating to timing of the Exchange Offer, which rights in
each case will terminate upon consummation of the Exchange Offer. The New
Senior Preferred Stock accrues dividends from the last date on which dividends
were paid on the Old Senior Preferred Stock or, if no dividends have been paid
on the Old Senior Preferred Stock, from June 24, 1998. Accordingly, registered
holders of New Senior Preferred Stock on the relevant record date for the first
Dividend Payment Date following the consummation of the Exchange Offer will
receive dividends accruing from the last date on which dividends were paid or,
if no dividends were paid, from June 24, 1998. Old Senior Preferred Stock
accepted for exchange will cease to accrue dividends from and after the date of
consummation of the Exchange Offer. Holders whose Old Senior Preferred Stock is
accepted for exchange will not receive any payment in respect of dividends
otherwise payable on any Dividend Payment Date the record date for which occurs
on or after consummation of the Exchange Offer, which rights will terminate
upon consummation of the Exchange Offer.
NEW SENIOR PREFERRED STOCK
Issuer...................... Samsonite Corporation.
New Senior Preferred Stock
Offered..................... One share of 13 7/8% Senior Redeemable
Exchangeable Preferred Stock, which has been
registered under the Securities Act, for one
share of issued and outstanding 13 7/8% Senior
Redeemable Exchangeable Preferred Stock.
Dividends................... Holders of the New Senior Preferred Stock are
entitled to receive, when, as and if declared by
the Board of Directors of the Company out of
funds legally available therefor, dividends on
the Senior Preferred Stock at a rate per annum of
13 7/8% of the liquidation preference per share
of Senior Preferred Stock, payable quarterly in
arrears on each March 15, June 15, September 15
and December 15 (each, a "Dividend Payment
Date"), commencing September 15, 1998. Dividends
may be paid, at the Company's option, on any
dividend payment date occurring on or prior to
June 15, 2003, either in cash or by the issuance
of additional shares of Senior Preferred Stock
with a liquidation preference equal to the amount
of such dividends; thereafter, dividends will be
payable in cash. If any dividend payable on any
Dividend Payment Date subsequent to June 15, 2003
is not paid in full in cash, or if, at any time,
any of the events described in clauses (ii)
through (vi) of the definition of the Voting
Rights Triggering Event shall have occurred, the
per annum dividend rate will be increased by 2%
from such Dividend Payment Date or during the
continuance of any such voting rights triggering
event, as the case may be. See "Description of
Senior Preferred Stock and Exchange Debentures--
The Senior Preferred Stock--Dividends" and "--
Voting Rights."
9
<PAGE>
Optional Redemption......... The Senior Preferred Stock is redeemable, at the
option of the Company, in whole or in part, at
any time and from time to time on or after June
15, 2001, at the redemption prices set forth
herein, plus, without duplication, all
accumulated and unpaid dividends to the
redemption date. In addition, the Company, at its
option, may redeem up to an aggregate of 35% of
the shares of Senior Preferred Stock (whether
initially issued or issued as a dividend payment)
at any time and from time to time prior to June
15, 2001, at a redemption price equal to 113.875%
of the liquidation preference thereof plus,
without duplication, all accumulated and unpaid
dividends to the redemption date, with the Net
Proceeds of one or more Equity Offerings;
provided that at least $113.75 million aggregate
liquidation preference of the Senior Preferred
Stock remains outstanding immediately after the
occurrence of any such redemption. Any such
redemption will be required to occur within 90
days after the receipt by the Company of the
proceeds of such Equity Offering. See
"Description of Senior Preferred Stock and
Exchange Debentures--The Senior Preferred Stock--
Optional Redemption."
Mandatory Redemption........ The Company is required, subject to certain
conditions, to redeem all of the Senior Preferred
Stock outstanding on June 15, 2010, at a
redemption price equal to 100% of the liquidation
preference thereof, plus, without duplication,
all accumulated and unpaid dividends to the
redemption date. See "Description of
Senior Preferred Stock and Exchange Debentures--
The Senior Preferred Stock--Mandatory
Redemption."
Voting Rights............... Holders of the Senior Preferred Stock have no
voting rights with respect to general corporate
matters, except as provided by Delaware law or as
set forth in the Certificate of Designation. The
Certificate of Designation provides that if the
Company: (i) after June 15, 2003, fails to pay
cash dividends on the Senior Preferred Stock for
two or more quarterly dividend periods (whether
or not consecutive); (ii) fails to redeem the
Senior Preferred Stock on or before the maturity
date thereof; (iii) fails to make an offer to
purchase upon a Change of Control or fails to
purchase shares validly tendered in such offer;
or (iv) fails to comply with certain covenants
described herein or make certain principal or
interest payments in respect of certain
indebtedness, then the holders of a majority of
the then outstanding shares of Senior Preferred
Stock, voting separately and as a class, will
have the right to elect the lesser of two
directors and that number of directors
constituting 25% of the members of the Board of
Directors of the Company, in each case until
remedied or cured. See "Description of Senior
Preferred Stock and Exchange Debentures--The
Senior Preferred Stock--Voting Rights."
Ranking..................... The Senior Preferred Stock, with respect to
dividend rights and rights upon liquidation,
dissolution or winding-up of the Company,
10
<PAGE>
ranks senior to the Common Stock and any other
class or series of common stock or preferred
stock of the Company created subsequent to June
24, 1998, the terms of which do not expressly
provide that it ranks senior to or on a parity
with the Senior Preferred Stock. See "Description
of Senior Preferred Stock and Exchange
Debentures--The Senior Preferred Stock--Ranking."
Change of Control........... Upon the occurrence of a Change of Control, each
holder of the Senior Preferred Stock will be
entitled to require the Company to purchase such
holder's Senior Preferred Stock at a purchase
price equal to 101% of the liquidation preference
thereof, plus, without duplication, all
accumulated and unpaid dividends to the purchase
date. There can be no assurance that the Company
will be contractually permitted or have
sufficient funds to pay the required purchase
price for all the shares of Senior Preferred
Stock tendered by holders thereof upon the
occurrence of a Change of Control. See
"Description of Senior Preferred Stock and
Exchange Debentures--The Senior Preferred Stock--
Change of Control."
Certain Covenants........... The Certificate of Designation for the Senior
Preferred Stock contains certain restrictive
covenants that, among other things, limit the
ability of the Company and its Restricted
Subsidiaries (as defined herein) to: (i) incur
additional indebtedness; (ii) pay dividends and
make certain other distributions; (iii) make
certain investments; (iv) enter into transactions
with affiliates; or (v) merge or consolidate.
These covenants are subject to a number of
important exceptions. See "Description of Senior
Preferred Stock and Exchange Debentures--The
Senior Preferred Stock--Certain Covenants."
Exchange.................... The Company, at its option, on any Dividend
Payment Date may either (i) from time to time
exchange, in whole or in part, on a pro rata
basis, the then outstanding shares of Senior
Preferred Stock for Company Exchange Debentures;
provided that immediately after giving effect to
any partial exchange, there shall be outstanding
shares of Senior Preferred Stock with an
aggregate liquidation preference of not less than
$75 million and not less than $75 million
aggregate principal amount of Company Exchange
Debentures or (ii) exchange all of the
outstanding shares of Senior Preferred Stock for
Holdings Exchange Debentures. The Notes Indenture
and the New Credit Facility restrict the
Company's ability to exchange the Senior
Preferred Stock for Company Exchange Debentures.
The Exchange Debentures will: (i) bear interest
at the same rate as the dividend rate on the
Senior Preferred Stock; and (ii) contain
covenants substantially identical to the Senior
Preferred Stock. The Company Exchange Debentures
will rank subordinate in right of payment to all
Senior Debt of the Company to the extent set
forth in the Exchange Indenture. The Holdings
Exchange Debentures will constitute general
unsecured obligations of Holdings. The Exchange
Debentures will also be effectively subordinated
to the obligations of the issuer's subsidiaries
and will not be guaranteed by any of the issuer's
subsidiaries. See "Description of Senior
Preferred Stock
11
<PAGE>
and Exchange Debentures--The Senior Preferred
Stock--Exchange."
For more complete information regarding the New Senior Preferred Stock,
including the definitions of certain capitalized terms used above, see
"Description of Senior Preferred Stock and Exchange Debentures."
EXCHANGE DEBENTURES
Issuer...................... Samsonite Corporation (if Company Exchange
Debentures are issued) or Samsonite Holdings Inc.
(if Holdings Exchange Debentures are issued)
(Samsonite Corporation and Samsonite Holdings
Inc., each, an "Issuer").
Exchange Debentures
Offered..................... The Exchange Debentures will be issuable in
exchange for Senior Preferred Stock in an
aggregate principal amount equal to the
liquidation preference of the Senior Preferred
Stock so exchanged, plus accrued and unpaid
dividends to the date (the "Exchange Date") fixed
for the exchange thereof. See "Description of
Senior Preferred Stock and Exchange Debentures--
The Exchange Debentures."
Maturity Date............... June 15, 2010.
Interest.................... Each Exchange Debenture will bear interest at the
rate of 13 7/8% per annum from the Exchange Date
or from the payment date to which interest has
been paid or provided for or, if no interest has
been paid or provided for, from the Exchange
Date. Interest will be payable quarterly in cash
(or, in the case of interest payable on interest
payment dates that occur on or prior to June 15,
2003, in additional Exchange Debentures at the
option of the issuer) in arrears on each March
15, June 15, September 15 and December 15,
commencing with the first such date after the
Exchange Date. Interest on the Exchange
Debentures will be computed on the basis of a
360-day year comprised of twelve 30-day months
and, for periods not involving a full calendar
month, the actual number of days elapsed but not
to exceed 30 days. See "Description of Senior
Preferred Stock and Exchange Debentures--The
Exchange Debentures."
Optional Redemption......... The Exchange Debentures will be redeemable, at
the option of the Issuer, in whole at any time or
in part from time to time on or after June 15,
2001 at the redemption prices set forth herein,
plus accrued and unpaid interest thereon to the
redemption date. In addition, the Issuer at its
option, may redeem, up to an aggregate of 35% of
the aggregate principal amount of Exchange
Debentures (whether initially issued or issued in
payment of interest obligations thereon) at any
time and from time to time prior to June 15,
2001, at a redemption price equal to 112% of the
aggregate principal amount thereof, plus accrued
and unpaid interest thereon to the redemption
date, with the Net Proceeds of one or more Equity
Offerings; provided that after any such
redemption at least $75 million aggregate
principal amount of Exchange Debentures remain
outstanding immediately after the occurrence of
any such redemption pursuant to an Equity
Offering and that any such redemption occurs on
or prior to 90 days after the receipt by the
Issuer of the proceeds of each such Equity
Offering. See
12
<PAGE>
"Description of Senior Preferred Stock and
Exchange Debentures--The Exchange Debentures--
Optional Redemption."
Change of Control........... Upon the occurrence of a Change of Control, each
holder of Exchange Debentures will be entitled to
require the Issuer to purchase such holders'
Exchange Debentures at a purchase price equal to
101% of the principal amount thereof, plus
accrued and unpaid interest thereon to the
purchase date. There can be no assurance that the
Issuer will be contractually permitted or have
sufficient funds to pay the required purchase
price for all Exchange Debentures tendered by
holders thereof upon the occurrence of a Change
of Control. See "Description of Senior Preferred
Stock and Exchange Debentures--The Exchange
Debentures--Change of Control."
Subordination............... The Company Exchange Debentures will rank
subordinate in right of payment to all Senior
Debt of the Company to the extent set forth in
the Exchange Indenture. The Holdings Exchange
Debentures will constitute general unsecured
obligations of Holdings. The Exchange Debentures
will also be effectively subordinated to the
obligations of the Issuer's subsidiaries and will
not be guaranteed by any of the Issuer's
subsidiaries. See "Description of Senior
Preferred Stock and Exchange Debentures--The
Exchange Debentures--Subordination."
Certain Covenants........... The Exchange Indenture contains certain
restrictive covenants that, among other things,
limit the ability of the Issuer and any
Restricted Subsidiary (as defined herein) of the
Issuer to: (i) incur additional indebtedness;
(ii) pay dividends and make certain other
distributions; (iii) make certain investments;
(iv) enter into transactions with affiliates; or
(v) merge or consolidate. These covenants are
subject to a number of important exceptions. See
"Description of Senior Preferred Stock and
Exchange Debentures--The Exchange Debentures--
Certain Covenants."
For more complete information regarding the Exchange Debentures, including
the definitions of certain capitalized terms used above, see "Description of
Senior Preferred Stock and Exchange Debentures."
Concurrent Offering......... Concurrently with the offering of the Old Senior
Preferred Stock, the Company also issued and sold
$350 million aggregate principal amount of Notes
in the Concurrent Offering. See "Concurrent
Offering."
Use of Proceeds............. The Company will not receive any proceeds from
the Exchange Offer. The net proceeds from the
offering of the Old Senior Preferred Stock,
together with the net proceeds from the
Concurrent Offering and borrowings under the New
Credit Facility were used to finance the
Recapitalization and to pay fees and expenses in
connection therewith. See "The Recapitalization,"
"Use of Proceeds" and "Capitalization."
RISK FACTORS
Holders of Old Senior Preferred Stock should carefully consider the
information set forth under the caption "Risk Factors" and all other
information set forth in this Prospectus, before making a decision to tender
their shares of Old Senior Preferred Stock in the Exchange Offer.
13
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary historical financial information for the Company presented below
has been derived from the Company's audited consolidated financial statements
as of and for the fiscal years ended January 31, 1998, 1997, 1996 and 1995, the
seven months ended January 31, 1994 and the five months ended June 30, 1993
which have been restated for discontinued operations and from the Company's
unaudited consolidated financial statements as of and for the three months
ended April 30, 1998 and 1997. The Company's unaudited consolidated financial
statements as of and for the three months ended April 30, 1998 and 1997
include, in the opinion of management, all adjustments, consisting only of
normal nonrecurring adjustments, which the Company considers necessary for a
fair presentation of the financial position and results of operations of the
Company for these periods. Operating results for the three months ended April
30, 1998 are not necessarily indicative of the results that may be expected for
the full year. The summary historical financial information presented below
should be read in conjunction with the other information contained under the
captions "Capitalization," "Selected Historical and Pro Forma Consolidated
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations"and with the Company's consolidated
financial statements and related notes thereto included elsewhere in this
Prospectus. The pro forma financial information presented below gives effect to
the Recapitalization as if it had occurred on February 1, 1997, in the case of
the statement of operations and other data, and on the balance sheet date, in
the case of the balance sheet data. The summary pro forma financial data are
presented for illustrative purposes only and are not necessarily indicative of
the operating results or financial position that would have occurred if the
Recapitalization had been consummated on the dates indicated, nor are they
necessarily indicative of future operating results or financial position.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------------------------------------------
1994(A) 1995 1996 1997 1998
---------- --------- -------- -------- --------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net Sales(b)............ $ 523,619 $ 635,452 $675,209 $741,138 $736,875 $736,875
Cost of Goods Sold...... 309,809 373,967 414,691 449,333 424,349 424,349
---------- --------- -------- -------- -------- --------
Gross Profit............ 213,810 261,485 260,518 291,805 312,526 312,526
Selling, General and
Administrative
Expenses............... 163,574 197,716 203,701 233,761(c) 234,257 239,485 (d)
Amortization of
Intangible Assets(e)... 40,130 67,189 63,824 31,837 7,101 7,101
Provision for
Restructuring
Operations............. -- -- 2,369 10,670 1,866 1,866
Other Income--Net(f).... 5,864 2,729 3,967 18,821 28,294 28,294
Interest Expense--
Net(g)................. 24,901 34,966 35,265 34,251 17,344 50,344 (h)
Reorganization Items.... 462,447 -- -- -- -- --
Income Tax Expense...... 9,110 10,619 9,095 10,389 23,088 8,561 (i)
Minority Interest in
Earnings of
Subsidiaries........... (2,049) (931) (1,385) (1,041) (287) (287)
---------- --------- -------- -------- -------- --------
Income (Loss) from
Continuing Operations.. 442,357 (47,207) (51,154) (11,323) 56,877 33,176
Income (Loss) from
Operations Discontinued
and Sold, Cumulative
Effect of Change in
Accounting Principles
and Extraordinary
Items.................. 430,946 (64,372) (10,293) -- (16,178) (22,402)
---------- --------- -------- -------- -------- --------
Net Income (Loss)....... $ 873,303 $(111,579) $(61,447) $(11,323) $ 40,699 $ 10,774
========== ========= ======== ======== ======== ========
Senior Preferred Stock
Dividends(j)........... 26,570
--------
Net Income (Loss)
Available to Common
Stockholders........... $(15,796)
========
Income (Loss) per
Share--Basic(j):
Continuing Operations.. $ (3.05) $ (3.24) $ (.71) $ 2.81 $ .68
Net Income (Loss)...... (7.22) (3.89) (.71) 2.01 (1.62)
Income (Loss) per
Share--Assuming
Dilution(j):
Continuing Operations.. (3.05) (3.24) (.71) 2.70 .62
Net Income (Loss)...... (7.22) (3.89) (.71) 1.93 (1.49)
OTHER DATA:
EBIT (k)................ $ 15,970 $ (691) $ (5,409) $ 34,358 $ 97,596 $ 97,596
Depreciation and
Amortization........... 55,024 85,486 84,101 53,889 28,594 28,594
---------- --------- -------- -------- -------- --------
EBITDA(l)............... 70,994 84,795 78,692 88,247 126,190 126,190
Items relating to
Settlement of
Contingent Liabilities
and Other Adjustments.. (4,797) (2,864) (357) (3,368) (13,762) (13,762)
---------- --------- -------- -------- -------- --------
Adjusted EBITDA(m)...... $ 66,197 $ 81,931 $ 78,335 $ 84,879 $112,428 $112,428
========== ========= ======== ======== ======== ========
Ratio of Adjusted EBITDA
to Pro Forma Interest
Expense--Net(n)........ -- -- -- -- -- 2.23x
Ratio of Earnings to
Fixed Charges(o)....... -- -- -- 1.00x 4.39x 1.05x
Capital Expenditures.... $ 13,095 $ 18,453 $ 21,668 $ 31,093 $ 36,313 $ 36,313
BALANCE SHEET DATA (AS
OF END OF PERIOD):
Property, Plant and
Equipment, Net......... $ 131,894(p) $ 137,686 $140,912 $143,959 $142,351 $142,351
Total Assets............ 1,111,735(p) 866,000 607,443 592,658 610,049 654,682
Long-Term Obligations
(Including Current
Installments).......... 573,197(q) 417,175 310,959 290,617 179,223 484,421
Redeemable Preferred
Stock.................. -- -- -- -- -- 163,080
Stockholders' Equity
(Deficit).............. 253,693(q) 148,472 25,116 24,998 208,886 (214,759)
</TABLE>
(see footnotes on the following pages)
14
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
------------------------------
1997 1998
-------- --------------------
HISTORICAL PRO FORMA
---------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales.................................... $169,562 $156,676 $156,676
Cost of Goods Sold........................... 99,293 97,273 97,273
-------- -------- --------
Gross Profit................................. 70,269 59,403 59,403
Selling, General and Administrative
Expenses.................................... 54,656 59,621 59,621
Amortization of Intangible Assets(e)......... 1,824 1,526 1,526
Provision for Restructuring Operations....... (600) 2,608 2,608
Other Income--Net(f)......................... 6,899 998 998
Interest Expense--Net(g)..................... 5,742 4,017 12,617 (h)
Income Tax Expense (Benefit)................. 6,829 (2,924) (6,192)(i)
Minority Interest in Earnings of
Subsidiaries................................ (218) (256) (256)
-------- -------- --------
Income (Loss) from Continuing Operations..... 8,499 (4,703) (10,035)
Income (Loss) from Operations Discontinued
and Sold, Cumulative Effect of Change in
Accounting Principles and Extraordinary
Items....................................... (6,633) (6,224) --
-------- -------- --------
Net Income (Loss)............................ $ 1,866 $(10,927) $(10,035)
======== ======== ========
Senior Preferred Stock Dividends(j).......... 7,210
--------
Net Income (Loss) Available to Common
Stockholders................................ $(17,245)
========
Income (Loss) per Share--Basic(j):
Continuing Operations....................... $ 0.43 $ (0.23) $ (1.74)
Net Income (Loss)........................... 0.09 (0.54) (1.74)
Income (Loss) per Share--Assuming
Dilution(j):
Continuing Operations....................... 0.41 (0.23) (1.74)
Net Income (Loss)........................... 0.09 (0.54) (1.74)
OTHER DATA:
EBIT (k)..................................... $ 21,288 $ (3,354) $ (3,354)
Depreciation and Amortization................ 7,208 6,943 6,943
-------- -------- --------
EBITDA(l).................................... 28,496 3,589 3,589
Items relating to Settlement of Contingent
Liabilities and Other Adjustments........... (5,296) 2,302 2,302
-------- -------- --------
Adjusted EBITDA(m)........................... $ 23,200 $ 5,891 $ 5,891
======== ======== ========
Ratio of Adjusted EBITDA to Pro Forma
Interest
Expense--Net................................ -- -- (n)
Ratio of Earnings to Fixed Charges(o)........ 3.17x -- --
Capital Expenditures......................... $ 8,002 $ 7,433 $ 7,433
BALANCE SHEET DATA (AS OF END OF PERIOD):
Property, Plant and Equipment, Net........... $141,092 $140,964 $140,964
Total Assets................................. 589,404 617,758 636,718
Long-Term Obligations (Including Current
Installments)............................... 161,728 208,291 481,592
Redeemable Preferred Stock................... -- -- 163,080
Stockholders' Equity (Deficit)............... 173,768 197,509 (219,912)
</TABLE>
(see footnotes on the following pages)
15
<PAGE>
NOTES TO SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(a) Prior to July 14, 1995, the Company was a subsidiary of Astrum
International Corp. ("Astrum"). On July 14, 1995, Astrum merged with
Samsonite Corporation and changed its name to Samsonite Corporation.
In June 1993, Astrum completed a financial restructuring pursuant to a plan
of reorganization under Chapter 11 of the United States Bankruptcy Code
(the "Plan"). Effective June 30, 1993 and 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"), the Company was required to adjust its
assets and liabilities to their fair ("fresh start") values and create a
new entity for financial reporting purposes. For purposes of this
presentation and in order to compare full fiscal years, the results for the
five months ended June 30, 1993 and the seven months ended January 31, 1994
have been combined. As a result of the effects of SOP 90-7 on amortization
of intangibles, depreciation, interest expense, and reorganization items,
the periods before and after June 30, 1993 are not comparable. See
"Selected Historical and Pro Forma Consolidated Financial Data" for a
presentation of separate results for such five and seven month periods in
accordance with SOP 90-7.
(b) The Company acquired American Tourister in August 1993. Net sales for the
combined periods comprising the year ended January 31, 1994 include net
sales of $47.7 million of American Tourister for five months. Net sales for
the fiscal years ended January 31, 1995, 1996 and 1997 include net sales
for American Tourister of $117.8 million, $115.0 million and $147.3
million, respectively. Because of the consolidation of American Tourister
wholesale operations with the Company's, comparable American Tourister
sales amount are not available for fiscal year 1998.
(c) Selling, General and Administrative Expenses include $5.4 million of
expenses during the year ended January 31, 1997 for (i) consulting fees to
establish the restructuring plan ($0.8 million), (ii) the cessation of the
former chief executive officer's employment and the change in management
($4.1 million) and (iii) expenses in excess of the original provision in
fiscal 1996 for the consolidation of American Tourister manufacturing
facilities ($0.5 million).
(d) Pro forma Selling, General and Administrative Expenses for the fiscal year
ended January 31, 1998 have been adjusted to reflect a $4.8 million charge
for estimated expenses associated with the process of exploring
alternatives to enhance stockholder value, including the Recapitalization,
and a $0.4 million charge for deferred financing costs related to the
Company's Old Credit Facility (as defined herein). Such expenses will be
charged to operations in fiscal 1999. In connection with the
Recapitalization, certain adjustments and modifications have been made to
outstanding employee stock options as a result of the consummation of the
Tender Offer. Such adjustments will result in increased compensation
expense of approximately $3.9 million in the second quarter of fiscal 1999,
$0.4 million during the remainder of fiscal 1999 and $0.8 million in fiscal
2000. Such increased compensation expense is not reflected in Pro Forma
Selling, General and Administrative Expenses.
(e) As discussed in note (a) above, the Company adjusted its assets and
liabilities to their fresh start values effective June 30, 1993. Since June
30, 1993, the Company's statements of operations include amortization and
depreciation related to these fresh start adjustments. The most significant
fresh start adjustment relates to recording Reorganization Value in Excess
of Identifiable Assets, which was amortized over a three-year period which
ended in June 1996. In addition, fresh start amortization includes
amortization of fresh start adjustments to reflect the fair value of
trademarks, licenses, patents and other intangibles, which are being
amortized over periods from one to forty years. Fresh start amortization
and depreciation also includes depreciation of fresh start adjustments to
reflect the fair value of property and equipment, depreciated over their
estimated useful lives ranging primarily from two to six years.
Fresh Start Amortization and Depreciation consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JANUARY 31, APRIL 30,
------------------------- -------------------
1996 1997 1998 1997 1998
-------- -------- ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FRESH START AMORTIZATION:
Amortization of
Reorganization Value in
Excess of Identifiable
Assets...................... $ 55,072 $ 22,947 $ -- $ -- $ --
Amortization of Licenses,
Patents and Trademarks and
Other....................... 7,823 7,976 6,184 1,607 1,432
-------- -------- ------- --------- ---------
Total Fresh Start
Amortization Included in
Amortization of
Intangibles............... 62,895 30,923 6,184 1,607 1,432
-------- -------- ------- --------- ---------
FRESH START DEPRECIATION--
PROPERTY AND EQUIPMENT:
Included in Cost of Goods
Sold........................ 2,895 2,914 2,093 685 411
Included in Selling, General
and Administrative
Expenses.................... 643 647 461 151 90
-------- -------- ------- --------- ---------
Total Fresh Start
Depreciation.............. 3,538 3,561 2,554 836 501
-------- -------- ------- --------- ---------
Total Fresh Start
Amortization and
Depreciation................ $ 66,433 $ 34,484 $ 8,738 $ 2,443 $ 1,933
======== ======== ======= ========= =========
</TABLE>
For information with respect to the impact of fair value adjustments
attributable to the reorganization of Astrum, restructuring and certain
other expenses, see "Selected Historical and Pro Forma Consolidated
Financial Information."
(footnotes continue on the following page)
16
<PAGE>
(f) Other Income--Net for fiscal 1996, 1997 and 1998 and for the three months
ended April 30, 1997 and 1998 consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JANUARY 31, APRIL 30,
------------------------ ----------------------
1996 1997 1998 1997 1998
------ ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net realized gains from
foreign currency
forward delivery
contracts.............. $ (494) $ 2,829 $ 6,463 $ 918 $ 675
Rental income........... 1,735 1,987 1,633 522 252
Equity in loss of uncon-
solidated affiliate.... -- (33) (547) (61) (235)
Pension expense related
to merged plans........ -- -- (706) -- --
Foreign currency trans-
action losses, net..... (1,660) (211) (1,834) (370) (77)
Unrealized gains from
foreign currency
forward delivery
contracts.............. -- -- -- 2,729 753
Gain (Loss) on disposi-
tion of fixed assets,
net.................... (245) (62) (377) (7) 737
Other, net.............. (737) (1,120) (1,247) (418) (1,107)
Favorable settlement of
claims................. -- 3,802 2,060 2,128 --
Adjustment of allowances
relating to previous
operations............. -- 529 5,299 1,458 --
Adjustment of contingent
tax accruals........... -- -- 12,700 -- --
Collection of loans to
settlement trust....... -- -- 4,850 -- --
Adjustment of liability
for PBGC claims........ -- 11,100 -- -- --
Gain on sale of televi-
sion station........... 5,368 -- -- -- --
------ ------- ------- ------- -------
$3,967 $18,821 $28,294 $ 6,899 $ 998
====== ======= ======= ======= =======
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for further information with respect to the items
comprising Other Income--Net.
(g) Interest Expense--Net consists of interest expense and amortization of debt
issuance costs and premium less interest income.
(h) Pro forma Interest Expense-Net gives effect to the issuance of the Notes,
and additional borrowings under the New Credit Facility, including the
amortization of debt issuance costs. The foregoing increases Interest
Expense-Net by approximately $33.0 million and $8.6 million for the year
ended January 31, 1998 and the three months ended April 30, 1998,
respectively. Pro forma Interest Expense-Net consists of the following (in
millions):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
JANUARY 31, 1998 APRIL 30, 1998
---------------- ------------------
<S> <C> <C>
Notes.................................. $37.6 $ 9.4
New Credit Facility (8.4% on U.S. Term
Loan and 6.1% on Europe Term Loan).... 9.2 2.3
Capital lease obligations and other
foreign borrowings.................... 4.4 1.3
Non-cash amortization of capitalized
fees and expenses..................... 1.7 0.4
Less interest income................... (2.6) (0.8)
----- -----
Net Interest Expense................ $50.3 $12.6
===== =====
</TABLE>
(i) Pro forma Income Tax Expense reflects the tax effect of the additional
interest expense described in note (h) above and the tax effect of certain
other expenses referred to in note (d) above (an aggregate decrease of
$14.5 million and $3.3 million in Income Tax Expense for the year ended
January 31, 1998 and the three months ended April 30, 1998, respectively).
(j) Pro forma income (loss) per share data reflects the deduction of pro-forma
dividends, the amortization of issuance costs related to the Senior
Preferred Stock and the amortization of the aggregate value assigned to the
Warrants of $5.82 million, which will be amortized over the twelve-year
term of the Senior Preferred Stock.
(k) EBIT is defined as Income (Loss) from Continuing Operations plus Interest
Expense-Net and Income Tax Expense plus Minority Interest in Earnings of
Subsidiaries less Reorganization Items plus, in the case of pro forma EBIT,
certain expenses described in note (d) above.
(l) EBITDA is defined as EBIT (as defined above) plus amortization and
depreciation. The Company believes that EBITDA provides useful information
regarding the Company's ability to service its indebtedness, but it should
not be considered in isolation or as a
(footnotes continue on the following page)
17
<PAGE>
substitute for operating income or cash flow from operations (in each case
as determined in accordance with generally accepted accounting principles)
as an indicator of the Company's operating performance or as a measure of
the Company's liquidity. Other companies may calculate EBITDA in a
different manner than the Company. EBITDA does not take into consideration
substantial costs and cash flows of doing business, such as interest
expense, income taxes, depreciation, and amortization. EBITDA does not
represent funds available for discretionary use by the Company because
those funds are required for debt service, capital expenditures to replace
fixed assets, working capital and other commitments and contingencies.
EBITDA is not an accounting term and is not used in generally accepted
accounting principles.
(m) Adjustments to EBITDA to arrive at Adjusted EBITDA include various income
and expense items included in EBIT and EBITDA which management believes
should be excluded in order to reflect recurring operating performance.
These items include:
(i) Provision for Restructuring Operations of $2.4 million, $10.7 million
and $3.6 million for fiscal 1996, 1997 and 1998, respectively, and
$2.6 million for the three months ended April 30, 1998. In fiscal
1998, the Company's statement of operations reflects a net Provision
for Restructuring Operations of $1.9 million which is comprised of a
gross restructuring charge of $3.6 million for the fiscal year net of
a $1.7 million credit for expenses not incurred with respect to
fiscal 1997's $10.7 million Provision of Restructuring Operations;
(ii) Other Income--Net, except for certain recurring transactions
including net gains from foreign currency forward delivery contracts,
rental income, equity in loss of unconsolidated affiliate and pension
expense related to merged plans (which are reflected in the first
four line items in note (f) above); and
(iii) Unfavorable production variances of $4.1 million during the second
half of fiscal 1998 arising from production problems in the Company's
North American manufacturing operations. These problems primarily
related to implementation of the strategic plan announced in May 1996
and, in the judgment of management, were nonrecurring. EBITDA has not
been adjusted for production variances in prior years (which totaled
$3.0 million and $2.4 million in fiscal 1996 and 1997, respectively)
or for $5.0 million of additional production variances in fiscal
1998.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for further information with respect to these items.
(n) The ratio of Adjusted EBITDA to Pro forma Interest Expense--Net for the 12
months ended April 30, 1998 was 1.90x.
(o) For purposes of computing the ratio of earnings to fixed charges, fixed
charges consist of interest (including the interest component of rental
expenses), amortization of debt expense and dividends (including the
amortization of issuance costs related to the Senior Preferred Stock and
the amortization of the aggregate value assigned to the Warrants) on
preferred stock. Earnings consist of earnings from continuing operations
before taxes, plus fixed charges. For the seven months ended January 31,
1994, the fiscal years ended January 31, 1995 and 1996, the three months
ended April 30, 1998 and on a pro forma basis for the three months ended
April 30, 1998, earnings were insufficient to cover fixed charges by $19.4
million, $36.6 million, $40.7 million, $7.1 million and $25.9 million,
respectively. No ratio of earnings to fixed charges for the year ended
January 31, 1994 is presented because it is not meaningful due to the
significant effect of applying SOP 90-7. Earnings from continuing
operations before taxes include significant nonrecurring amounts related
to various items from the settlement of certain continuing liabilities
from previous operations.
(p) Includes the effects of SOP 90-7 "fresh start" adjustments recorded at
June 30, 1993, net of depreciation and amortization. Pursuant to SOP 90-7,
the net book value of property and equipment was increased by $34 million
and intangible and other assets were increased by $530 million.
(q) Pursuant to SOP 90-7, under the Plan effected in June 1993, $1.5 billion
in long-term debt subject to compromise, including accrued interest, was
forgiven in exchange for $500 million principal amount of senior secured
notes, approximately $342 million in cash and 15 million shares of common
stock. In July 1995, the senior secured notes were redeemed with the
proceeds from the sale of the 11 1/8% Series A Senior Subordinated Notes
and borrowings under the Company's U.S. banking lines.
18
<PAGE>
RISK FACTORS
Holders should consider carefully all of the information set forth in this
Prospectus and, in particular, should evaluate the following risks before
tendering their Old Senior Preferred Stock in the Exchange Offer, although the
risk factors set forth below (other than "--Consequences of Failure to
Exchange and Requirements for Transfer of New Senior Preferred Stock") are
generally applicable to the Old Senior Preferred Stock as well as the New
Senior Preferred Stock.
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF NEW
SENIOR PREFERRED STOCK
Holders who do not exchange their Old Senior Preferred Stock for New Senior
Preferred Stock pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Senior Preferred Stock as set forth
in the legend thereon as a consequence of the issuance of the Old Senior
Preferred Stock pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Old Senior Preferred Stock may not be offered
or sold unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register Old Senior Preferred Stock under the Securities Act.
Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties, the Company believes that New Senior
Preferred Stock issued pursuant to the Exchange Offer in exchange for Old
Senior Preferred Stock may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Senior Preferred
Stock is acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such New Senior Preferred Stock. However, the Commission has not considered
the Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each
holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of New Senior Preferred
Stock and has no arrangement or understanding to participate in a distribution
of New Senior Preferred Stock. If any holder is an "affiliate" of the Company
(within the meaning of Rule 405 under the Securities Act), is engaged in or
intends to engage in or has any arrangement or understanding with respect to
the distribution of New Senior Preferred Stock to be acquired pursuant to the
Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Senior Preferred Stock for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Senior Preferred Stock. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Senior Preferred Stock received in exchange for Old Senior Preferred Stock
where such Old Senior Preferred Stock was acquired by such broker-dealer as a
result of market-making activities or other trading activities. For a period
of 180 days after the Expiration Date, the Company will make this Prospectus,
as amended or supplemented from time to time, available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
However, to comply with the securities laws of certain jurisdictions, if
applicable, the New Senior Preferred Stock may not be offered or sold unless
it has been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied
with. See "The Exchange Offer--Consequences of Exchanging Old Senior Preferred
Stock."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
As a result of the Recapitalization, the Company is highly leveraged. After
giving pro forma effect to the Recapitalization, as of April 30, 1998, the
Company would have had total indebtedness of $490.7 million and stockholders'
equity would have been a deficit of $225.7 million. The New Credit Facility,
the Indenture
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governing the Notes (the "Notes Indenture"), and the Certificate of
Designation permit the Company to incur or guarantee certain additional
indebtedness, subject to certain limitations. See "Concurrent Offering" and
"Description of New Credit Facility."
In addition, this substantial leverage will have a negative effect on the
Company's net income. For the fiscal year ended January 31, 1998, the
Company's net income on a pro forma basis as adjusted to give effect to the
Recapitalization would have been $10.8 million, including non-recurring gains,
net of tax expense, of approximately $20.3 million, compared to the historical
net income of $40.7 million for such period. Pro forma net interest expense
would have been $50.3 million for the year ended January 31, 1998, as compared
to $17.3 million for the same period on an historical basis.
The Company's high degree of leverage could have important consequences to
holders of Senior Preferred Stock, including but not limited to the following:
(i) the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired in the future; (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for its
operations and other purposes, including capital expenditures; (iii) the
Company may be substantially more leveraged than certain of its competitors,
which may place the Company at a competitive disadvantage; (iv) the Company
may be hindered in its ability to adjust rapidly to changing market
conditions; and (v) the Company's substantial degree of leverage could make it
more vulnerable in the event of a downturn in general economic conditions or
its business or changing market conditions.
The Company's ability to repay or to refinance its obligations with respect
to its indebtedness or to pay cash dividends on or to redeem the Senior
Preferred Stock pursuant to the Certificate of Designation will depend on its
future financial and operating performance, which, in turn, will be subject to
prevailing economic and competitive conditions and to certain financial,
business, economic and other factors, many of which are beyond the Company's
control. These factors could include operating difficulties, increased
operating costs, product pricing pressures, the response of competitors, and
delays in implementing strategic plans. The Company's ability to meet its debt
service and other obligations may depend in significant part on the extent to
which the Company can implement successfully its business strategy. There can
be no assurance that the Company will be able to implement its strategy fully
or that the anticipated results of its strategy will be realized. See""--
Implementation of Business Strategy; Forward-Looking Statements."
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations or its obligations under the Senior Preferred
Stock, the Company may be forced to reduce or delay capital expenditures, sell
assets, or seek to obtain additional equity capital, or to refinance or
restructure its debt. There can be no assurance that the Company's cash flow
and capital resources will be sufficient for payment of principal of, and
premium, if any, and interest on its indebtedness or to meet its other
obligations in the future, or that any such alternative measures would be
successful or would permit the Company to meet its scheduled debt service
obligations. In addition, because the Company's obligations under the New
Credit Facility bear interest at floating rates, an increase in interest rates
could adversely affect, among other things, the Company's ability to meet its
financing obligations.
RECENT EVENTS AND RECAPITALIZATION
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 stockholder value. On March 20,
1998, the Company's Board of Directors approved a recapitalization plan,
pursuant to which the Company planned to pay a special cash dividend to
stockholders of $12.50 per share. Consummation of this recapitalization plan
and payment of the $12.50 dividend per share was subject to a number of
conditions, including the closing of a new bank credit facility, the
successful retirement of the Company's outstanding 11 1/8% Series B
Subordinated Notes (the "Series B Notes") (which were substantially retired in
April 1998 as discussed below), and declaration of the dividend by the
Company's Board of Directors. The Company also previously announced
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that it was engaged in discussions with third parties concerning a possible
transaction whereby approximately 50% of the Company's equity would be
acquired by a third party and stockholders would receive cash payments in the
range of $30.00 per share and retain a significant equity interest in the
Company. 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 completed a tender offer on April 23, 1998 for $52.3 million out
of the $52.8 million outstanding princpal amount of the Series B Notes at a
price of $115.35 per $100 of principal. The Company's previous senior credit
facility was amended to allow for financing the retirement of the Series B
Notes from borrowings thereunder. The Company incurred a pre-tax charge to
earnings of approximately $10 million during the first quarter of fiscal 1999
for the premium paid to repurchase the Series B Notes and other charges
related to the transaction.
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 first quarter of fiscal 1999 in
connection with the restructuring. The restructuring provision is primarily
related to termination and severance costs for the elimination of
approximately 111 positions.
As discussed under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company expects U.S. wholesale sales
to be depressed through at least the first half of fiscal 1999 because of
various factors which affected U.S. wholesale sales in fiscal 1998, including
the adverse impact of price increases and pricing strategies, market
disruptions and retailer discounting issues associated with various forms of
cross distribution-channel sales, and forecasting and production scheduling
errors. 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, 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
has recorded 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 substantially completed by July 31,
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 information and involves known and unknown risks,
uncertainties and other factors that may cause actual cost savings to be
materially different from the foregoing estimate. In addition to the general
factors discussed under "--Implementation of Business Strategy; Forward
Looking Statements" 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.
In connection with the Recapitalization, certain adjustments and
modifications were made to outstanding employee stock options as a result of
the consummation of the Tender Offer. Such adjustments will result in
increased compensation expense of approximately $3.9 million in the second
quarter of fiscal 1999, $0.4 million
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during the remainder of fiscal 1999 and $0.8 million in fiscal 2000. See note
(d) of "Notes to Summary Consolidated Financial Information." The pro forma
financial information contained herein does not reflect such increased
compensation expense.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; CURRENCY RISKS
Approximately 48% of the Company's net sales for fiscal 1998 were
attributable to its European sales and other foreign operations and export
sales from the United States. In addition to its European manufacturing and
distribution subsidiaries, the Company has a 100% owned Mexican manufacturing
and distribution company and is a partner in joint ventures in Singapore,
South Korea, India, Brazil and China. The Company also has a wholly owned
distribution organization in Hong Kong. The Company's operations may be
affected by economic, political and governmental conditions in some of the
countries where the Company has manufacturing facilities or where its products
are sold. In addition, factors such as changes in economic or political
conditions in any of the countries in which the Company operates could result
in unfavorable exchange rates, new or additional currency or exchange
controls, other restrictions being imposed on the operations of the Company,
or expropriation. The Company's operations may also be adversely affected by
significant fluctuations in the value of the U.S. dollar or the failure of a
partner in an international joint venture to meet performance expectations.
When appropriate, the Company enters into foreign exchange contracts in order
to reduce its economic exposure on certain foreign operations and/or royalty
agreements through the use of forward delivery commitments. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
COMPETITION
The Company competes with many domestic and international companies in its
global markets. Samsonite competes on brand name, consumer advertising,
product innovation, quality, differentiation of product features, customer
service and price. The worldwide luggage market is highly fragmented, with the
vast majority of individual competitors having annual sales that are less than
10% of the Company's sales; nevertheless, the Company has many competitors.
Barriers to entry into the manufacturing of softside luggage are very low and
the Company faces competition from many low cost manufacturers of inexpensive,
softside luggage products. In contrast to the softside luggage market, more
significant capital costs are necessary to enter the manufacturing of hardside
luggage; nonetheless, the Company has several hardside luggage competitors in
its major U.S. and European markets. See "Business--Competition."
RESTRICTIONS ON CASH DIVIDENDS ON THE SENIOR PREFERRED STOCK
The New Credit Facility and the Notes Indenture restrict the Company's
ability to pay cash dividends on the Senior Preferred Stock. In addition to
the limitations imposed on the payment of dividends by the New Credit Facility
and the Notes Indenture, under Delaware law the Company is permitted to pay
dividends on its capital stock, including the Senior Preferred Stock, only out
of its surplus or, in the event that it has no surplus, out of its net profits
for the year in which a dividend is declared or for the immediately preceding
fiscal year. Surplus is defined as the excess of a company's total assets over
the sum of its total liabilities plus the par value of its outstanding capital
stock. In order to pay dividends in cash, the Company must have surplus or net
profits equal to the full amount of the cash dividend at the time such
dividend is declared.
In determining the Company's ability to pay dividends, Delaware law permits
the Board of Directors to revalue the Company's assets and liabilities from
time to time to their fair market values in order to create surplus. The
Company cannot predict what the value of its assets or the amount of its
liabilities will be in the future and, accordingly, there can be no assurance
that the Company will be able to pay cash dividends on the Senior Preferred
Stock.
RESTRICTIVE COVENANTS
The New Credit Facility contains numerous financial and operating covenants,
including restrictions on the ability of the Company to pay dividends; incur
indebtedness; merge, consolidate or transfer all or substantially
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all of its assets; make certain sales of assets; make investments in joint
ventures; make capital expenditures; create, incur or permit the existence of
certain liens, and requires the Company to achieve and maintain certain
financial ratios. See "Description of New Credit Facility." Such financial
covenants affect the operating flexibility of the Company. The failure to
comply with the covenants would result in a default and permit the lenders
under the New Credit Facility to accelerate the maturity of the indebtedness
issued thereunder. In addition, the Certificate of Designation, the Notes
Indenture and the Exchange Indenture contain a number of restrictive covenants
relating to the Company.
RISKS ASSOCIATED WITH EXCHANGE DEBENTURES
Subject to the satisfaction of certain conditions, the Senior Preferred
Stock is exchangeable at the option of the Company for subordinated debt
securities of the Company ("the Company Exchange Debentures") or general
unsecured debt securities of Holdings ("Holdings Exchange Debentures"). See
"Description of Senior Preferred Stock and Exchange Debentures--The Senior
Preferred Stock--Exchange."
Subordination of Company Exchange Debentures; Absence of Subsidiary
Guarantees. The Company Exchange Debentures, if issued, will be general
unsecured obligations of the Company, subordinated in right of payment to all
existing and future Senior Debt of the Company to the extent set forth in the
Exchange Indenture. As of April 30, 1998, after giving pro forma effect to the
Recapitalization, the aggregate amount of outstanding Senior Debt of the
Company would have been approximately $126.7 million. The subordination
provisions of the Exchange Indenture provide that no payment other than in
Qualified Capital Stock (as defined herein) of the Company or subordinated
debt securities of the Company that require no payment of principal prior to
the stated maturity of the Company Exchange Debentures and that are
subordinated and junior in right of payment to Senior Debt at least to the
same extent as the Company Exchange Debentures (with terms no less favorable
to the Company and the holders of the Designated Senior Debt (as defined
herein) than the terms of the Company Exchange Debentures and the Exchange
Indenture) may be made by or on behalf of the Company or any Subsidiary (as
defined herein), including, without limitation, by way of set-off or
otherwise, for or on account of the Company Exchange Debentures or any
Obligations (as defined herein) under the Company Exchange Debentures or the
Exchange Indenture, or for or on account of the purchase, redemption or other
acquisition of the Company Exchange Debentures or any Obligations under the
Company Exchange Debentures or the Exchange Indenture, and neither the Trustee
(as defined herein) nor any holder or owner of any Company Exchange Debentures
shall take or receive from the Company or any Subsidiary, directly or
indirectly in any manner, payment in respect of all or any portion of Company
Exchange Debentures or for or on account of the purchase, redemption or other
acquisition of the Company Exchange Debentures or in respect of any other
Obligations under the Company Exchange Debentures or the Exchange Indenture
following the occurrence of a Payment Default (as defined herein) and such
prohibition shall continue until such Payment Default is cured, waived in
writing or ceases to exist. In addition, upon the occurrence and during the
continuance of a Non- Payment Event of Default (as defined herein) on any
Designated Senior Debt, no payment or distribution of any assets or securities
of the Company of any kind or character other than Qualified Capital Stock of
the Company or subordinated debt securities of the Company that require no
payment of principal prior to the stated maturity of the Company Exchange
Debentures and that are subordinated and junior in right of payment to Senior
Debt at least to the same extent as the Company Exchange Debentures (with
terms no less favorable to the Company and the holders of the Designated
Senior Debt than the terms of the Company Exchange Debentures and the Exchange
Indenture) may be made by the Company, including, without limitation, by way
of set-off or otherwise, for or on account of the Company Exchange Debentures
or any Obligations under the Company Exchange Debentures or the Exchange
Indenture, or for or on account of the purchase or redemption or other
acquisition of Company Exchange Debentures or any other Obligations under the
Company Exchange Debentures or the Exchange Indenture for a designated period
of time. Upon any payment or distribution of assets of the Company upon
liquidation, dissolution, reorganization, insolvency, or any similar
proceeding, the holders of Senior Debt will be entitled to receive prior
indefeasible payment and satisfaction in full in cash before the holders of
the Company Exchange Debentures are entitled to receive any payment. See
"Description of the Senior Preferred Stock and Exchange Debentures--The
Exchange Debentures--Subordination."
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The Company's obligations under the Company Exchange Debentures, if issued,
will be subordinate in right of payment to the New Credit Facility and the
Notes. In addition, the Company's obligations under the New Credit Facility
are secured by a security interest in certain capital stock of certain
subsidiaries of the Company and certain other assets of the Company and
certain of its domestic subsidiaries, and the New Credit Facility contains
certain restrictions and covenants customary to bank credit facilities,
including the maintenance of specified financial ratios. In the event of a
default under the New Credit Facility, or a bankruptcy, liquidation or
reorganization of the Company or certain of its subsidiaries, the lenders
thereunder will have a prior, secured claim on such capital stock and certain
other assets. See "Description of New Credit Facility."
In addition, the rights of the Company and its creditors, including holders
of the Exchange Debentures, to realize upon the assets of a Subsidiary of the
Company upon such Subsidiary's liquidation or reorganization will be subject
to the prior claims of such Subsidiary's creditors, except to the extent that
the Company may itself be a creditor with recognized claims against such
Subsidiary; in such case, the Company's claim would nevertheless be subject to
any security interests in the assets of such Subsidiary and subordinated to
any indebtedness of such Subsidiary senior to claims of the Company. As of
April 30, 1998, after giving pro forma effect to the Recapitalization, the
liabilities of the Company's Subsidiaries would have totaled $211.6 million,
including approximately $109.2 million of trade payables and obligations other
than for borrowed money. Approximately 60% of the Company's net sales and
approximately 58% of the Company's operating income prior to amortization of
intangibles for fiscal 1998 were derived from operations conducted through
Subsidiaries.
Although a majority of the Company's assets is held through Subsidiaries
which will not be guarantors of the Company's obligations under the Company
Exchange Debentures, the Company is an operating company with substantial
assets. In order to afford the Company flexibility to operate its business as
an integrated enterprise, the Exchange Indenture does not restrict the
Company's ability to transfer assets to its Restricted Subsidiaries. While the
Company has no intention of transferring operating assets to its Subsidiaries,
except in the ordinary course of business, there is no restriction on the
Company's ability to transfer all of its assets to its Restricted
Subsidiaries, thereby becoming a holding company whose only assets consist of
the capital stock of its Subsidiaries.
Effective Subordination of Holdings Exchange Debentures. Samsonite Holdings
Inc. will be the issuer of the Holdings Exchange Debentures, if issued. If the
Company transfers its assets to Samsonite Holdings Inc., then Samsonite
Holdings Inc. will be a holding company whose only material asset will be the
capital stock of the Company. As a result, Samsonite Holdings Inc. will be
dependent upon payments or other transfers of funds from the Company to
generate the funds necessary to meet its obligations, including payments in
respect of the Holdings Exchange Debentures. The ability of the Company to
make such payments or transfers of funds will be subject to, among other
things, the availability of sufficient cash and may be subject to the
restrictive covenants contained in the New Credit Facility, the Notes
Indenture and future debt agreements. The New Credit Facility and the Notes
Indenture restrict the Company's ability to make such payments and other
transfers of funds, subject to certain limited exceptions. Therefore, no
assurance can be given that Samsonite Holdings Inc. will have sufficient funds
to make payments in respect of the Holdings Exchange Debentures when due. See
"Concurrent Offering," "Description of Senior Preferred Stock and Exchange
Debentures--The New Senior Preferred Stock--Exchange" and "New Credit
Facility."
CONTROLLING STOCKHOLDER
Affiliates of Apollo Advisors, L.P. (collectively, "Apollo") beneficially
own approximately 34.1% of the outstanding Common Stock. See "Security
Ownership of Certain Beneficial Owners and Management." By reason of such
percentage ownership, Apollo may have significant control over the management
and policies of the Company.
LITIGATION AND CONTINGENT OBLIGATIONS
In May 1993, the United States Bankruptcy Court for the Southern District of
New York confirmed Astrum's Chapter 11 Plan of Reorganization, pursuant to
which Astrum effected a comprehensive restructuring
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that, among other things, created certain contingent obligations. In addition,
the Company is a party to certain currently pending litigation, including
recently filed purported class action lawsuits. See "Business--Legal
Proceedings" and Note 14 to the Company's consolidated financial statements
included elsewhere in this Prospectus for a description of these matters.
FRAUDULENT CONVEYANCE RISKS
The incurrence by the Company of indebtedness, including indebtedness in
connection with the New Credit Facility and the Notes offered in the
Concurrent Offering, and the subsequent transfer of a portion of the proceeds
thereof to the Company's stockholders to purchase Common Stock in the Tender
Offer, may be subject to review under relevant federal and state fraudulent
conveyance statutes in a bankruptcy, reorganization or rehabilitation case or
similar proceeding or in a lawsuit by or on behalf of unpaid creditors of the
Company. Under these fraudulent conveyance statues, if a court were to find
that, at the time of the Recapitalization, (i) the Company incurred the
indebtedness and purchased the Common Stock in the Tender Offer with the
intent of hindering, delaying or defrauding current or future creditors or
(ii)(a) the Company received less than reasonably equivalent value or fair
consideration in connection with the Recapitalization and (b) the Company (1)
was insolvent or was rendered insolvent by reason of the Recapitalization,
including the incurrence of the indebtedness related thereto, (2) was engaged
in a business or transaction for which its assets constituted unreasonably
small capital, (3) intended to incur, or believed that it would incur
obligations beyond its ability to pay as such obligations mature (as the
foregoing terms are defined in or interpreted under the fraudulent conveyance
statutes) or (4) was a defendant in an action for money damages, or had a
judgment for money damages docketed against it (if, in either case, after
final judgment the judgment is unsatisfied), such court could determine to
invalidate such indebtedness, in whole or in part, as a fraudulent conveyance
or subordinate such indebtedness to existing or future creditors of the
Company.
IMPLEMENTATION OF BUSINESS STRATEGY; FORWARD-LOOKING STATEMENTS
The Company's business strategy includes plans to broaden product offerings
and channels of distribution, strengthen marketing and product innovation,
continue worldwide expansion, reduce excess working capital and resolve U.S.
wholesale issues. The Company's strategic plan should be considered in light
of the risks and expenses associated with implementing these strategies.
Successful implementation of these strategies will depend on numerous factors,
many of which are beyond the Company's control, including economic,
competitive and other conditions and uncertainties and the ability to retain
qualified management personnel. No assurance can be given that the Company
will be successful in implementing its business strategy.
Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this Prospectus (including certain
documents incorporated herein by reference) constitute "forward-looking
statements" 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 the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following: general
economic and business conditions, including foreign currency fluctuations;
industry capacity; changes in customer preferences; demographic changes;
competition; changes in methods of distribution and technology; changes in
political, social and economic conditions and local regulations, particularly
in Europe and Asia; general levels of economic growth in emerging market
countries such as India, China, Brazil, Argentina, and other Asian and South
American countries; the loss of any significant customers; completion of new
product developments within anticipated time frames; changes in interest
rates; and various other factors beyond the Company's control.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Issuer will be required to
make an offer to purchase all of the outstanding Senior Preferred Stock and/or
Exchange Debentures, as the case may be, at a price equal to 101%
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of the aggregate amount thereof plus accrued and unpaid dividends or interest,
as the case may be, thereon to the purchase date. The occurrence of certain of
the events that would constitute a Change of Control would constitute a
default under the New Credit Facility and might constitute a default under
other indebtedness of the Company. In addition, the New Credit Facility
prohibits the purchase of the Senior Preferred Stock and/or Exchange
Debentures, as the case may be, by the Issuer in the event of a Change of
Control, unless and until such time as the indebtedness under the New Credit
Facility is repaid in full. The Issuer's failure to purchase the Senior
Preferred Stock and/or Exchange Debentures, as the case may be, in such
instance would result in a default under each of the Certificate of
Designation, the Exchange Indenture and the New Credit Facility. The inability
to repay the indebtedness under the New Credit Facility, if accelerated, could
have material adverse consequences to the Company and to the holders of the
Senior Preferred Stock and/or Exchange Debentures, as the case may be. Future
equity or indebtedness of the Issuer may also contain prohibitions of certain
events or transactions that could constitute a Change of Control or require
such equity or indebtedness to be repurchased upon a Change of Control. See
"Description of the Senior Preferred Stock and Exchange Debentures--Change of
Control." In the event of a Change of Control, there can be no assurance that
the Issuer would have sufficient assets to satisfy all of its obligations
under the New Credit Facility and the Senior Preferred Stock and/or Exchange
Debentures, as the case may be.
LIMITATION ON NET OPERATING LOSS CARRYFORWARDS
Following the Recapitalization, the ability of the Company to utilize its
net operating loss carryforwards for United States federal income tax purposes
may be subject to certain limitations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
EFFECT OF YEAR 2000 ISSUES ON COMPANY OPERATIONS
The Company has conducted a review of its computer systems to identify the
systems that could be affected by the Year 2000 issue which results from
computer programs being written using two digits rather than four to define
the applicable year. Any computer programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000,
resulting in a major system failure or miscalculations. In the U.S., the
Company is installing new financial, manufacturing and distribution software
which is Year 2000 compliant. The Company is experiencing certain difficulties
in connection with the conversion of its systems to its new distribution
software, as described in the press release included as an exhibit to the
Company's report on Form 8-K, dated August 12, 1998, incorporated herein by
reference. See "Available Information" and "Incorporation of Certain Documents
by Reference." These new systems are being installed in response to other
business needs as well as Year 2000 issues. The Company's European division is
updating its systems to be Year 2000 compliant and expects this to be
completed during fiscal 1999. Other operations throughout the world are
generally using recently purchased software which is Year 2000 compliant. The
Company estimates it will spend approximately $8 million in the U.S. for new
systems by the end of fiscal 1999; costs incurred in Europe and the remainder
of the world for Year 2000 compliance are not expected to be material.
Although the Company believes it has identified internal Year 2000 issues
which might have a significant impact on operations, no assurance can be given
that all such issues have been identified or will be corrected. Additionally,
no assurances can be given that the Company's customers, vendors, banks or
other third parties will not experience Year 2000 issues which may have a
significant impact on the Company's operations.
ABSENCE OF PUBLIC MARKET FOR THE SENIOR PREFERRED STOCK
The New Senior Preferred Stock is being offered to the holders of the Old
Senior Preferred Stock. The Old Senior Preferred Stock was issued on June 24,
1998 to a limited number of institutional investors and is eligible for
trading in the Private Offering, Resale and Trading through Automated Linkages
Market, the National Association of Securities Dealers' screenbased, automated
market for trading of securities eligible for resale under Rule 144A. To the
extent that shares of Old Senior Preferred Stock are tendered and accepted in
the Exchange Offer, the trading market for the remaining untendered shares of
Old Senior Preferred Stock could be adversely affected. There is no existing
trading market for the New Senior Preferred Stock, and there can be no
26
<PAGE>
assurance regarding the future development of a market for the New Senior
Preferred Stock, or the ability of holders of the New Senior Preferred Stock
to sell their shares of New Senior Preferred Stock or the price at which such
holders may be able to sell their shares of New Senior Preferred Stock. If
such a market were to develop, the New Senior Preferred Stock could trade at
prices that may be higher or lower than the initial offering price of the Old
Senior Preferred Stock depending on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
securities. Although the Initial Purchaser has informed the Company that it
currently intends to make a market in the New Senior Preferred Stock, it is
not obligated to do so, and any such market making may be discontinued at any
time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Senior Preferred Stock. The
Company does not intend to apply for listing of the New Senior Preferred Stock
on any securities exchange or for quotation through the National Association
of Securities Dealers Automated Quotation System.
THE RECAPITALIZATION
The Old Senior Preferred Stock was issued as part of the recapitalization of
the Company (the "Recapitalization") involving the repurchase pursuant to the
Tender Offer of 10.5 million shares of Common Stock at a purchase price of
$40.00 per share ($420 million in the aggregate) and the refinancing of
certain existing indebtedness. Concurrently with the consummation of the
offering of the Old Senior Preferred Stock, the Company and its principal
European subsidiary entered into the New Credit Facility to obtain funds that,
together with the net proceeds of the offering of the Old Senior Preferred
Stock and the Concurrent Offering of Notes, were used to finance the
Recapitalization. See "Concurrent Offering" and "Description of New Credit
Facility."
The following table sets forth the sources and uses of funds in connection
with the Recapitalization (in millions):
<TABLE>
<S> <C>
SOURCES:
New Credit Facility--Term Loan Facilities.......................... $110.0
Proceeds from sale of Old Senior Preferred Stock and warrants...... 175.0
Proceeds from sale of Notes........................................ 350.0
------
Total.......................................................... $635.0
======
USES:
Tender Offer....................................................... $420.0
Repayment of existing indebtedness................................. 180.0
Estimated fees and expenses(a)..................................... 25.9
Working capital.................................................... 9.1
------
Total.......................................................... $635.0
======
</TABLE>
- --------
(a) Includes discounts and commissions payable in connection with the offering
of the Old Senior Preferred Stock and the Concurrent Offering, fees
payable in connection with the New Credit Facility and investment banking,
legal, accounting, printing and other miscellaneous fees and expenses in
connection with the Recapitalization.
27
<PAGE>
CONCURRENT OFFERING
Concurrently with the consummation of the sale of the Old Senior Preferred
Stock, the Company issued and sold $350 million aggregate principal amount of
Notes in a transaction exempt from, or not subject to, the registration
requirements of the Securities Act. The net proceeds to the Company from the
Concurrent Offering were approximately $337.7 million. The interest rate on
the Notes is 10 3/4% per annum, payable in cash semi-annually in arrears. The
Notes will mature on June 15, 2008.
The Notes are redeemable at the option of the Company in whole or in part,
at any time on or after June 15, 2003, at a premium to principal amount
(declining to 100% of principal amount on June 15, 2006), plus accrued and
unpaid interest thereon to the redemption date. In addition, the Company, at
its option, may redeem in the aggregate up to 40% of the principal amount of
the Notes originally issued, at any time and from time to time prior to June
15, 2001, at a redemption price equal to 110.75% of the aggregate principal
amount so redeemed, plus accrued and unpaid interest thereon to the redemption
date with the Net Proceeds of one or more Equity Offerings; provided that at
least $210 million aggregate principal amount of Notes remain outstanding
immediately after any such redemption and that any such redemption occurs
within 90 days after the receipt by the Company of the proceeds of such Equity
Offering. The Notes will be redeemable at the option of the holders thereof
upon a Change of Control of the Company at a redemption price of 101% of
principal amount, plus accrued and unpaid interest thereon to the purchase
date.
The Notes Indenture contains certain restrictive covenants customary for
similar securities, including limitations on the ability of the Company and
its Restricted Subsidiaries to: (i) incur additional indebtedness; (ii) pay
dividends and make certain other distributions; (iii) issue capital stock of
Restricted Subsidiaries; (iv) make certain investments; (v) repurchase stock;
(vi) create liens; (vii) enter into transactions with affiliates; (viii)
create dividend and other payment restrictions affecting Restricted
Subsidiaries; (ix) merge or consolidate; and (x) sell or transfer assets.
These covenants are subject to a number of important exceptions.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the offering of the Old Senior Preferred Stock were
approximately $168.9 million, after deducting discounts and commissions and
expenses related to the offering of the Old Senior Preferred Stock. The
Company used such net proceeds, together with the net proceeds from the
Concurrent Offering and borrowings under the New Credit Facility, to
repurchase 10.5 million shares of its outstanding Common Stock pursuant to the
Tender Offer, to refinance certain existing indebtedness and to pay related
fees and expenses. The existing indebtedness of the Company repaid consisted
of borrowings under the Company's then existing senior credit facility (the
"Old Credit Facility"), which was terminated upon completion of the offering
of the Old Senior Preferred Stock. As of April 30, 1998, there were
approximately $186.7 million of outstanding borrowings under the Old Credit
Facility which bore interest at a weighted average rate of approximately 5.8%
per annum. An affiliate of the Initial Purchaser is an agent under the New
Credit Facility. See "The Recapitalization," "Capitalization," "Selected
Historical and Pro Forma Consolidated Financial Information" and "Plan of
Distribution."
28
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents, short-term
obligations, and capitalization of the Company as of April 30, 1998, as
adjusted to give pro forma effect to the Recapitalization as if it had
occurred on April 30, 1998. See "The Recapitalization" and "Use of Proceeds."
The information set forth below should be read in conjunction with "Selected
Historical and Pro Forma Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF APRIL 30, 1998
--------------------------------
AS
ACTUAL ADJUSTMENTS ADJUSTED
--------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................. $ 6,911 $ 2,301 $ 9,212
========= ========= =========
Short-term debt and current installments
of long-term obligations................. $ 13,746 $ -- $ 13,746
--------- --------- ---------
Long-term obligations:
Old Credit Facility..................... 186,699 (186,699) --
New Credit Facility..................... -- 110,000 110,000
Capital leases and other obligations.... 16,398 -- 16,398
11 1/8% Series B Senior Subordinated
Notes.................................. 532 -- 532
Notes................................... -- 350,000 350,000
--------- --------- ---------
Total long-term obligations........... 203,629 273,301 476,930
--------- --------- ---------
Total obligations................... 217,375 273,301 490,676
--------- --------- ---------
Redeemable Preferred Stock................ -- 163,080 163,080 (a)
Stockholders' equity:
Preferred stock, $.01 par value;
2,000,000 shares authorized; no shares
issued and outstanding................. -- -- --
Common stock, $.01 par value; 60,000,000
shares authorized; 20,420,902 shares
issued and outstanding; 9,920,902
shares outstanding, as adjusted........ 204 -- 204
Additional paid-in capital.............. 419,283 5,820 425,103
Accumulated deficit..................... (206,098) (3,241) (209,339)
Foreign currency translation adjust-
ment................................... (15,857) -- (15,857)
Unearned compensation-restricted stock.. (23) -- (23)
Treasury stock, at cost................. -- (420,000) (420,000)
--------- --------- ---------
Total stockholders' equity (deficit).. $ 197,509 $(417,421) $(219,912)
========= ========= =========
Total capitalization (including
short-term debt, net of cash and
cash equivalents).................. $ 407,973 $ 16,659 $ 424,632
========= ========= =========
</TABLE>
- -------
(a) The carrying value of the Senior Preferred Stock (which is mandatorily
redeemable) is recorded net of issuance costs of approximately $6.1
million and the aggregate value assigned to the warrants to purchase
Common Stock of $5.82 million, which will be amortized over the twelve-
year term of the Senior Preferred Stock.
29
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The selected historical consolidated financial information for the Company
presented below has been derived from the Company's audited consolidated
financial statements as of and for the fiscal years ended January 31, 1998,
1997, 1996 and 1995, the seven months ended January 31, 1994 and the five
months ended June 30, 1993 which have been restated for discontinued
operations and from the Company's unaudited consolidated financial statements
as of and for the three months ended April 30, 1998 and 1997. The Company's
unaudited consolidated financial statements as of and for the three months
ended April 30, 1998 and 1997 include, in the opinion of management, all
adjustments, consisting only of normal nonrecurring adjustments, which the
Company considers necessary for a fair presentation of the financial position
and results of operations of the Company for these periods. Operating results
for the three months ended April 30, 1998 are not necessarily indicative of
the results that may be expected for the full year. The selected historical
consolidated financial information presented below should be read in
conjunction with "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's consolidated
financial statements and related notes thereto included elsewhere in this
Prospectus. The pro forma financial information presented below gives effect
to the Recapitalization as if it had occurred on February 1, 1997, in the case
of the statement of operations and other data, and on the balance sheet date,
in the case of the balance sheet data. The selected pro forma financial data
are presented for illustrative purposes only and are not necessarily
indicative of the operating results or financial position that would have
occurred if the Recapitalization had been consummated on the dates indicated,
nor are they necessarily indicative of future operating results or financial
position.
<TABLE>
<CAPTION>
PREDECESSOR REORGANIZED
COMPANY(A) COMPANY(A)
----------- -----------------------------------------------------------------------------
COMBINED
FIVE SEVEN TWELVE
MONTHS MONTHS MONTHS
ENDED ENDED ENDED YEAR ENDED JANUARY 31,
JUNE 30, JANUARY 31, JANUARY 31, -----------------------------------------------------
1993 1994 1994 1995 1996 1997 1998
----------- ----------- ----------- --------- -------- -------- --------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales(b)................. $192,519 $331,100 $523,619 $ 635,452 $675,209 $741,138 $736,875 $736,875
Cost of Goods Sold........... 113,032 196,777 309,809 373,967 414,691 449,333 424,349 424,349
-------- -------- -------- --------- -------- -------- -------- --------
Gross Profit................. 79,487 134,323 213,810 261,485 260,518 291,805 312,526 312,526
Selling, General and Adminis-
trative
Expenses.................... 66,094 97,480 163,574 197,716 203,701 233,761(c) 234,257 239,485(d)
Amortization of Intangible
Assets(e)................... 206 39,924 40,130 67,189 63,824 31,837 7,101 7,101
Provision for Restructuring
Operations.................. -- -- -- -- 2,369 10,670 1,866 1,866
-------- -------- -------- --------- -------- -------- -------- --------
Operating Income (Loss)...... 13,187 (3,081) 10,106 (3,420) (9,376) 15,537 69,302 64,074
Interest Income.............. -- 4,342 4,342 2,909 4,709 1,419 2,574 2,574
Interest Expense and
Amortization of Debt Issue
Costs and Premium........... 4,404(f) 24,839 29,243 37,875 39,974 35,670 19,918 52,918(g)
Other Income--Net(h)......... 360 5,504 5,864 2,729 3,967 18,821 28,294 28,294
Reorganization Items......... 462,447 -- 462,447 -- -- -- -- --
Income Tax Expense........... 2,313 6,797 9,110 10,619 9,095 10,389 23,088 8,561(i)
Minority Interest in Earnings
of
Subsidiaries................ (901) (1,148) (2,049) (931) (1,385) (1,041) (287) (287)
-------- -------- -------- --------- -------- -------- -------- --------
Income (Loss) from Continuing
Operations.................. 468,376 (26,019) 442,357 (47,207) (51,154) (11,323) 56,877 33,176
Income (Loss) from Operations
Discontinued and Sold,
Cumulative
Effect of Change in
Accounting
Principles and Extraordinary
Items....................... 456,448 (25,502) 430,946 (64,372) (10,293) -- (16,178) (22,402)
-------- -------- -------- --------- -------- -------- -------- --------
Net Income (Loss)............ $924,824 $(51,521) $873,303 $(111,579) $(61,447) $(11,323) $ 40,699 $ 10,774
======== ======== ======== ========= ======== ======== ======== ========
Senior Preferred Stock
Dividends(j)................ 26,570
--------
Net Income (Loss) Available
to Common Stockholders...... $(15,796)
========
</TABLE>
(table continues on the following page)
30
<PAGE>
(table continued from the previous page)
<TABLE>
<CAPTION>
PREDECESSOR REORGANIZED
COMPANY(A) COMPANY(A)
----------- -----------------------------------------------------------------------------
COMBINED
FIVE SEVEN TWELVE
MONTHS MONTHS MONTHS
ENDED ENDED ENDED YEAR ENDED JANUARY 31,
JUNE 30, JANUARY 31, JANUARY 31, --------------------------------------------------
1993 1994 1994 1995 1996 1997 1998
----------- ----------- ----------- -------- -------- -------- --------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (Loss) per
Share--Basic(j):
Continuing Operations.. $(1.68) $ (3.05) $ (3.24) $ (.71) $ 2.81 $ .68
Net Income (Loss)...... (3.33) (7.22) (3.89) (.71) 2.01 (1.62)
Income (Loss) per
Share--
Assuming Dilution(j):
Continuing Operations.. (1.68) (3.05) (3.24) (.71) 2.70 .62
Net Income (Loss)...... (3.33) (7.22) (3.89) (.71) 1.93 (1.49)
BALANCE SHEET DATA (AS
OF END OF PERIOD):
Property, Plant and
Equipment, Net......... $ 131,894(k) $137,686 $140,912 $143,959 $142,351 $142,351
Total Assets............ 1,111,735(k) 866,000 607,443 592,658 610,049 654,682
Long-Term Obligations
(Including Current
Installments).......... 573,197(l) 417,175 310,959 290,617 179,223 484,421
Redeemable Preferred
Stock.................. -- -- -- -- -- 163,080
Stockholders' Equity
(Deficit).............. 253,693(l) 148,472 25,116 24,998 208,886 (214,759)
OTHER DATA:
EBIT(m)................. $ 15,970 $ (691) $ (5,409) $ 34,358 $ 97,596 $ 97,596
Depreciation and
Amortization........... 55,024 85,486 84,101 53,889 28,594 28,594
---------- -------- -------- -------- -------- --------
EBITDA(n)............... 70,994 84,795 78,692 88,247 126,190 126,190
Items Relating to
Settlement of
Contingent Liabilities
and Other Adjustments.. (4,797) (2,864) (357) (3,368) (13,762) (13,762)
---------- -------- -------- -------- -------- --------
Adjusted EBITDA(o)...... $ 66,197 $ 81,931 $ 78,335 $ 84,879 $112,428 $112,428
========== ======== ======== ======== ======== ========
Ratio of Adjusted EBITDA
to Pro Forma Interest
Expense, Net(p)........ -- -- -- -- -- 2.23x
Ratio of Earnings to
Fixed Charges(q)....... -- -- -- 1.00x 4.39x 1.05x
Capital Expenditures.... $ 13,095 $ 18,453 $ 21,668 $ 31,093 $ 36,313 $ 36,313
</TABLE>
(see footnotes on the following pages)
31
<PAGE>
<TABLE>
<CAPTION>
REORGANIZED
COMPANY(A)
--------------------------------------------
THREE MONTHS ENDED APRIL 30,
--------------------------------------------
1997 1998
------------ ------------------------------
HISTORICAL PRO FORMA
--------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales(b).................... $ 169,562 $ 156,676 $ 156,676
Cost of Goods Sold.............. 99,293 97,273 97,273
------------ ------------- -------------
Gross Profit.................... 70,269 59,403 59,403
Selling, General and Administra-
tive Expenses.................. 54,656 59,621 59,621
Amortization of Intangible
Assets(e)...................... 1,824 1,526 1,526
Provision for Restructuring
Operations..................... (600) 2,608 2,608
------------ ------------- -------------
Operating Income (Loss)......... 14,389 (4,352) (4,352)
Interest Income................. 465 791 791
Interest Expense and
Amortization of Debt Issue
Costs and Premium.............. 6,207 4,808 13,408 (g)
Other Income--Net(h)............ 6,899 998 998
Income Tax Expense (Benefit).... 6,829 (2,924) (6,192)(i)
Minority Interest in Earnings of
Subsidiaries................... (218) (256) (256)
------------ ------------- -------------
Income (Loss) from Continuing
Operations..................... 8,499 (4,703) (10,035)
Income (Loss) from Operations
Discontinued and Sold,
Cumulative Effect of Change in
Accounting Principles and
Extraordinary Items............ (6,633) (6,224) --
------------ ------------- -------------
Net Income (Loss)............... $ 1,866 $ (10,927) $ (10,035)
============ ============= =============
Senior Preferred Stock
Dividends(j)................... 7,210
-------------
Net Income (Loss) Available to
Common Stockholders............ $ (17,245)
=============
Income (Loss) per Share--
Basic(j):
Continuing Operations.......... $ 0.43 $ (0.23) $ (1.74)
Net Income (Loss).............. 0.09 (0.54) (1.74)
Income (Loss) per Share--
Assuming Dilution(j):
Continuing Operations.......... 0.41 (0.23) (1.74)
Net Income (Loss).............. 0.09 (0.54) (1.74)
BALANCE SHEET DATA (AS OF END OF
PERIOD):
Property, Plant and Equipment,
Net............................ $ 141,092 $ 140,964 $ 140,964
Total Assets.................... 589,404 617,758 636,718
Long-Term Obligations (Including
Current Installments).......... 161,728 208,291 481,592
Redeemable Preferred Stock...... -- -- 163,080
Stockholders' Equity (Deficit).. 173,768 197,509 (219,912)
OTHER DATA:
EBIT(m)......................... $ 21,288 $ (3,354) $ (3,354)
Depreciation and Amortization... 7,208 6,943 6,943
------------ ------------- -------------
EBITDA(n)....................... 28,496 3,589 3,589
Items Relating to Settlement of
Contingent Liabilities and
Other Adjustments.............. (5,296) 2,302 2,302
------------ ------------- -------------
Adjusted EBITDA(o).............. $ 23,200 $ 5,891 $ 5,891
============ ============= =============
Ratio of Adjusted EBITDA to Pro
Forma Interest Expense, Net.... -- -- (p)
Ratio of Earnings to Fixed
Charges(q)..................... 3.17x -- --
Capital Expenditures............ $ 8,002 $ 7,433 $ 7,433
</TABLE>
(see footnotes on the following pages)
32
<PAGE>
IMPACT OF FAIR VALUE ADJUSTMENTS ATTRIBUTABLE TO THE REORGANIZATION OF ASTRUM,
RESTRUCTURINGS AND CERTAIN OTHER EXPENSES:
Included in the Company's statements of operations are amortization and
depreciation related to adjustments of assets and liabilities to fair value in
connection with the adoption of 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") in June
1993. The most significant adjustment related to reorganization value in
excess of identifiable assets which was amortized over the three-year period
ended June 1996. The Company also recorded fresh start adjustments to reflect
tradenames, licenses, patents, and other intangibles at their fair values,
which are being amortized over periods ranging from one to forty years.
Property and equipment adjusted to fair values in connection with the adoption
of SOP 90-7 are being depreciated over their respective useful lives,
primarily ranging from two to six years. In addition, the Company's statements
of operations include provisions for restructuring operations in fiscal 1996,
1997 and 1998 as well as certain other expenses associated with the fiscal
1997 restructuring and management team changes. Such other expenses in fiscal
1997 include those incurred for consulting services in connection with
establishing the fiscal 1997 restructuring plan, the cessation of the former
chief executive officer's employment, the hiring of new and additional members
of the executive management team, and for expenses incurred in excess of the
original fiscal 1996 provision for the consolidation of American Tourister
manufacturing facilities.
Due to the significance of these items, management believes that it is
useful to isolate their impact on net income (loss) and operating income
(loss) as shown below. This information does not represent and should not be
considered an alternative to net income, any other measure of performance as
determined by generally accepted accounting principles or as an indicator of
operating performance. The information presented may not be comparable to
similar presentations reported by other companies.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------------------
1996 1997 1998
------------- -------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
IMPACT ON NET INCOME OR LOSS
Fresh Start Amortization and
Depreciation(e)................ $ 66,433 $ 34,484 $ 8,738
Provision for Restructuring
Operations..................... 2,369 10,670 1,866
Certain Other Expenses
Associated with the
Restructuring and Management
Changes(c)..................... -- 5,400 --
Tax Benefit..................... (5,629) (11,319) (4,030)
------------- -------------- -------------
After-Tax Impact on Net Income
or Loss........................ $ 63,173 $ 39,235 $ 6,574
============= ============== =============
Impact on Net Income or Loss Per
Share--Assuming Dilution....... $ 4.00 $ 2.38 $ 0.31
============= ============== =============
IMPACT ON OPERATING INCOME
(LOSS)
Operating Income (Loss)......... $ (9,376) $ 15,537 $ 69,302
Fresh Start Amortization and
Depreciation(e)................ 66,433 34,484 8,738
Provision for Restructuring
Operations..................... 2,369 10,670 1,866
Certain Other Expenses
Associated with the
Restructuring and Management
Changes(c)..................... -- 5,400 --
------------- -------------- -------------
Operating Income Before Fresh
Start Amortization and
Depreciation, Provision for
Restructuring Operations and
Certain Other Expenses
Associated with the
Restructuring and Management
Changes........................ $ 59,426 $ 66,091 $ 79,906
============= ============== =============
</TABLE>
(see footnotes on the following pages)
33
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(a) Prior to July 14, 1995, the Company was a subsidiary of Astrum International
Corp. ("Astrum"). On July 14, 1995, Astrum merged with Samsonite Corporation
and changed its name to Samsonite Corporation. In June 1993, Astrum
completed a financial restructuring pursuant to a plan of reorganization
under Chapter 11 of the United States Bankruptcy Code (the "Plan").
Effective June 30, 1993 and pursuant to SOP 90-7, the Company was required
to adjust its assets and liabilities to their fair ("fresh start") values
and create a new entity for financial reporting purposes. The information
for the "Predecessor Company" reflects activity occurring through June 30,
1993, prior to effectiveness of the Plan, and the information for the
"Reorganized Company" reflects activity occurring after such date. As a
result of the effects of SOP 90-7 on amortization of intangibles,
depreciation, interest expense, and reorganization items, the periods before
and after June 30, 1993 are not comparable.
(b) The Company acquired American Tourister in August 1993. Net sales for the
combined periods comprising the year ended January 31, 1994 include net
sales of $47.7 million of American Tourister for five months. Net sales
for the fiscal years ended January 31, 1995, 1996 and 1997 include net
sales for American Tourister of $117.8 million, $115.0 million and $147.3
million, respectively. Because of the consolidation of American Tourister
wholesale operations with the Company's, comparable American Tourister
sales amount are not available for fiscal year 1998.
(c) Selling, General and Administrative Expenses include $5.4 million of
expenses during the year ended January 31, 1997 for (i) consulting fees to
establish the restructuring plan ($0.8 million), (ii) the cessation of the
former chief executive officer's employment and the change in management
($4.1 million) and (iii) expenses in excess of the original provision in
fiscal 1996 for the consolidation of American Tourister manufacturing
facilities ($0.5 million).
(d) Pro forma Selling, General and Administrative Expenses for the fiscal year
ended January 31, 1998 have been adjusted to reflect a $4.8 million charge
for estimated expenses associated with the process of exploring
alternatives to enhance stockholder value, including the Recapitalization
and a $0.4 million charge for deferred financing costs related to the Old
Credit Facility. Such expenses will be charged to operations in fiscal
1999. In connection with the Recapitalization, certain adjustments and
modifications have been made to outstanding employee stock options as a
result of the consummation of the Tender Offer. Such adjustments will
result in increased compensation expense of approximately $3.9 million in
the second quarter of fiscal 1999, $0.4 million during the remainder of
fiscal 1999 and $0.8 million in fiscal 2000. Such increased compensation
expense is not reflected in Pro Forma Selling, General and Administrative
Expenses.
(e) As discussed in note (a) above, the Company adjusted its assets and
liabilities to their fresh start values effective June 30, 1993. Since
June 30, 1993, the Company's statements of operations include amortization
and depreciation related to these fresh start adjustments. The most
significant fresh start adjustment relates to recording Reorganization
Value in Excess of Identifiable Assets, which was amortized over a three-
year period which ended in June 1996. In addition, fresh start
amortization includes amortization of fresh start adjustments to reflect
the fair value of trademarks, licenses, patents and other intangibles,
which are being amortized over periods from one to forty years. Fresh
start amortization and depreciation also includes depreciation of fresh
start adjustments to reflect the fair value of property and equipment,
depreciated over their estimated useful lives ranging primarily from two
to six years.
Fresh Start Amortization and Depreciation consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JANUARY 31, APRIL 30,
---------------------- --------------------
1996 1997 1998 1997 1998
------- ------- ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FRESH START AMORTIZATION:
Amortization of Reorganization
Value in Excess of Identifi-
able Assets.................. $55,072 $22,947 $ -- $ -- $ --
Amortization of Licenses, Pat-
ents and Trademarks and Oth-
er........................... 7,823 7,976 6,184 1,607 1,432
------- ------- ------ ------- -------
Total Fresh Start Amortiza-
tion Included in Amortiza-
tion of
Intangibles................ 62,895 30,923 6,184 1,607 1,432
------- ------- ------ ------- -------
FRESH START DEPRECIATION--
PROPERTY AND EQUIPMENT:
Included in Cost of Goods
Sold......................... 2,895 2,914 2,093 685 411
Included in Selling, General
and Administrative Expenses.. 643 647 461 151 90
------- ------- ------ ------- -------
Total Fresh Start Deprecia-
tion....................... 3,538 3,561 2,554 836 501
------- ------- ------ ------- -------
Total Fresh Start Amortization
and Depreciation............. $66,433 $34,484 $8,738 $ 2,443 $ 1,933
======= ======= ====== ======= =======
</TABLE>
(footnotes continue on the following page)
34
<PAGE>
(f) In accordance with SOP 90-7, no interest expense on certain indebtedness
outstanding prior to the effectiveness of the Plan was accrued from June
25, 1992 through June 30, 1993.
(g) Pro forma Interest Expense and Amortization of Debt Issue Costs and
Premium gives effect to the issuance of the Notes, and additional
borrowings under the New Credit Facility, including the amortization of
debt issuance costs. The foregoing increase Interest Expense and
Amortization of Debt Issue Costs and Premium by approximately $33.0
million and $8.6 million for the year ended January 31, 1998 and the three
months ended April 30, 1998, respectively. Pro forma Interest Expense and
Amortization of Debt Issue Costs and Premium consists of the following
(in millions):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
JANUARY 31, 1998 APRIL 30, 1998
----------------- ------------------
<S> <C> <C>
Notes................................. $37.6 $ 9.4
New Credit Facility (8.4% on U.S. Term
Loan and 6.1% on
Europe Term Loan).................... 9.2 2.3
Capital lease obligations and other
foreign borrowings................... 4.4 1.3
Non-cash amortization of capitalized
fees and expenses.................... 1.7 0.4
----- -----
Pro forma Interest Expense and Amor-
tization of Debt Issue Costs and
Premium............................ $52.9 $13.4
===== =====
</TABLE>
(h) Other Income--Net for fiscal 1996, 1997 and 1998 and for the three months
ended April 30, 1997 and 1998 consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JANUARY 31, APRIL 30,
------------------------ --------------------
1996 1997 1998 1997 1998
------ ------- ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net realized gains from
foreign currency forward
delivery contracts....... $ (494) $ 2,829 $ 6,463 $ 918 $ 675
Rental income............. 1,735 1,987 1,633 522 252
Equity in loss of uncon-
solidated affiliate...... -- (33) (547) (61) (235)
Pension expense related to
merged plans............. -- -- (706) -- --
Foreign currency transac-
tion losses, net......... (1,660) (211) (1,834) (370) (77)
Unrealized gains from for-
eign currency forward de-
livery contracts......... -- -- -- 2,729 753
Gain (Loss) on disposition
of fixed assets, net..... (245) (62) (377) (7) 737
Other, net................ (737) (1,120) (1,247) (418) (1,107)
Favorable settlement of
claims................... -- 3,802 2,060 2,128 --
Adjustment of allowances
relating to previous op-
erations................. -- 529 5,299 1,458 --
Adjustment of contingent
tax accruals............. -- -- 12,700 -- --
Collection of loans to
settlement trust......... -- -- 4,850 -- --
Adjustment of liability
for PBGC claims.......... -- 11,100 -- -- --
Gain on sale of television
station.................. 5,368 -- -- -- --
------ ------- ------- --------- ---------
$3,967 $18,821 $28,294 $ 6,899 $ 998
====== ======= ======= ========= =========
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for further information with respect to the items
comprising Other Income--Net.
(i) Pro forma Income Tax Expense reflects the tax effect of the additional
interest expense described in note (g) above and the tax effect of certain
other expenses described in note (d) above (an aggregate decrease of $14.5
million and $3.3 million in Income Tax Expense for the year ended January
31, 1998 and the three months ended April 30, 1998, respectively).
(j) Pro forma income (loss) per share data reflects the deduction of pro forma
dividends, the amortization of issuance costs related to the Senior
Preferred Stock and the amortization of the aggregate value assigned to
the Warrants of $5.82 million, which will be amortized over the twelve-
year term of the Senior Preferred Stock.
(footnotes continue on the following page)
35
<PAGE>
(k) Includes the effects of SOP 90-7 "fresh start" adjustments recorded at
June 30, 1993, net of depreciation and amortization. Pursuant to SOP 90-7,
the net book value of property and equipment was increased by $34 million
and intangible and other assets were increased by $530 million.
(l) Pursuant to SOP 90-7, under the Plan effected in June 1993, $1.5 billion
in long-term debt subject to compromise, including accrued interest, was
forgiven in exchange for $500 million principal amount of senior secured
notes, approximately $342 million in cash and 15 million shares of common
stock. In July 1995, the senior secured notes were redeemed with the
proceeds from the sale of the 11 1/8% Series A Senior Subordinated Notes
and borrowings under the Company's U.S. banking lines.
(m) EBIT is defined as Income (Loss) from Continuing Operations plus Interest
Expense and Amortization of Debt Issue Costs and Premium and Income Tax
Expense plus Minority Interest in Earnings of Subsidiaries less
Reorganization Items plus, in the case of pro forma EBIT, certain expenses
described in note (d) above.
(n) EBITDA is defined as EBIT (as defined above) plus amortization and
depreciation. The Company believes that EBITDA provides useful information
regarding the Company's ability to service its indebtedness, but it should
not be considered in isolation or as a substitute for operating income or
cash flow from operations (in each case as determined in accordance with
generally accepted accounting principles) as an indicator of the Company's
operating performance or as a measure of the Company's liquidity. Other
companies may calculate EBITDA in a different manner than the Company.
EBITDA does not take into consideration substantial costs and cash flows
of doing business, such as interest expense, income taxes, depreciation
and amortization. EBITDA does not represent funds available for
discretionary use by the Company because those funds are required for debt
service, capital expenditures to replace fixed assets, working capital and
other commitments and contingencies. EBITDA is not an accounting term and
is not used in generally accepted accounting principles.
(o) Adjustments to EBITDA to arrive at Adjusted EBITDA include various income
and expense items included in EBIT and EBITDA which management believes
should be excluded in order to reflect recurring operating performance.
These items include:
(i) Provision for Restructuring Operations of $2.4 million, $10.7 million
and $3.6 million for fiscal 1996, 1997 and 1998, respectively, and
$2.6 million for the three months ended April 30, 1998. In fiscal
1998, the Company's statement of operations reflects a net Provision
for Restructuring Operations of $1.9 million which is comprised of a
gross restructuring charge of $3.6 million for the fiscal year net of
a $1.7 million credit for expenses not incurred with respect to fiscal
1997's $10.7 million Provision for Restructuring Operations;
(ii) Other Income--Net, except for certain recurring transactions,
including net gains from foreign currency forward delivery contracts,
rental income, equity in loss of unconsolidated affiliate and pension
expense related to merged plans (which are reflected in the first four
line items in note (h) above); and
(iii) Unfavorable production variances of $4.1 million during the
second half of fiscal 1998 arising from production problems in
the Company's North American manufacturing operations. These
problems primarily related to implementation of the strategic
plan announced in May 1996 and, in the judgment of management,
were nonrecurring. EBITDA has not been adjusted for production
variances in prior years (which totaled $3.0 million and $2.4
million in fiscal 1996 and fiscal 1997, respectively) or for $5.0
million of additional production variances in fiscal 1998.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for further information with respect to these items.
(footnotes continue on the following page)
36
<PAGE>
(p) The ratio of Adjusted EBITDA to Pro Forma Interest Expense--Net for the 12
months ended April 30, 1998 was 1.90x.
(q) For purposes of computing the ratio of earnings to fixed charges, fixed
charges consist of interest (including the interest component of rental
expenses), amortization of debt expense and dividends on preferred stock.
Earnings consist of earnings from continuing operations before taxes, plus
fixed charges. For the seven months ended January 31, 1994, the fiscal
years ended January 31, 1995 and 1996, the three months ended April 30,
1998, and on a pro forma basis for the three months ended April 30, 1998,
earnings were insufficient to cover fixed charges by $19.4 million, $36.6
million and $40.7 million, $7.1 million and $25.9 million, respectively.
No ratio of earnings to fixed charges for the year ended January 31, 1994
is presented because it is not meaningful due to the significant effect of
applying SOP 90-7. Earnings from continuing operations before taxes
include significant nonrecurring amounts related to various items from the
settlement of certain continuing liabilities from previous operations.
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Historical and Pro Forma Consolidated Financial Information" and the
consolidated financial statements of the Company and notes thereto appearing
elsewhere in this Prospectus. The Company's fiscal year ends on January 31.
References to a fiscal year denote the calendar year in which the fiscal year
ended (for example, "fiscal 1998" refers to the 12 months ended January 31,
1998). The Company's continuing operations consist of a single business
segment, the manufacture and sale of luggage and luggage related products.
RESULTS OF OPERATIONS
RECENT OPERATING RESULTS
On August 12, 1998, the Company filed a report on Form 8-K incorporating a
press release issued the previous day. The press release announced that, based
on currently available information, its preliminary estimate of results for
the second quarter ended July 31, 1998 would be substantially below the
forecasts included in the Company's report on Form 8-K filed with the
Commission on May 20, 1998. It said that net sales for the second quarter are
expected to be in the range of $158.0 million to $163.0 million, EBIT is
expected to be a loss in the range of $11.0 million to $13.0 million, and
Adjusted EBITDA is expected to be in the range of $6.5 million to $8.5
million. The Company's estimate of EBIT reflects $9.3 million of expenses
(which were not included in the forecasts prepared in May) associated with the
Tender Offer, including expenses associated with adjustments to employee stock
options as a result of the Tender Offer, which expenses have been excluded
from Adjusted EBITDA. The Company expects to report actual second quarter
results on or about September 14, 1998. See "Available Information" and
"Incorporation of Certain Documents by Reference."
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 as of April 30,
1998 and for the three months ended April 30, 1998 and 1997 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.
38
<PAGE>
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 to such operations, see "--Recent Events and 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
39
<PAGE>
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.
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 as of April
30, 1998 and for the three months ended April 30, 1998 and 1997 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 as of April 30, 1998 and for the three months ended April
30, 1998 and 1997 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
40
<PAGE>
30, 1998. The extraordinary loss for the three months ended April 30, 1997
resulted from redemption 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 accepted 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.
FISCAL 1998 COMPARED TO FISCAL 1997
The Company analyzes its net sales and operations by the following
categories: (i) "European operations," which consist of its European
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, South America, and Latin America and (iii) "International operations,"
which include the sales, manufacturing and distribution operations in
Singapore, India, Hong Kong, and South Korea, exports to the Far East and
Middle East, and global licensing operations. Beginning in mid-fiscal year
1998, Middle East sales are reported with European operations.
General. Results of European operations were translated from Belgian francs
to U.S. dollars in fiscal 1998 and fiscal 1997 at average rates of
approximately 35.67 and 30.93 francs to the U.S. dollar, respectively. This
decrease in the value of the Belgian franc of 13% resulted in decreases in
European reported sales, cost of sales and other expenses in fiscal 1998
compared to fiscal 1997. 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--Net. During fiscal 1998, the Company had net
gains from such instruments of $6.5 million; during fiscal 1997, the Company
had net gains on such instruments of $2.8 million. The Company estimates the
reduction in operating income from the year-to-year strengthening of the U.S.
dollar versus the Belgian franc to be approximately $5.6 million and $2.9
million in fiscal 1998 and 1997, respectively.
Net Sales. Consolidated net sales decreased from $741.1 million in fiscal
1997 to $736.9 million in fiscal 1998, a decrease of $4.2 million. Fiscal 1998
sales were adversely affected by the large decrease in the value of the
Belgian franc compared to the U.S. dollar in fiscal 1998. Without the effect
of the European exchange rate difference, fiscal 1998 sales would have
increased by $38.3 million or approximately 5%.
On a U.S. dollar basis, sales from European operations decreased from $280.8
million in fiscal 1997 to $277.2 million in fiscal 1998, a decrease of $3.6
million. Expressed in the local European reporting currency
41
<PAGE>
(Belgian francs), fiscal 1998 sales increased by 13.8%, or the U.S. constant
dollar equivalent of $38.9 million, from fiscal 1997; however, the increase
was more than offset by a $42.5 million exchange rate difference. Despite the
effect of the strong U.S. dollar on reported sales, Europe's local results
were much improved over the prior year. Sales of hardside products were 7%
above the prior year due primarily to the success of the new Oyster II
product. Sales of softside products were 22% above the prior year because of
strong traditional softside luggage sales, the new Trunk & Co product line,
and strong computer and other softside business case lines. Sales in most
European countries increased over the prior year, with the exceptions of
Germany and Belgium, where sales were down approximately 1% from fiscal 1997.
Sales from the Americas operations increased from $417.6 million in fiscal
1997 to $423.5 million in fiscal 1998, an increase of $5.9 million or 1.4%.
The increase was largely due to an increase in U.S. retail sales of $30.4
million or 39% from the prior year. Comparable store sales increased by 15.6%
from fiscal 1997 and the number of stores open increased from 149 at January
31, 1997 to 189 at January 31, 1998. The Company has rapidly expanded the
number of retail locations during the past two fiscal years which, along with
the increase in comparable store sales growth, contributed to the 39% growth
in fiscal 1998 sales over fiscal 1997 sales. The Company does not expect to
continue the rate of growth in retail store openings in fiscal 1999 and
therefore will not sustain the level of retail sales growth achieved in fiscal
1998. U.S. wholesale revenues of $274.0 million were less than the prior year
by $21.8 million, or 7.4%. U.S. wholesale sales decreased due to market
disruptions caused by the adverse impact of higher pricing strategies, various
forms of cross distribution channel selling, dealer bankruptcies and product
availability problems associated with forecasting and production issues. The
Company has addressed these issues by focusing on traditional disciplined
channel management and strategic pricing which targets critical retailer price
points and is working on a long-term resolution of forecasting and production
issues in its U.S. wholesale business. Although the Company is taking these
corrective actions, it expects sales in the U.S. wholesale division to
continue to be negatively impacted by the aforementioned factors through at
least the first two quarters of fiscal 1999. Sales from other Americas
operations, including Mexico, Canada and Latin America, were less than the
prior year by an aggregate of $2.7 million. The decrease in the other Americas
countries was caused primarily by a decline in Canadian sales caused by issues
related to product standardization requirements which have been modified
subsequent to January 31, 1998.
Sales from International operations decreased from $42.7 million in fiscal
1997 to $36.2 million in fiscal 1998, a decrease of $6.5 million. Product
sales from export and emerging markets decreased by $4.7 million from fiscal
1997. During fiscal 1998, the Company moved export responsibility for the
Middle East from the Americas to Europe resulting in a decrease in sales
classified as International operations. Export sales from the U.S. to Asia
have been moved to the Company's subsidiaries in Singapore, Hong Kong, and
South Korea entities which were formerly the Company's regional distributors.
Transition issues resulting from the formation of the joint ventures and the
economic problems in Asia resulted in decreased sales in this region. Sales in
India were $2.7 million for fiscal 1998. Samsonite products were introduced to
the Indian market through the new Indian manufacturing and distribution joint
venture which completed construction and began operations in April 1997.
Royalties from global licensing operations decreased by $2.2 million from the
prior year; $1.7 million of the difference occurred largely because $3.9
million of revenues were realized in fiscal 1997 from a single license sale
transaction while fiscal 1998 included approximately $2.2 million from two
separate license sales.
Gross profit. Consolidated gross profit for fiscal 1998 increased from
fiscal 1997 by $20.7 million. Gross margin increased by 3.0 percentage points,
from 39.4% in fiscal 1997 to 42.4% in fiscal 1998.
Gross margins from European operations increased by 0.7 percentage points,
from 39.2% in fiscal 1997 to 39.9% in fiscal 1998. The improvement is due to
price increases in selected product lines and lower costs from standardized
global production sources.
Gross margins for the Americas operations increased 5.1 percentage points
from 38.2% in fiscal 1997 to 43.3% in fiscal 1998. U.S. wholesale margins
increased from 35.8% to 43.9%, primarily as a result of price increases on
product sales to both trade customers and the Company's retail division and
product cost improvements from global sourcing and product design
improvements. The increase in gross margins was
42
<PAGE>
achieved despite negative production variances incurred during the last half
of fiscal 1998 of approximately $4.1 million. Margins in the Americas also
benefitted from a higher mix of retail versus wholesale sales compared to the
prior year. The Company intends to pursue a different marketing and pricing
strategy in fiscal 1999 and expects to roll back certain prices approximately
4% to 6% to conform to previously successful pricing strategies and make
corresponding reductions in the various co-op advertising and sales promotions
costs. Thus, while gross profit margins may decline somewhat from fiscal 1998
levels, the Company believes this strategy will stimulate sales over the long-
term and achieve an increased level of operating profit margin percentages
from U.S. wholesale sales.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $0.5 million from fiscal 1997 to fiscal 1998. As a percent of
sales, SG&A was 31.8% in fiscal 1998 and 31.5% in fiscal 1997.
SG&A for European operations decreased by $5.6 million from fiscal 1997 to
fiscal 1998. The exchange rate difference caused SG&A to decrease by $10.7
million. The remaining increase of $5.1 million was due primarily to higher
variable selling expenses of $2.5 million related to the higher sales levels,
higher advertising expenses of $2.4 million and various other net increases of
$0.2 million.
SG&A for the Americas operations, including worldwide corporate
headquarters, increased by $5.5 million in fiscal 1998 compared to fiscal
1997. In fiscal 1998, U.S. wholesale price increases and the relatively high
rate of new product introductions were supported by increased co-op
advertising allowances and other sales promotion credits given to customers,
particularly during the second half of fiscal 1998. The Company is modifying
this strategy in fiscal 1999 by reducing prices from 4% to 6% on certain
products to better target critical retailer and competitive price points. The
Company will make corresponding reductions in co-op advertising allowances and
sales promotion costs. The Company believes this strategy will better
stimulate sales over the long-term and result in an increased level of
operating profit margin, albeit with lower gross profit margins and lower
selling, general and administrative expenses. SG&A related to U.S. wholesale
operations was approximately equal to fiscal 1997. SG&A related to U.S. retail
operations increased by $10.4 million because of an increase in the number of
stores open and increased sales volume. As a percent of sales, retail SG&A
decreased from 45.9% of sales in fiscal 1997 to 42.6% of sales in fiscal 1998.
SG&A for other Americas operations increased by $1.5 million primarily because
of a new Brazilian joint venture. Corporate SG&A decreased by $6.4 million
from the prior year due primarily to expenses incurred in the prior year
related to expenses associated with a restructuring and changing organization
structure in fiscal 1997.
SG&A for International operations increased by $0.6 million from fiscal 1997
due to the addition of new joint venture subsidiaries in the Far East and
startup of operations in India, net of various cost savings from the
reorganization of export operations from the U.S. to Europe and the Far East.
Amortization of intangible assets. The Company recorded significant
intangible assets as a result of its reorganization in 1993. See Notes 1(b),
1(i) and 7 to the Company's consolidated financial statements included
elsewhere herein for a discussion of the recording and amortization of
intangible assets.
Reorganization value in excess of identifiable assets became fully amortized
in fiscal 1997, which generally accounts for the decrease in amortization of
intangible assets of $24.8 million in fiscal 1998.
Provision for restructuring operations. Over the past three fiscal years,
the Company has recorded a series of restructuring provisions to accrue the
costs of consolidating and reorganizing various operations and realigning its
management and workforce structure. Net restructuring provisions decreased
from $10.7 million in fiscal 1997 to $1.9 million in fiscal 1998. In fiscal
1998, the Company recorded a $3.6 million restructuring provision and reduced
the restructuring provision by $1.7 million for excess accruals related to the
fiscal 1997 restructuring. The fiscal 1998 restructuring includes the
elimination of approximately 180 positions in the Mexico City manufacturing
plant and 20 management positions in the U.S. and is expected to be completed
by July 31, 1998. The provision consists primarily of costs associated with
involuntary employee terminations and is comprised of estimated cash
expenditures of $3.3 million and estimated non-cash charges of $0.3 million.
See the discussion of the fiscal 1997 restructuring provision under Results of
Operations--Fiscal 1997 Compared to Fiscal 1996 and Note 4 to the consolidated
financial statements for further information relative to the restructuring
provisions.
43
<PAGE>
As discussed elsewhere herein, the Company expects U.S. wholesale sales to
be depressed through at least the first half of fiscal 1999 because of various
market factors which affected U.S. wholesale sales in fiscal 1998, including
the adverse impact of price increases and pricing strategies, market
disruptions and retailer discounting issues associated with various forms of
cross distribution channel sales and forecasting and production scheduling
errors. The Company is currently evaluating its U.S. wholesale hardside
production operations in light of various marketing issues the Company is
encountering with its hardside suitcase products in the United States which
have resulted in excess inventory, declining sales and reduced production
requirements. This evaluation may result in additional restructuring charges
related to U.S. wholesale operations in fiscal 1999.
The Company is also 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 dispose of or liquidate this investment. At January 31, 1998, the
Company had a net investment of approximately $2.4 million in this joint
venture.
Operating income (loss). Operating income increased from $15.5 million in
fiscal 1997 to $69.3 million in fiscal 1998. This is a result of increased
gross profit of $20.7 million, the decrease in amortization of intangibles of
$24.8 million and the decrease in restructuring provisions of $8.8 million,
net of the increase in SG&A of $0.5 million.
Interest income. Interest income increased from the prior year by $1.2
million, primarily as a result of nonrecurring interest income received in
fiscal 1998 upon recovery of a loan to the settlement trust created as a
result of the reorganization in 1993. See Note 14 to the consolidated
financial statements included elsewhere herein and the discussion of the
collection of the receivable from the trust under Other income (expense)--net
included elsewhere herein.
Other income (expense)--net. The following is an analysis of other income
(expense)--net for fiscal 1998 compared to fiscal 1997:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Net gains from foreign currency forward delivery
contracts(a)................................... $ 6,463 $ 2,829
Rental income(b)................................ 1,633 1,987
Equity in loss of unconsolidated affiliate(c)... (547) (33)
Pension expense related to merged plans(d)...... (706) --
Foreign currency transaction losses, net (e).... (1,834) (211)
Loss on disposition of fixed assets, net (f).... (377) (62)
Other, net (g).................................. (1,247) (1,120)
Favorable settlement of claims(h)............... 2,060 3,802
Adjustment of allowances relating to previous
operations(i).................................. 5,299 529
Adjustment of contingent tax accruals(j)........ 12,700 --
Collection of loans to settlement trust(k)...... 4,850 --
Adjustment of liability for PBGC claims(l)...... -- 11,100
----------- -----------
$ 28,294 $ 18,821
=========== ===========
</TABLE>
- --------
(a) The Company has entered into certain forward exchange contracts to reduce
its exposures to changes in exchange rates. Other income for fiscal 1998
includes gains from such transactions of $6.5 million. In fiscal 1997,
such transactions resulted in gains of $2.8 million. The income recorded
for fiscal 1998 results primarily from forward exchange contracts selling
forward the Belgian franc which has devalued significantly against the
U.S. dollar since the contracts were executed. The Company estimates that
the reduction in net sales and operating income from the year-to-year
strengthening of the U.S. dollar versus the Belgian franc to be
approximately $42.5 million and $14.8 million, and $5.6 million and $2.9
million during fiscal 1998 and 1997, respectively.
44
<PAGE>
(b) Rental income represents income from rents received from properties
retained by the Company which were used in previous operations and which
are held for sale as of January 31, 1998. The Company expects that all of
these properties will be sold during fiscal 1999 and that rental income
will decline accordingly.
(c) Equity in loss of unconsolidated affiliate represents the Company's 50%
equity interest in the losses of its affiliate, Chia Tai Samsonite (H.K.)
Ltd., a 50% owned joint venture formed to manufacture and distribute
luggage in China. This start-up operation completed construction of a
manufacturing plant in Ningbo, China and began operations in fiscal 1998.
(d) Pension expense related to merged plans represents the net periodic
pension expense for plans merged with a Company pension plan, as discussed
in Note 14 to the consolidated financial statements included elsewhere
herein.
(e) Foreign currency transaction losses represent net realized losses on
payments for goods and services denominated in currencies other than those
used for financial reporting. Foreign currency transaction losses
increased from $0.2 million in fiscal 1997 to $1.8 million in fiscal 1998
due to the strengthening of the U.S. dollar versus the Mexican Peso, the
Canadian dollar, and certain Asian currencies.
(f) Loss on disposition of fixed assets, net represents losses incurred from
the disposition of fixed assets retired or sold in the ordinary course of
business.
(g) Other net represents miscellaneous expenses and increased from $1.1
million in fiscal 1997 to $1.2 million in fiscal 1998.
(h) Other income for fiscal 1998 includes $2.1 million from the 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. Additionally, the Company has entered into a non-
binding agreement-in-principle to settle the remainder of these claims for
approximately $9.4 million. The Company has $10.3 million accrued for the
payment of such claims at January 31, 1998. Because these claims are in
the judicial process, final settlement is not expected to occur for
several months.
(i) Other income from the adjustment of allowances for contingencies from
previous operations of $5.3 million in fiscal 1998 includes (i) $3.8
million from the adjustment of an accrual for potential environmental
liability related to real estate used in previous operations, for which no
claims were filed and liability terminated by agreement with the
purchasers of the real estate during fiscal 1998, and (ii) $1.5 million
for the adjustment of allowances for factored receivables from previous
operations which were no longer necessary upon collection of the
receivables. Fiscal 1997 included $0.5 million of income from the reversal
of excess reserves relating to previous operations that were determined to
be unnecessary.
(j) Other income for fiscal 1998 includes adjustments totaling $12.7 million
to reduce accruals for certain tax contingencies established in
conjunction with the Restructuring referred to in Note 1(b) to the
consolidated financial statements included elsewhere herein. The
adjustment was made upon the resolution of these contingencies which did
not result in any cash payment or future liability for taxes.
(k) As described in Note 14 to the consolidated financial statements included
elsewhere herein, under Obligations to Settlement Trust, the Company had
made loans of $4.8 million to a trust (the "Trust") established for the
benefit of the holders of certain classes of pre-bankruptcy claims against
the Company. The Company provided allowances for the full amount of these
loans at the time they were funded and accrued no interest on them. The
Trust repaid the Company's loan during fiscal 1998 with interest of $1.4
million. As a result, the Company recognized $4.8 million of other income
in fiscal 1998 from the collection of the loan, which had no carrying
value, and recorded interest income of $1.4 million. The Company believes
it is very unlikely it will be required to make any additional loans to
the Trust which, under the terms of the Trust Agreement, must settle with
its beneficiaries and dissolve by June 8, 1998.
(l) Other income in fiscal 1997 includes $11.1 million from the adjustment of
a liability accrued from contingent pension liabilities established during
the reorganization in 1993. See Note 14 to the consolidated financial
statements included elsewhere herein for a discussion of this matter.
Interest expense and amortization of debt issue costs and premium. Interest
expense and amortization of debt issue costs decreased from $35.7 million in
fiscal 1997 to $19.9 million in fiscal 1998. The decrease was caused primarily
by retirement of indebtedness out of the proceeds of a public stock offering
completed in
45
<PAGE>
February 1997, a lower interest rate on borrowings under the Old Credit
Facility which was refinanced in June 1997, and interest savings from the
retirement of high interest rate subordinated debt financed by lower rate bank
borrowings. See Notes 9 and 18 to the consolidated financial statements
included elsewhere herein.
Income taxes. Income tax expense increased from $10.4 million in fiscal 1997
to $23.1 million in fiscal 1998. The increase in tax expense is due primarily
to higher consolidated pretax earnings in fiscal 1998. The difference between
expected income tax expense, computed by applying the U.S. statutory rate to
income from continuing operations, and income tax expense recognized, results
primarily because of (i) the nondeductibility for tax purposes of amortization
of reorganization value in excess of identifiable assets, (ii) foreign income
tax expense provided on foreign earnings, (iii) certain nontaxable liability
adjustments, (iv) foreign tax credits and (v) state and local income taxes.
See Note 11 to the consolidated financial statements included elsewhere herein
for further analysis of income tax expenses.
Extraordinary loss. The extraordinary loss of $16.2 million for fiscal 1998
resulted from (i) the payment of $17.3 million of redemption and market
premiums and the write-off of deferred financing costs of $4.6 million related
to the early retirement of $137.2 million principal amount of the Company's 11
1/8% Series B Senior Subordinated Notes, (ii) the payment of $0.3 million of
early retirement fees and the write-off of $3.9 million of deferred financing
costs related to refinancing of the Old Credit Facility, and (iii) the tax
benefit from the aforementioned transactions of $9.9 million. See Note 9 to
the consolidated financial statements included elsewhere herein.
Net income (loss). The Company had a net loss in fiscal 1997 of $11.3
million and net income in fiscal 1998 of $40.7 million. The increase in the
net income from the prior year of $52.0 million is caused by the effect of the
increases in operating income and other income and the decrease in interest
expense, offset by the increase in income tax expense and the extraordinary
loss.
FISCAL 1997 COMPARED TO FISCAL 1996
General. Results of European operations were translated from Belgian francs
to U.S. dollars in fiscal 1997 and fiscal 1996 at average rates of
approximately 30.93 and 29.38 francs to the U.S. dollar, respectively. This
represented a decrease in the value of the Belgian franc of 5.0%, which
resulted in decreases in reported sales, cost of sales and other expenses in
fiscal 1997 compared to fiscal 1996. The most significant effects from the
difference in exchange rates from fiscal 1997 to fiscal 1996 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 1997, the Company had net
gains from such instruments of $2.8 million.
Net Sales. Consolidated net sales increased to $741.1 million in fiscal 1997
from $675.2 million in fiscal 1996, an increase of $65.9 million or 9.8%.
Adjusted for the European exchange rate difference, sales increased from
fiscal 1996 by 12.0%.
Sales from European operations increased from $271.6 million in fiscal 1996
to $280.8 million in fiscal 1997, an increase of $9.2 million. The exchange
rate difference resulted in a $14.8 million decrease in reported sales versus
fiscal 1996. The remainder, an increase of $24.0 million, represents an
increase in sales expressed in Belgian francs of 8.8% from fiscal 1996.
Despite a generally weak European economy, sales increased due to increased
market share, increased sales of diversified products (which includes
footwear, handbags, and other travel accessories), and consumer acceptance of
new product lines. In fiscal 1997, European sales enjoyed strong third and
fourth quarters, with strong summer and Christmas sales reversing trends
earlier in fiscal 1997.
Sales from the Americas operations increased from $366.4 million in fiscal
1996 to $417.6 million in fiscal 1997, an increase of $51.2 million or 14.0%.
The increase was due to continued broad consumer preference and demand for
Samsonite brand products, particularly lines of upright, lightweight softside
luggage which were redesigned in fiscal 1996. Additionally, the Company began
sales in the third quarter of fiscal 1997 of its new
46
<PAGE>
EZ CART(TM) product. Sales of softside products in the U.S. continued to
increase while sales of hardside products decreased from fiscal 1996 to fiscal
1997. U.S. wholesale sales increased from $266.9 million in fiscal 1996 to
$295.8 million in fiscal 1997, an increase of $28.9 million or 10.8%. Sales
from operations in the other Americas increased from $36.9 million to $43.4
million, an increase of $6.5 million, due to an increase in Mexican sales of
$4.5 million, Canadian sales of $1.0 million, and Latin American exports of
$1.0 million. Sales from the Company's retail stores increased by $15.8
million or 25.2%, from $62.7 million in fiscal 1996 to $78.5 million in fiscal
1997. Same store sales increased by 10.3% from fiscal 1996. The Company had
149 retail outlets open at January 31, 1997, compared to 126 at January 31,
1996.
Sales from International operations increased from $37.2 million in fiscal
1996 to $42.7 million in fiscal 1997, an increase of $5.5 million or 14.8%. Of
the change in revenues from fiscal 1996, $4.0 million was due to revenue from
the sale of McGregor apparel tradenames in certain Pacific Rim countries. The
remainder was due primarily to the Singapore distribution company which began
operations on January 1, 1996.
Gross profit. Consolidated gross profit for fiscal 1997 increased from
fiscal 1996 by $31.3 million. Gross margin increased by 0.8 percentage point,
from 38.6% in fiscal 1996 to 39.4% in fiscal 1997. Without the effect of a
sale of tradenames for $4.0 million, gross margin increased 0.4 percentage
point to 39.0% in fiscal 1997.
Gross margins from European operations increased by 1.5 percentage points,
from 37.7% in fiscal 1996 to 39.2% in fiscal 1997. The improvement was due to
price increases in selected product lines, declining materials costs, and
improving productivity variances compared to fiscal 1996.
Gross profit margins from the Americas operations were 38.2% in fiscal 1997
and fiscal 1996. Certain margin improvements occurred in fiscal 1997,
including lower raw materials costs, product cost improvements on certain
products, the introduction of innovative products at higher margins, price
increases on selected product lines in the fourth quarter of fiscal 1997,
higher retail sales (which produce a higher margin than wholesale sales), and
decreased sales of obsolete products in fiscal 1997. These improvements were
offset by promotional sales discounts, increased sales of certain lower margin
products relative to the previous fiscal year, negative productivity variances
from the startup of production of new hardside products and the restructuring
of operations, and higher than anticipated costs on certain new product lines.
The net result of these factors was consistent year-to-year margin
percentages.
Excluding the effect of the tradename sales in fiscal 1997, gross profit
margins from International operations decreased by 2.7 percentage points. The
decrease was attributable to the lack of price increases and a greater
proportion of sales of lower margin products in fiscal 1997.
In fiscal 1997, the Company began a global standardization project to
standardize its product lineup, product components and finished goods
purchasing in order to continue to increase gross profit margins. To further
enhance gross profit margins, the Company announced price increases in the
United States on many of its product lines effective March 1, 1997.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $30.1 million from fiscal 1996 to fiscal 1997. As a percent of
sales, SG&A was 31.5% in fiscal 1997 and 30.2% in fiscal 1996. Expenses
totaling approximately $5.4 million were incurred during fiscal 1997 for
consulting fees to establish the restructuring plan, the cessation of the
former CEO's employment, the hiring of new and additional members of the
executive management team, and for expenses in excess of the original
provision in fiscal 1996 for the consolidation of American Tourister
manufacturing facilities. Without such expenses, SG&A would have been 30.8% of
sales during fiscal 1997.
SG&A for European operations increased by $5.5 million from fiscal 1996 to
fiscal 1997. The exchange rate difference caused SG&A to decrease by $4.0
million. The remainder, an increase of $9.5 million, resulted from an increase
in SG&A expressed in Belgian francs of 13.3%. The increase was due to higher
variable selling and distribution costs related to the higher sales levels
($2.0 million); higher salaries and employee benefits from the hiring of
additional sales and general management personnel to support higher sales
levels and growth oriented projects ($2.7 million); higher bad debt expense
because of the financial difficulties of a few specific
47
<PAGE>
customers ($1.1 million); higher advertising expenses to support new products,
entry into the eastern European markets, and brand image in light of a
generally weak European economy ($2.3 million); and various other expense
categories ($1.4 million).
SG&A for the Americas operations, including worldwide corporate
headquarters, increased by $22.3 million in fiscal 1997 compared to fiscal
1996. The increase was due to higher selling and administrative costs related
to the increase in retail sales ($7.9 million); higher national and co-op
advertising expenses ($6.8 million); expenses relating to the cessation of the
former CEO's employment, expenses of hiring new and additional management team
members, consulting fees and the other expenses incurred related to the
restructuring ($5.4 million); compensation expense related to restricted stock
awards ($0.9 million): and other net increases ($1.3 million).
SG&A for the International operations increased by $2.3 million primarily
due to the expenses incurred in the foreign joint venture operations in
Singapore, which began in fiscal 1997.
Amortization of intangible assets. The Company recorded significant
intangible assets as a result of its reorganization in 1993. See Notes 1(b),
1(i) and 7 to the Company's consolidated financial statements included
elsewhere herein for a discussion of the recording and amortization of
intangible assets.
Reorganization value in excess of identifiable assets became fully amortized
as of June 30, 1996, which generally accounts for the decrease in amortization
of intangible assets from $63.8 million in fiscal 1996 to $31.8 million in
fiscal 1997.
Provision for restructuring operations. The fiscal 1996 provision resulted
from a restructuring of certain manufacturing and administrative functions of
the American Tourister division. The fiscal 1997 provision of $10.7 million
resulted from a program to further consolidate functions and operations in
North America, Europe and the Far East, and to reduce or eliminate certain
other operations. The fiscal 1997 restructuring plan includes further
consolidation of hardside luggage production to Samsonite's largest U.S.
facility located in Denver, CO from other locations in the Americas, as well
as eventual consolidation of many administrative and control functions,
primarily to Denver. The Plan included the elimination of as many as 450
positions worldwide, including approximately 150 manufacturing positions and
approximately 300 managerial, office and clerical positions. The restructuring
provision consisted primarily of costs associated with involuntary employee
terminations and was comprised of estimated cash expenditures of $9.7 million
and estimated non-cash charges of $1.0 million, both on a pretax basis.
Operating income (loss). Operating results improved from a loss in fiscal
1996 of $9.4 million to income in fiscal 1997 of $15.5 million, an increase of
$24.9 million. This increase was a result of higher revenues and improved
margins which increased gross profit by $31.3 million from fiscal 1996 and the
decrease in amortization of intangibles of $32.0 million, both of which were
partially offset by increases in SG&A of $30.1 million and the higher
provision for restructuring of $8.3 million.
Interest income. Interest income decreased from $4.7 million in fiscal 1996
to $1.4 million in fiscal 1997. Fiscal 1996 interest income included $2.9
million realized from a note receivable collected in connection with the sale
of an investment in a television station. Recurring interest income results
from temporary investments of cash on hand and is $0.4 million less than in
fiscal 1996.
48
<PAGE>
Other income (expense)--net. The following is an analysis of other income
(expense)--net for fiscal 1997 compared to fiscal 1996:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1997 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Net gains from foreign currency forward delivery
contracts(a)................................... $ 2,829 $ (494)
Rental income(b)................................ 1,987 1,735
Equity in loss of unconsolidated affiliate(c)... (33) --
Foreign currency transaction losses, net(d)..... (211) (1,660)
Loss on disposition of fixed assets, net(e)..... (62) (245)
Other, net(f)................................... (1,120) (737)
Favorable settlement of claims(g)............... 3,802 --
Adjustment of allowances relating to previous
operations(h).................................. 529 --
Adjustment of liability for PBGC claims(i)...... 11,100 --
Gain on sale of television station(j)........... -- 5,368
----------- -----------
$ 18,821 $ 3,967
=========== ===========
</TABLE>
- --------
(a) Beginning in fiscal 1997, the Company entered into certain forward
exchange contracts to reduce its exposure to changes in exchange rates.
Other income for fiscal 1997 includes gains of $2.8 million from such
transactions. The income for fiscal 1997 resulted primarily from forward
exchange contracts selling forward the Belgian franc. The Company
estimates that the reduction in operating income from the year-to-year
strengthening of the U.S. dollar versus the Belgian franc was $2.9 million
in fiscal 1997.
(b) Rental income in fiscal 1997 and 1996 represents rents received from
properties retained by the Company which were used in previous operations.
As discussed elsewhere herein, such properties are expected to be disposed
of in fiscal 1999 and rental income will decline accordingly.
(c) Equity in loss of unconsolidated affiliate represents the Company's 50%
equity interest in the loss of its affiliate, Chia Tai Samsonite (H.K.)
Ltd., a 50% owned joint venture formed in fiscal 1997 to manufacture and
distribute luggage in China.
(d) Foreign currency transaction losses represent net realized losses on
transactions denominated in currencies other than those used for financial
reporting. Foreign currency transaction losses decreased from $1.7 million
in fiscal 1996 to $0.2 million in fiscal 1997.
(e) Loss on disposition of fixed assets, net represents losses incurred from
the disposition of fixed assets retired or sold in the ordinary course of
business.
(f) Other, net represents miscellaneous expenses and increased from $0.7
million in fiscal 1996 to $1.1 million in fiscal 1997.
(g) Other Income in fiscal 1997 included $3.8 million from the favorable
settlement for $0.2 million of a claim against the Company by a related
party. The Company had previously accrued $4.0 million for such claim.
This claim is part of the Contingent Liability with Respect to the Old
Notes described in Note 14 to the consolidated financial statements
included elsewhere herein and relates to the claim for interest on overdue
installments of interest accruing prior to the commencement of the
bankruptcy of the Company's predecessor in 1993. The contingent liability
was recorded as part of the reorganization. The holders of this claim were
Apollo Investment Fund, L.P. ("Apollo") and an affiliate of Apollo. Apollo
and its affiliates owned 36.08% of the outstanding shares of the Company's
common stock as of March 31, 1997.
(h) Fiscal 1997 included $0.5 million of income from the reversal of excess
reserves relating to previous operations that were determined to be
unnecessary.
(i) Other income in fiscal 1997 included $11.1 million from the adjustment of
a previously recorded liability for contingent pension liabilities. See
Note 14 to the consolidated financial statements included elsewhere herein
for a discussion of this item.
(j) Other income in fiscal 1996 included a $5.4 million gain from the sale of
a television station investment related to previous operations.
49
<PAGE>
Interest expense and amortization of debt issue costs and premium. Interest
expense and amortization of debt issue costs and premium decreased from $40.0
million in fiscal 1996 to $35.7 million in fiscal 1997 due to lower levels of
outstanding indebtedness in fiscal 1997 and lower average interest rates. The
U.S. senior credit facility allowed for lower rates in fiscal 1997 based on
improved performance and lower debt levels.
Income taxes. Income taxes increased from $9.1 million in fiscal 1996 to
$10.4 million in fiscal 1997. The increase in tax expense is due to higher
consolidated pretax earnings in fiscal 1997, partially offset by amortization
of reorganization value in excess of identifiable assets, which is not
deductible for tax purposes, in fiscal 1997 as compared to fiscal 1996. The
relationship between the expected income tax expense or benefit, computed by
applying the U.S. statutory rate to income or loss from continuing operations
and income tax expense recognized, resulted primarily because of (i) the
nondeductibility for tax purposes of amortization of reorganization value in
excess of identifiable assets, (ii) foreign income tax expense provided on
foreign earnings and (iii) state and local income taxes. See Note 11 to the
consolidated financial statements included elsewhere herein for further
analysis of income tax expense.
Operations discontinued and sold. The loss from discontinued operations in
fiscal 1996 includes an adjustment to reduce previously accrued losses on
disposal of $2.6 million, net of income taxes of $1.1 million, and a provision
for federal income taxes of $3.8 million on the distribution of Culligan stock
to certain foreign stockholders.
Extraordinary item. The extraordinary loss in fiscal 1996 resulted from the
payment of an $18.0 million redemption premium upon the early retirement of
senior secured notes. The extraordinary loss is presented in the consolidated
financial statements net of the unamortized premium on such notes of $4.4
million and the associated income tax benefit of $5.6 million.
Net loss. The net loss decreased from $61.5 million in fiscal 1996 to $11.3
million in fiscal 1997, a decrease of $50.2 million. The decrease in the net
loss was caused by the effect of the increases in operating and other income
and the decreases in interest expense, extraordinary loss and loss on
discontinued operations, offset by the decrease in interest income and the
increase in income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
Although the Company is, as a result of the Recapitalization, more highly
leveraged than has recently been the case, the Company believes that cash flow
from operating activities and available borrowings under the New Credit
Facility and existing lines of credit will be adequate to meet operating cash
flow requirements during the next 12 months and to execute its business
strategy.
THREE MONTHS ENDED APRIL 30, 1998
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 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
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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 under the Old 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.
YEAR ENDED JANUARY 31, 1998
As reflected in the consolidated statements of cash flows included elsewhere
herein, cash flows provided by continuing operating activities decreased by
$7.1 million in fiscal 1998 from fiscal 1997. Cash flows from net income,
adjusted for nonoperating and noncash charges, increased by $22.4 million,
primarily as a result of the increases in operating income described above,
while cash flow used for increases in working capital and other operating
assets increased by $29.5 million.
At January 31, 1998, the Company had working capital of $187.2 million
compared to $105.4 million at January 31, 1997, an increase of $81.8 million.
Current assets increased by $39.3 million primarily due to an increase in
receivables of $9.3 million and an increase in inventories of $37.6 million,
both of which were partially offset by net decreases in cash and other current
assets of $7.6 million. Receivables increased due to a high volume of sales in
the second half of the fiscal year and extended terms on certain sales. The
increase in inventories of $37.6 million occurred primarily in domestic U.S.
operations and resulted from (i) an increase in retail stores' inventories of
approximately $15.1 million due to an increase in the number of stores and
sales volume and (ii) an increase in wholesale inventories of $15.0 million
due to an oversupply of certain new product introductions which were not
accepted in the marketplace, an increase in discontinued and obsolete products
due to the volume of new product introductions in fiscal 1998, and
overproduction in the last half of the fiscal year due to over optimistic
sales forecasts. The Company is addressing these problems and intends to
reduce inventories through better forecasting and selling discontinued
products through its retail store outlets located primarily in factory outlet
malls. Subsequent to January 31, 1998, the Company sold two of the four assets
held for sale realizing approximately $3.0 million in proceeds, and has a
contract to sell another asset for approximately $12.2 million.
Cash flows used in investing activities increased from $17.0 million in
fiscal 1997 to $37.9 million in fiscal 1998, an increase of $20.9 million.
Capital expenditures were $36.3 million in fiscal 1998 compared to $31.1
million in fiscal 1997. Capital expenditures in fiscal 1998 consist primarily
of tooling for new products, warehouse expansion in Europe, and capital
expenditures in India for factory construction. Capital expenditures of $6.1
million in fiscal 1998 were incurred in the less than 100% owned subsidiaries,
and were therefore financed in part by the other shareholders in the ventures.
The Company has currently budgeted $28.6 million for capital expenditures in
fiscal 1999. In fiscal 1997, cash was provided by liquidating assets used in
previous operations of $10.4 million, while in fiscal 1998, cash of $4.0
million was used to fund obligations related to these previous operations. The
Company expects it will continue to use cash to fund these obligations,
totaling approximately $6.3 million through calendar 2000. During fiscal 1998,
the Company formed subsidiaries in Korea and Hong Kong to acquire the
distributorships from the former distributors in those countries and made
initial investments of approximately $2.5 million for inventory, fixed assets,
other assets and goodwill.
Cash flows provided by (used in) financing activities increased from cash
used in financing activities in fiscal 1997 of $11.7 million to cash provided
by financing activities in fiscal 1998 of $21.1 million, an increase in cash
of $32.8 million. The Company completed a public stock offering in February
1997, receiving net cash proceeds from the offering of $130.2 million and $6.6
million from the exercise of stock options by a former
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chief executive officer in connection with the offering. The Company also
received $0.4 million from the exercise of other employee stock options
throughout the fiscal year. The Company used the net proceeds of the stock
offering approximately as follows: (i) $89.5 million to redeem and purchase in
the market $80.8 million principal amount of its 11 1/8% Series B Subordinated
Notes (the "Series B Notes"), including $8.7 million for early redemption and
market premiums, (ii) $45.0 million to pay down a term loan outstanding under
the Old Credit Facility and (iii) the remainder for accrued interest and
revolving credit loans under the Old Credit Facility. The Company also amended
and refinanced the Old Credit Facility, which permitted it to purchase a
limited liquidation amount of the Series B Notes by open market purchases. As
a result of the public stock offering and the amended and refinanced Old
Credit Facility, a total of $137.2 million principal amount of the Series B
Notes were retired from the previously outstanding amount of $190.0 million
and a total of $17.6 million of redemption and market premiums were paid.
Also, see note 19 to the consolidated financial statements included elsewhere
herein which discusses the repurchase of the Series B Notes subsequent to
January 31, 1998.
At January 31, 1998, long-term obligations (including current installments)
were $179.2 million compared to $290.6 million at January 31, 1997, a decrease
of $111.4 million. At January 31, 1998, the Company had $133.0 million
available under its Old Credit Facility. In addition, the Company's foreign
subsidiaries have approximately $56 million available borrowings under other
short-term lines of credit.
The Company's cash flow from operations together with amounts available
under its credit facilities were sufficient to fund fiscal 1998 operations,
scheduled payments of principal and interest on indebtedness, and capital
expenditures. As further discussed in Note 14 to the consolidated financial
statements under Contingent Pension Liabilities and Contingent Liability with
Respect to the Old Notes (included elsewhere herein), the Company has merged
two pension plans into one of its pension plans and has reached an agreement-
in-principle to settle certain claims arising from the reorganization in 1993
for $9.4 million. The Company does not expect the merger of the pension plans
to have a material effect on funding requirements for the merged plans and
plans to fund the proposed $9.4 million settlement of the other claims out of
available capital resources from operations and/or credit facilities.
The Company's principal foreign operations are located in Western Europe,
the economies of which are not considered to be highly inflationary. The
economy in Mexico is considered highly inflationary beginning February 1,
1997. The Company enters into foreign exchange contracts in order to reduce
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.
The Company's foreign operations in Asia consist primarily of
distributorships organized as joint venture subsidiaries. Economies and local
currencies throughout much of Asia have entered a tumultuous period beginning
in fiscal 1998 as a result of political turmoil and general economic problems
with principal industries. During fiscal 1998, the Company had approximately
$25 million of revenues from Asian sales and royalties and, as of January 31,
1998, approximately $17.2 million in investments and receivables from Asian
subsidiaries, not including investments in the India joint venture subsidiary.
Part of the Company's hedging strategy is to protect against further currency
devaluation by hedging its expected operating earnings and investments related
to these countries through forward exchange contracts and local borrowings.
There can be no assurance given that such strategies will be effective.
Additionally, such hedging strategies do not mitigate the effect on sales and
operating earnings of the slumping local economies in these countries.
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. However, if such
conditions continue, the Company's expected growth in this area of the world
could be adversely affected.
The Company believes that disclosure of its Earnings Before Interest, Taxes,
Depreciation, and Amortization (EBITDA) provides useful information regarding
the Company's ability to incur and service debt,
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but that it should not be considered a substitute for operating income or cash
flow from operations determined in accordance with generally accepted
accounting principles. Other companies may calculate EBITDA in a different
manner than the Company. EBITDA does not take into consideration substantial
costs and cash flows of doing business, such as interest expense, income
taxes, depreciation and amortization, and should not be considered in
isolation to or as a substitute for other measures of performance. EBITDA does
not represent funds available for discretionary use by the Company because
those funds are required for debt service, capital expenditures to replaces
fixed assets, working capital, and other commitments and contingencies.
EBITDA, as calculated by the Company, also excludes extraordinary items,
discontinued operations, and minority interest in earnings of subsidiaries.
The Company's EBITDA for the years ended January 31, 1998, 1997 and 1996 was
$126.2 million, $88.2 million and $78.7 million, respectively. However, this
amount includes net income of $17.9 million, $3.4 million and $0.4 million for
the years ended January 31, 1998, 1997 and 1996, respectively, from
(i) restructuring provisions, (ii) other income primarily related to various
items from previous operations and (iii) foreign currency transaction losses,
net; loss on disposition of fixed assets, net; and other net (see Note 15 to
the consolidated financial statement included elsewhere herein), which
management believes should be deducted from the calculation of EBITDA. EBITDA
as set forth above reflects the impact of $4.1 million of negative production
variances incurred during the last half of fiscal 1998.
As of January 31, 1998, the Company had net operating loss carryforwards
("NOLs") of approximately $135 million for United States federal income tax
purposes. These carryforwards, if not utilized to offset taxable income in
future periods, will expire at various dates through fiscal 2012. The
Recapitalization, together with certain other changes in the ownership of the
Company's stock which have occurred or may occur in the future, could cause
the Company to experience an "ownership change" within the meaning of Section
382 of the Internal Revenue Code of 1986, as amended (the "Code"). Following
such an ownership change, the ability of the Company and its subsidiaries to
utilize for U.S. federal income tax purposes its NOLs arising in periods
before the ownership change would be subject to an annual limitation, which
would generally be equal to the product of the value of all of the outstanding
stock of the Company immediately prior to the ownership change, or if the
Recapitalization resulted in an ownership change, immediately after the
Recapitalization (less certain capital contributions made within the preceding
two years), and the "long-term tax-exempt rate" (determined monthly and, for
ownership changes occurring in the month of August 1998, 5.15%). Although the
Company cannot currently predict the effect of any limitation on its ability
to utilize its net operating loss carryforwards, such limitation could result
in additional income tax expense being recorded for financial reporting
purposes if the Company determines in the future that it is likely that the
limitation will affect its ability to realize net deferred tax assets related
to the net operating loss carryforwards.
RECENT EVENTS AND RECAPITALIZATION
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. On March 20,
1998, the Board of Directors approved a recapitalization plan, pursuant to
which the Company planned to pay a special cash dividend to stockholders of
$12.50 per share. Consummation of this recapitalization plan and payment of
the $12.50 dividend per share was subject to a number of conditions, including
the closing of a new bank credit facility, the successful retirement of the
Company's outstanding Series B Notes (which were substantially retired in
April, 1998 as discussed below) and declaration of the dividend by the
Company's Board of Directors. The Company also previously announced that it
was engaged in discussions with third parties concerning a possible
transaction whereby approximately 50% of the Company's equity would be
acquired by a third party and shareholders would receive cash payments in the
range of $30.00 per share and retain a significant equity interest in the
Company. 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 completed a tender offer on April 23, 1998 for $52.3 million out
of the $52.8 million outstanding principal amount of its Series B Notes at a
price of $115.35 per $100 of principal. The Old Credit Facility was amended to
allow for financing the retirement of the Series B Notes from borrowings
thereunder. The Company incurred a pre-tax charge to earnings of approximately
$10 million during the first quarter of fiscal 1999 for the premium paid to
repurchase the Series B Notes and other charges related to the transaction.
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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 first quarter of fiscal 1999 in
connection with the restructuring. The restructuring provision is primarily
related to termination and severance costs for the elimination of
approximately 111 positions.
As discussed elsewhere herein, the Company expects U.S. wholesale sales to
be depressed through at least the first half of fiscal 1999 because of various
factors which affected U.S. wholesale sales in fiscal 1998, including the
adverse impact of price increases and pricing strategies, market disruptions
and retailer discounting issues associated with various forms of cross
distribution channel sales, and forecasting and production scheduling errors.
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, 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
has recorded 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 substantially completed by July 31,
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 information and involves known and unknown risks,
uncertainties and other factors that may cause actual cost savings to be
materially different from the foregoing estimate. In addition to the general
factors discussed under "Risk Factors--Implementation of Business Strategy;
Forward Looking Statements" 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.
In connection with the Recapitalization, certain adjustments and
modifications were made to outstanding employee stock options as a result of
the consummation of the Tender Offer. Such adjustments will result in
increased compensation expense of approximately $3.9 million in the second
quarter of fiscal 1999, $0.4 million during the remainder of fiscal 1999 and
$0.8 million in fiscal 2000.
EFFECT OF YEAR 2000 ISSUES ON COMPANY OPERATIONS
The Company has conducted a review of its computer systems to identify the
systems that could be affected by the Year 2000 issue which results from
computer programs being written using two digits rather than four to define
the applicable year. Any computer programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000,
resulting in a major system failure or miscalculations. In the U.S., the
Company is installing new financial, manufacturing and distribution software
which is Year 2000 compliant. These new systems are being installed in
response to other business needs as well as Year 2000 issues. The Company's
European division is updating its systems to be Year 2000 compliant and
expects this to be completed during fiscal 1999. Other operations throughout
the world are generally using recently purchased software which is Year 2000
compliant. The Company estimates it will spend approximately $8 million in the
U.S. for new systems by the end of fiscal 1999; costs incurred in Europe and
the remainder of the world for Year 2000 compliance are not expected to be
material. Although the Company believes it has identified internal
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Year 2000 issues which might have a significant impact on operations, no
assurance can be given that all such issues have been identified or will be
corrected. Additionally, no assurances can be given that the Company's
customers, vendors, banks or other third parties will not experience Year 2000
issues which may have a significant impact on the Company's operations.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share. This statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to all entities with publicly held common stock or potential
common stock. This statement replaces the presentation of primary EPS and
fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing earnings
available to common stockholders by the weighted-average number of common
shares outstanding for the period. Similar to fully diluted EPS, diluted EPS
reflects the potential dilution of securities that could share in the
earnings. This statement is effective for the Company's consolidated financial
statements for the year ended January 31, 1998, and has been adopted,
resulting in the restatement of earnings per share for all prior periods.
Details regarding earnings per share are disclosed at Note 1(k) to the
consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
(Statement 130), which requires comprehensive income to be displayed
prominently within the consolidated financial statements. Comprehensive income
is defined as all recognized changes in equity during a period from
transactions and other events and circumstances except those resulting from
investments by owners and distributions to owners. Net income and items that
previously have been recorded directly in equity are included in comprehensive
income. Statement 130 affects only the reporting, and disclosure of
comprehensive income; it does not affect recognition or measurement of income.
Statement 130 is effective for fiscal years beginning after December 15, 1997,
with earlier application permitted. The Company plans to adopt Statement 130
in the first quarter of fiscal 1999.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (Statement 131). Statement 131 provides
guidance for reporting information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial reports of public companies. An
operating segment is defined as a component of a business that engages in
business activities from which it may earn revenue and incur expenses, a
component whose operating results are regularly reviewed by the company's
chief operating decision maker, and a component for which discrete financial
information is available. Statement 131 establishes quantitative thresholds
for determining operating segments of a company. Statement 131 is effective
for fiscal years beginning after December 15, 1997, with earlier application
permitted. The Company plans to adopt Statement 131 in the first quarter of
fiscal 1999 by reporting operating segment information on Form 10-Q.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits (Statement 132). This statement
revised employers' disclosures about pension and other postretirement benefit
plans and standardizes the disclosure requirements to the extent practicable.
This statement is effective for the Company's consolidated financial
statements for the year ending January 31, 1999. The Company does not expect
the adoption of Statement 132 to materially impact the financial statement
presentation.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD SENIOR PREFERRED STOCK
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), the Company will accept for exchange shares of Old Senior
Preferred Stock which are properly tendered on or prior to the Expiration Date
and not withdrawn as permitted below. As used herein, the term "Expiration
Date" means 5:00 p.m. New York City time, on September 28, 1998; provided,
however, that if the Company, in its sole discretion, has extended the period
of time for which the Exchange Offer is open, the term "Expiration Date" means
the latest time and date to which the Exchange Offer is extended.
As of the date of this Prospectus, 175,000 shares of Old Senior Preferred
Stock are outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about August 26, 1998, to all holders
known to the Company. The Company's obligation to accept Senior Preferred
Stock for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Senior Preferred Stock, by
giving oral or written notice of such extension to the holders thereof in the
manner described below. During any such extension, all Old Senior Preferred
Stock previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Senior Preferred Stock not
accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Shares of Old Senior Preferred Stock tendered in the Exchange Offer must be
in denominations of $1,000 liquidation preference per share and any integral
multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Senior Preferred Stock not
theretofore accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified below under "--Certain Conditions
to the Exchange Offer." The Company will give oral or written notice of any
extension, amendment, non-acceptance or termination to the holders of the Old
Senior Preferred Stock as promptly as practicable, such notice in the case of
any extension to be issued by means of a press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD SENIOR PREFERRED STOCK
The tender to the Company of shares of Old Senior Preferred Stock by a
holder thereof as set forth below and acceptance thereof by the Company will
constitute a binding agreement between the tendering holder and the Company
upon terms and subject to the conditions set forth in this Prospectus and in
the accompanying Letter of Transmittal. Except as set forth below, a holder
who wishes to tender Old Senior Preferred Stock for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to BankBoston, N.A. (the "Exchange Agent") at the address set
forth below under "Exchange Agent" prior to the Expiration Date. In addition,
either (i) certificates for such Old Senior Preferred Stock must be received
by the Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of book-entry transfer (a "Book-Entry Confirmation") of such Old
Senior Preferred Stock, if such procedure is available, into the Exchange
Agent's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below,
must be received by the Exchange Agent prior to the Expiration Date or (iii)
the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD SENIOR PREFERRED STOCK, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD SENIOR PREFERRED STOCK SHOULD BE SENT TO THE COMPANY.
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Any beneficial owner whose Old Senior Preferred Stock is registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered holder promptly and
instruct such registered holder to tender on such beneficial owner's behalf.
If such beneficial owner wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the Letter of Transmittal and
delivering such owner's Old Senior Preferred Stock, either make appropriate
arrangements to register ownership of the Old Senior Preferred Stock in such
owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Senior Preferred Stock surrendered
for exchange pursuant thereto is tendered (i) by a registered holder of the
Old Senior Preferred Stock who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice of
a withdrawal, as the case may be, are required to be guaranteed, such
guarantees must be by a firm which is a financial institution (including most
banks, savings and loan associations and brokerage houses) that is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion
Program (collectively, "Eligible Institutions"). If Old Senior Preferred Stock
is registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Senior Preferred Stock surrendered for exchange must be
endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Senior Preferred Stock tendered for exchange
will be determined by the Company in its sole discretion, which determination
shall be final and binding. The Company reserves the absolute right to reject
any and all tenders of any particular shares of Old Senior Preferred Stock not
properly tendered or to not accept any particular shares of Old Senior
Preferred Stock which acceptance might, in the judgment of the Company or its
counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular shares of Old Senior Preferred Stock either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Old Senior Preferred Stock in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer as to any
particular shares of Old Senior Preferred Stock either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of shares of
Old Senior Preferred Stock for exchange must be cured within such reasonable
period of time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of
shares of Old Senior Preferred Stock for exchange, nor shall any of them incur
any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Senior Preferred Stock, such Old Senior
Preferred Stock must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders appear on the Old Senior Preferred Stock.
If the Letter of Transmittal or any Old Senior Preferred Stock or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the New Senior Preferred Stock acquired pursuant to the Exchange Offer
is being obtained in the ordinary course of business of the person receiving
such New Senior Preferred Stock, whether or not such person is the holder, and
that neither the holder
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nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Senior Preferred Stock. In the case
of a holder that is not a broker-dealer, each such holder, by tendering, will
also represent to the Company that such holder is not engaged in and does not
intend to engage in a distribution of the New Senior Preferred Stock. If any
holder or any such other person is an "affiliate," as defined under Rule 405
of the Securities Act, of the Company, or is engaged in or intends to engage
in or has an arrangement or understanding with any person to participate in a
distribution of such New Senior Preferred Stock to be acquired pursuant to
Exchange Offer, such holder or any such other person (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. Each broker-dealer that
receives New Senior Preferred Stock for its own account in exchange for Old
Senior Preferred Stock, where such Old Senior Preferred Stock was acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Senior Preferred Stock. See "Plan of Distribution." The Letter of Transmittal
states that by so acknowledging and by delivering such a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
ACCEPTANCE OF OLD SENIOR PREFERRED STOCK FOR EXCHANGE; DELIVERY OF NEW SENIOR
PREFERRED STOCK
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Senior
Preferred Stock properly tendered and will issue the New Senior Preferred
Stock promptly after acceptance of the Old Senior Preferred Stock. See "--
Certain Conditions to the Exchange Offer" below. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old
Senior Preferred Stock for exchange when, as and if the Company has given oral
or written notice thereof to the Exchange Agent, with written confirmation of
any oral notice to be given promptly thereafter.
For each share of Old Senior Preferred Stock accepted for exchange, the
holder of such Old Senior Preferred Stock will receive a share of New Senior
Preferred Stock having a liquidation preference equal to that of the
surrendered Old Senior Preferred Stock. Holders are entitled to receive, when,
as and if declared by the Board of Directors of the Company out of funds
legally available therefor, dividends on the New Senior Preferred Stock at a
rate per annum of 13 7/8% of the liquidation preference per share of Senior
Preferred Stock. The New Senior Preferred Stock will accrue dividends from the
most recent date to which dividends have been paid on the Old Senior Preferred
Stock or, if no dividends have been paid on the Old Senior Preferred Stock,
from June 24, 1998. Old Senior Preferred Stock accepted for exchange will
cease to accrue dividends from and after the date of consummation of the
Exchange Offer. Holders of Old Senior Preferred Stock whose Old Senior
Preferred Stock is accepted for exchange will not receive any payment in
respect of accrued dividends on such Old Senior Preferred Stock otherwise
payable on any Dividend Payment Date the record date for which occurs on or
after consummation of the Exchange Offer.
In all cases, issuance of New Senior Preferred Stock for Old Senior
Preferred Stock that is accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of certificates
for such Old Senior Preferred Stock, or a timely Book-Entry Confirmation of
such Old Senior Preferred Stock in to the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Senior
Preferred Stock is not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Senior Preferred Stock is submitted
for a greater liquidation preference than the holder desires to exchange, such
unaccepted or non-exchanged Old Senior Preferred Stock will be returned
without expense to the tendering holder thereof (or, in the case of Old Senior
Preferred Stock tendered by book-entry transfer to the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Old Senior Preferred Stock will
be credited to an account maintained with such Book-Entry Transfer Facility)
as promptly as practicable after the expiration or termination of the Exchange
Offer.
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BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Senior Preferred Stock at the Book-Entry Transfer Facility for
purposes of the Exchange Offer within two business days after the date of this
Prospectus, and any financial institution that is a participant in the Book-
Entry Transfer Facility's systems may make book-entry delivery of Old Senior
Preferred Stock by causing the Book-Entry Transfer Facility to transfer such
Old Senior Preferred Stock into the Exchange Agent's account at the Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Old Senior Preferred
Stock may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth
below under "--Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Senior Preferred Stock desires to tender
such Old Senior Preferred Stock and the Old Senior Preferred Stock is not
immediately available, or time will not permit such holder's Old Senior
Preferred Stock or other required documents to reach the Exchange Agent before
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Senior Preferred Stock and the amount of Old
Senior Preferred Stock tendered, stating that the tender is being made thereby
and guaranteeing that within three New York Stock Exchange trading days after
the Expiration Date the certificates for all physically tendered Old Senior
Preferred Stock, in proper form for transfer, or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent and
(iii) the certificates for all physically tendered Old Senior Preferred Stock,
in proper form for transfer, or a Book-Entry Confirmation, as the case may be,
and all other documents required by the Letter of Transmittal, are received by
the Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
WITHDRAWAL RIGHTS
Tenders of Old Senior Preferred Stock may be withdrawn at any time prior to
the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address or, in the case of Eligible
Institutions, at the facsimile number, set forth below under "--Exchange
Agent" prior to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having tendered the Old Senior Preferred Stock
to be withdrawn (the "Depositor"), (ii) identify the Old Senior Preferred
Stock to be withdrawn (including the certificate number or numbers and
liquidation preference of such Old Senior Preferred Stock), (iii) contain a
statement that such holder is withdrawing his election to have such Old Senior
Preferred Stock exchanged, (iv) be signed by the holder in the same manner as
the original signature on the Letter of Transmittal by which such Old Senior
Preferred Stock was tendered (including any required signature guarantees) and
(v) specify the name in which such Old Senior Preferred Stock is registered,
if different from that of the Depositor. If Old Senior Preferred Stock has
been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Old Senior Preferred Stock and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Senior
Preferred Stock so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer and no New Senior Preferred
Stock will be issued with respect thereto unless the Old Senior Preferred
Stock so withdrawn is validly retendered. Any Old Senior Preferred Stock
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that has been tendered for exchange but which is not exchanged for any reason
will be returned to the holder thereof without cost to such holder (or, in the
case of Old Senior Preferred Stock tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Senior Preferred
Stock will be credited to an account maintained with the Book-Entry Transfer
Facility for the Old Senior Preferred Stock) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Senior Preferred Stock may be retendered by following the
procedures described under "--Procedures for Tendering Old Senior Preferred
Stock" above at any time prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Senior Preferred Stock
in exchange for, any Old Senior Preferred Stock and may terminate or amend the
Exchange Offer, if at any time before the acceptance of such Old Senior
Preferred Stock for exchange or the exchange of the New Senior Preferred Stock
for such Old Senior Preferred Stock, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Senior Preferred Stock pursuant to the Exchange Offer, or any
statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer
or any of the transactions contemplated by the Exchange Offer by any
government or governmental authority, domestic or foreign, or any action
shall have been taken, proposed or threatened, by any government,
governmental authority, agency or court, domestic or foreign, that in the
sole judgment of the Company might directly or indirectly result in any of
the consequences referred to in clauses (i) or (ii) above or, in the sole
judgment of the Company, might result in the holders of New Senior
Preferred Stock having obligations with respect to resales and transfers of
New Senior Preferred Stock which are greater than those described in the
interpretation of the Commission referred to below under "--Consequences of
Exchanging Old Senior Preferred Stock," or would otherwise make it
inadvisable to proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by a governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Company, is or may be adverse to the Company, or the
Company shall have become aware of facts that, in the sole judgment of the
Company, have or may have adverse significance with respect to the value of
the Old Senior Preferred Stock or the New Senior Preferred Stock; which in
the sole judgment of the Company in any case, and regardless of the
circumstances (including any action by the Company) giving rise to any such
condition, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance for exchange or with such exchange.
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The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Senior
Preferred Stock tendered, and no New Senior Preferred Stock will be issued in
exchange for any such Old Senior Preferred Stock, if at such time any stop
order shall be threatened or in effect with respect to the registration
statement of which this Prospectus is a part or the qualification of the
Exchange Indenture under the Trust Indenture Act of 1939.
EXCHANGE AGENT
BankBoston, N.A. has been appointed as the Exchange Agent for the Exchange
Offer. All executed Letters of Transmittal should be directed to the Exchange
Agent at the address set forth below. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notices of Guaranteed Delivery should be directed
to the Exchange Agent addressed as follows:
BankBoston, N.A., Exchange Agent
By First Class Mail: By Overnight Courier, Certified or
Express Mail and
By Hand after 4:30 p.m. New York City
BankBoston, N.A. Time
Attention: Corporate Reorganization on the Expiration Date:
P.O. Box 8029
BankBoston, N.A.
Boston, Massachusetts 02266-8029
Attention: Corporate Reorganization
By Hand (before 4:30 p.m. New York 150 Royall Street
City Time):
Canton, Massachusetts 02021
For Information Call:
Securities Transfer & Reporting Shareholder Services
Services, Inc.
(781) 575-3100
c/o Boston EquiServe LP
By Facsimile Transmission (for Eligible
1 Exchange Plaza Institutions only):
55 Broadway, 3rd Floor
New York, New York 10006 (781) 575-2232 or
(781) 575-2233
Confirm by Telephone:
(781) 575-3100
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptance of the Exchange Offer. The estimated cash expenses to be
incurred in connection with the Exchange Offer will be paid by the Company and
are estimated in the aggregate to be approximately $150,000.
TRANSFER TAXES
Holders who tender their Old Senior Preferred Stock for exchange will not be
obliged to pay any transfer taxes in connection therewith, except that holders
who instruct the Company to register New Senior Preferred Stock in the name
of, or request that Old Senior Preferred Stock not tendered or not accepted in
the Exchange Offer be returned to, a person other than the registered
tendering holder will be responsible for the payment of any applicable
transfer tax thereon.
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CONSEQUENCES OF EXCHANGING OLD SENIOR PREFERRED STOCK
Holders of Old Senior Preferred Stock who do not exchange their Old Senior
Preferred Stock for New Senior Preferred Stock pursuant to the Exchange Offer
will continue to be subject to the provisions in the Certificate of
Designation regarding transfer and exchange of the Old Senior Preferred Stock
and the restrictions on transfer of such Old Senior Preferred Stock as set
forth in the legend thereon as a consequence of the issuance of the Old Senior
Preferred Stock pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Old Senior Preferred Stock may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register Old Senior Preferred Stock under the Securities Act.
Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties, the Company believes that New Senior
Preferred Stock issued pursuant to the Exchange Offer in exchange for Old
Senior Preferred Stock may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Senior Preferred
Stock is acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such New Senior Preferred Stock. However, the Commission
has not considered the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Each holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, a distribution of New
Senior Preferred Stock and has no arrangement or understanding to participate
in a distribution of New Senior Preferred Stock. If any holder is an
"affiliate" of the Company (within the meaning of Rule 405 under the
Securities Act), is engaged in or intends to engage in or has any arrangement
or understanding with respect to the distribution of the New Senior Preferred
Stock to be acquired pursuant to the Exchange Offer, such holder (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Senior Preferred Stock for its own account in exchange for
Old Senior Preferred Stock must acknowledge that such Old Senior Preferred
Stock was acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus
in connection with any resale of such New Senior Preferred Stock. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Senior Preferred Stock received in exchange for Old Senior
Preferred Stock where such Old Senior Preferred Stock was acquired as a result
of market-making activities or other trading activities. For a period of 180
days after the Expiration Date, the Company will make this Prospectus, as
amended or supplemented from time to time, available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Senior Preferred Stock may not be offered or sold unless
it has been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied
with.
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BUSINESS
GENERAL
Samsonite is one of the world's largest manufacturers and distributors of
luggage. The Company markets its products primarily under the Samsonite(R),
American Tourister(R) and Lark(R) brand names. The Samsonite brand enjoys
worldwide recognition and is the leading brand of luggage products in the
United States and Europe. American Tourister is the second most recognized
brand of luggage in the United States. American Tourister products are also
sold in Europe. The Lark brand is well-recognized in the United States and
competes in the premium segment of the luggage market. Samsonite and American
Tourister luggage products have been manufactured and sold continuously since
the 1930s.
The Company is a major factor in the worldwide luggage market, with net
sales of $736.9 million for fiscal 1998. Competition in the luggage market is
highly fragmented with the vast majority of individual competitors having less
than 10% of the Company's annual luggage sales. Samsonite offers the broadest
range of products in the luggage industry, including hardside suitcases,
softside suitcases, garment bags, casual bags, hardside and softside business
cases and other travel bags. Many of today's most successful luggage products
and features--such as suitcases on wheels, suitcases with a built-in luggage
cart, full-featured structured garment bags, ultra-light softside suitcases
and innovative new wheel systems--were introduced or popularized by Samsonite.
The Company benefits from its large size through sale driven purchasing and
manufacturing economies. The Company's products are sourced through a global
network consisting of 14 Company-operated manufacturing facilities and various
third-party suppliers throughout the world. By operating its own facilities
to produce hardside luggage and more complex softside products, the Company is
better able to control manufacturing quality and to achieve shorter product
introduction lead times and lower delivery costs. In addition, the Company
takes advantage of its global sourcing capabilities by buying less complex
products from various countries when their product costs or currency exchange
rates are favorable.
The Company's marketing and distribution strategy focuses on the broad
middle segment of the luggage market as opposed to the more commodity driven
low end of the market or the premium priced high end. In the United States,
the Samsonite brand has historically been positioned as high quality,
innovative luggage, targeted at frequent business travelers. The American
Tourister brand has been positioned as quality luggage at an affordable price,
and the Lark brand has been positioned as premium luggage targeted at first
and business class travelers. In Europe, the Samsonite brand enjoys more of a
premium image than in the United States, and is targeted at first class and
frequent business travelers. The Company's marketing theme centers around the
Samsonite "WorldproofTM" brand image which represents strength, durability,
quality, and style.
The Company's products are sold throughout the world in more than 100
countries through approximately 23,000 retail outlets, including department
and specialty stores, catalog showrooms, mass merchant retailers, warehouse
clubs and Company-owned retail stores located primarily in factory outlet
malls. In addition, Samsonite licenses its trademarks for use on non-luggage
products, such as travel accessories, personal leather goods, handbags and
furniture. These products are made and sold primarily by independent licensees
which pay royalties to Samsonite.
COMPETITIVE STRENGTHS AND NEW GROWTH INITIATIVES
Management believes that the Company's leading position in the global
luggage industry is due to its widely recognized brand names, broad range of
innovative luggage products and global manufacturing and distribution network.
Brand Names. The Company markets its products primarily under the Samsonite,
American Tourister and Lark brand names. The Company commits substantial
resources to aggressive brand advertising programs that
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promote the features, durability and quality of the Company's products and
target particular segments of the luggage market based on consumer
demographics. For each of the last five fiscal years, the Company has
invested, either directly or through co-op advertising programs, approximately
$50 million in television and print advertising and related promotional
activities. A 1994 market survey, the most recent Company sponsored survey
conducted by an independent surveying organization, indicated that
approximately 93% and 79% of travelers surveyed in the United States
recognized the Samsonite and American Tourister brand names, respectively,
compared to less than 15% for the next most recognized luggage brand. Similar
surveys show that recognition of the Samsonite brand name in most major
Western European countries ranges from 60% to 80%.
Innovative Products. The Company is the industry leader in offering
innovative products that meet travelers' needs. The Company has spent over $40
million on product design and development during the last five fiscal years.
Many of today's most successful luggage products and features--such as
suitcases on wheels, suitcases with a built-in luggage cart, full-featured,
structured garment bags, ultra-lightweight, softside suitcases, and innovative
new wheel systems--were introduced or popularized by Samsonite. Sales of
products that were introduced or substantially redesigned by the Company in
the last three years accounted for approximately 60% of the Company's fiscal
1998 sales. The Company currently holds approximately 730 patents worldwide
and has over 300 patent applications pending worldwide.
Global Manufacturing and Distribution Network. The Company's global sourcing
network consists of 14 Company-operated manufacturing facilities and various
third-party suppliers located principally in the Far East, Eastern Europe and
the Dominican Republic. By operating its own facilities to produce hardside
luggage and more complex softside products, the Company is better able to
control manufacturing quality and reduce lead times and delivery costs. The
Company's global sourcing network also enables it to opportunistically source
less complex products from countries with low product costs and favorable
currency exchange rates. The Company has one of the largest and most
technologically advanced luggage distribution networks in both the United
States and Europe. Its pan-European distribution network is capable of billing
customers in their local currency and delivering products within five days
after an order is placed. The Company also has significant distribution
relationships in Asia, Australia, Latin America and the Middle East.
In May 1996, the Company appointed Richard R. Nicolosi as Chief Executive
Officer and shortly thereafter announced a strategic plan intended to further
strengthen the Company's leadership position in the worldwide luggage market
and to improve its financial performance. The plan included a series of
initiatives designed to broaden the product and pricing architecture in the
U.S. and position products and brands on a consistent basis in the U.S. and
Europe; to streamline the organizational structure by adopting a structure
based on channel management instead of brand management which relied upon
separate organizations to manage each of the Company's three principal brands;
and to improve the Company's cost structure by reducing SKUs, standardizing
components and instituting global sourcing.
As a result of the plan initiatives, net sales, EBITDA and Adjusted EBITDA
increased from $675.2 million, $78.7 million, and $78.3 million, respectively,
in fiscal 1996 to $736.9 million, $126.2 million and $112.4 million,
respectively, in fiscal 1998. During this period, the Company's European
operations posted increases in local currency sales and operating income of
23.9% and 58.6%, respectively. Samsonite's U.S. retail business also recorded
significant sales and operating income growth during this period; however, the
Company's U.S. wholesale business experienced difficulty implementing certain
of the plan initiatives, and began to perform below expectations commencing in
the third quarter of fiscal 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
In February 1998, Mr. Luc Van Nevel, a 23-year Samsonite veteran, who
previously had responsibility for Samsonite's successful European and
International operations, was promoted to President of Samsonite. In May 1998,
Mr. Van Nevel was appointed to succeed Mr. Nicolosi as Chief Executive Officer
and was elected to the Company's Board of Directors. Mr. Nicolosi currently
serves as Chairman of the Board of Directors.
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Since the beginning of fiscal 1999, Mr. Van Nevel has continued to refine
the successful strategies initiated in 1996 and has taken aggressive action to
address the issues facing the Company's U.S. wholesale business, as described
below.
. Emphasize Growth Oriented Product Offerings and Channels of
Distribution. The Company plans to introduce more entries in casual bags
and business cases in the U.S. in order to expand the Company's sales in
these two growth categories. This strategy has already proven to be
successful for Samsonite in Europe and Japan. The Company also plans to
increase its presence in channels of distribution where it believes it
is under-represented by using targeted marketing and sales efforts
tailored to each channel. In addition, the Company intends to exploit
its manufacturing and sourcing leverage by aggressively pursuing
opportunities to sell American Tourister and retailer-labeled products
to mass merchant retailers and in other high volume-potential channels
throughout the world.
. Strengthen Marketing and Product Innovation. Samsonite plans to continue
to expand its presence in the worldwide luggage market from both a
consumer and trade standpoint. The Company's marketing program is
expected to include more consumer-preferred products, styles and
features, more effective advertising at higher investment levels,
strengthened point-of-sale support and better customer service. Recent
successful product introductions include the updated ultralite product
line in the U.S., the second generation Oyster(TM) product line in
Europe, and products incorporating the innovative Big Wheel(R) system
worldwide. In addition, other product launches are scheduled for fiscal
1999. For example, the Company's best selling U.S. line, Silhouette(TM)
with sales of approximately $64 million in each of the last two fiscal
years, will be reintroduced as Silhouette 6 in the second half of fiscal
1999. The Company believes Silhouette 6 will have improved aesthetics
and performance and an improved price to value relationship at
competitive price points. Silhouette 6 will include separate designs
targeted at business travelers, women, and "road warriors"--the ultimate
business travelers.
. Continue Worldwide Expansion. The Company plans to continue expansion
worldwide in countries where growing economies and reduced political and
trade barriers provide opportunities for long-term growth. Samsonite
currently has operations in a number of emerging foreign markets,
including China, India, South America and the Pacific Rim. Since the
beginning of fiscal 1997, the Company has: (i) acquired luggage
distribution companies in Hong Kong, Singapore and South Korea;
(ii) established manufacturing and distribution joint ventures in India
and China; and (iii) established a new venture partnership with a former
Samsonite distributor to distribute Samsonite products in Brazil and
other major South American markets. During fiscal 1999, the Company
intends to take over distribution operations in Taiwan from the
Company's current distributor whose contract has expired and also to
form a joint venture with the Company's current Argentinian distributor.
The Company is currently considering the possible disposal or
liquidation of its investment in its manufacturing facilities in China,
although the Company intends to maintain its sales and distribution
presence in China. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Recent Events and
Recapitalization."
. Resolve U.S. Wholesale Issues. In fiscal 1998, the Company's U.S.
wholesale operation (which accounted for 37.2% of the Company's fiscal
1998 consolidated sales) produced significant increases in
operating income of 89.4% as compared to fiscal 1997. However,
commencing with the end of the third quarter of fiscal 1998, this
operation began to perform below expectations causing U.S. wholesale
sales for fiscal 1998 to be 7.4% below fiscal 1997. This decline was due
to various factors including the adverse impact of price increases and
other pricing strategies adopted by the Company, market disruptions and
retailer discounting taken in connection with various forms of cross
distribution-channel selling. In addition, forecasting and production
scheduling errors, along with the reduced level of sales, resulted in
product availability constraints, significant negative production
variances and excess inventory both at the Company and in certain of the
Company's distribution channels.
Since the beginning of fiscal 1999, the Company has taken aggressive
action to resolve these issues. These actions have included: (i)
replacing the management team responsible for U.S. wholesale
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operations with experienced luggage industry veterans; (ii) improving
customer relationships by eliminating cross distribution-channel selling
and by modifying the Company's strategy for its retail operations; (iii)
modifying the Company's pricing and co-op advertising strategy by
reducing prices from 4% to 6% on certain products with corresponding
reductions in co-op advertising allowances and sale promotion costs;
(iv) reducing production levels, particularly in the Denver hardside
plant, to bring volume into line with expected sales, and working in
conjunction with the Company's trade customers and Company-owned stores
to reduce excess working capital by approximately $45 million over the
next 18 months; and (v) rightsizing the cost structure of the Company's
U.S. wholesale operations, including implementation of a plan to further
restructure its U.S. manufacturing operations. The restructuring plan,
which is intended 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, 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 has
recorded 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 substantially
completed by July 31, 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 information
and involves known and unknown risks, uncertainties and other factors
that may cause actual cost savings to be materially different from the
foregoing estimate. See "Risk Factors--Implementation of Business
Strategy; Forward-Looking Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Recent Events
and Recapitalization."
Notwithstanding these corrective actions, the Company expects sales and
operating results in U.S. wholesale operations through at least the
first two quarters of fiscal 1999 to continue to be adversely affected
by the factors which adversely affected U.S. wholesale operations in
fiscal 1998.
THE LUGGAGE MARKET
The worldwide luggage market covers a wide range of products, values and
price points. At the highest end of the market are luxury products (such as
Louis Vuitton and Gucci) that have prestige identities, high prices, and
tightly confined distribution. Beneath the luxury segment is the broad middle
band of the luggage market in which products are differentiated by features,
brand name and price. Within this band, unit sales volumes are largest at the
middle and lower prices. Product differentiation decreases and breadth of
distribution increases with decreasing price levels.
At the low end of the luggage market, unbranded products with few, if any,
differentiating features are sold in significant volumes and at low margins,
competing primarily on the basis of price.
In the United States, luggage is sold to consumers through (i) traditional
retail distribution channels, including department and specialty luggage
stores and national retail chains, (ii) catalog showrooms and (iii) discount
retail distribution channels, including mass merchants, warehouse clubs and
Company-owned retail stores.
In Europe, luggage is sold to consumers primarily through traditional
distribution channels, primarily department and specialty luggage stores. In
the European discount channels, the Company is distributing several new
product lines, including its American Tourister brand. Samsonite operates one
Company-owned store in Northern Europe, one in Italy and one in Spain. The
Company also has two factory outlet stores, one in Italy and one in Spain. In
addition, Samsonite products are sold through a group of ten exclusive
franchise stores in Italy.
PRODUCTS
The Company offers the broadest range of products in the luggage industry,
including hardside suitcases, softside suitcases, garment bags, casual bags,
hardside and softside (including leather) business cases and laptop
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computer bags. Hardside suitcases and business cases typically consist of two
plastic shells held together by a hinge and secured closed by locking latches.
The plastic shells are made by injection molding or vacuum forming, some of
which use Samsonite's know-how, proprietary technology and unique designs.
Softside products are normally made of textile and closed by a zipper. They
are often supported by a frame and/or a pull handle and wheel assembly,
including proprietary Samsonite designs. Garment bags are designed to hold
garments on coat hangers, and can be opened while hanging up. Casual bags
include duffle bags and other bags that do not have a frame. Business and
attache cases are constructed of both softside and hardside materials. The
following table sets forth an estimate of the percentage of the Company's
fiscal 1998 revenues from sales of luggage and travel-related products by
product type:
<TABLE>
<S> <C>
Softside suitcases.................................................... 39%
Hardside suitcases.................................................... 29
Casual bags (softside)................................................ 12
Garment bags (softside)............................................... 6
Business cases (hardside and softside)................................ 4
Other products (primarily non-luggage)................................ 10
---
100%
===
</TABLE>
The Company sells a full range of luggage products under each of its
Samsonite, American Tourister and Lark brand names. Although the positioning
of the Company's brands and its target consumers vary somewhat from market to
market, product lines within each brand are designed to appeal to targeted
consumer groups. The following table sets forth, for each of the Company's
principal luggage brands, its market position and targeted consumer.
<TABLE>
<CAPTION>
BRAND NAME MARKET POSITION TARGET CONSUMER
- ---------- --------------- ---------------
<S> <C> <C>
Samsonite(R)............ Top quality luggage with leading edge Business/frequent traveler
features
American Tourister(R)... High quality luggage offering value, Value-conscious traveler
versatility and durability
Lark(R)................. Premium luggage for upscale consumers with First and business class traveler
luxurious styling
</TABLE>
Hardside Luggage. The Company manufactures virtually all of its requirements
for hardside luggage in its own factories. Hardside luggage is sold under the
Samsonite brand globally. In the United States and Europe, hardside luggage is
also sold under the American Tourister brand. Hardside products provide
greater protection and security than softside, as well as "wrinkle free"
packing for suits and dresses. Both in Europe and in the United States,
hardside products are offered in several lines, each including a variety of
sizes and styles to suit different consumer needs.
In Europe, popular Samsonite-branded hardside lines include the Samsonite
System 4 Deluxe and System 4 Art lines, priced at the higher end of the market
with large cases commanding up to US$550 at retail, the Samsonite Epsilon(R)
lines priced in the upper-middle range and Samsonite Oyster II and Oyster
products priced at the lower end.
In the United States, Samsonite-branded hardside products include the Road
Warrior(R) 900 Series and the Silhouette(R) 700 Series in the upper range,
Ultralite 3(TM) 550 Series in the upper-middle range, as well as Epsilon(R) 2
400 Series and Oyster(TM) 200 Series products in the middle and lower range
which are comparable to such products in Europe.
Globally, Samsonite distributes and sells hardside suitcases which include
features to facilitate transport. These include the patented Piggyback(R)
product, which incorporates a luggage cart, an extendable handle and a strap
allowing additional bags to be attached and transported. As a result of
proprietary improvements in molding technology and design, Samsonite is
introducing new lighter weight hardside luggage.
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<PAGE>
Softside Luggage. The Company sources approximately two-thirds of its
requirements for softside luggage and other bags from numerous independent
suppliers located worldwide, and produces the balance of its requirements in
its own facilities located in several countries. The Company has introduced
many innovative features in its softside products in response to consumer
needs for better interior organization, ease of use, mobility and portability.
The softside products are sold under all of the Company's major brands,
Samsonite, American Tourister and Lark. Globally, softside products are
grouped into product lines with a variety of matching or complementary
suitcases, garment bags and other bags.
Samsonite has introduced over the years numerous softside products with
proprietary features. Examples include the Ultravalet(R) Garment Bag, with a
unique wrinkle-free folding system, also available on wheels; the EZ Big
Wheel(R) rolling system, which allows effortless passage over carpet and rough
surfaces; and the EZ CART(TM) system, whose 4 wheels support all the weight of
the case, combined with a push-handle that provides optimum stability and
mobility. Virtually all wheeled upright cases are provided with hook-on
features that allow transport of accessory pieces such as casual bags, attache
cases or handbags.
Other Luggage. Samsonite utilizes its global manufacturing and product
sourcing leverage to compete in the high-volume, discount channels of retail
distribution by marketing luggage products under a number of secondary brands
and retailer labels. These hardside and softside luggage products are
generally lower priced than the Company's Samsonite, American Tourister and
Lark products, and usually provide fewer features. Samsonite's secondary
brands include Magnum(R) and Royal Traveler(R) in Europe, Tauro(R) in Spain,
Azzura(R) and Bogey(R) in Italy, and Legacy(R) in the U.S.
Licensed Products. The Company licenses Samsonite brand names and
McGregor(R) apparel brand names to third parties primarily for the sale of
non-luggage products. Licensees most frequently have outstanding competency in
their product categories, and sell parallel lines of products under their own
or other brands. Currently, licensed products distributed by the Company or by
third party licensees include furniture, travel accessories, photo and audio
storage gear, personal leather goods, ladies handbags, tool organizers,
umbrellas, binoculars, pet carriers, auto accessories, cellular phone cases,
back-to-school bags and other childrens' products. Revenue from royalties for
licensing the use of Company-owned brand names (including apparel brands)
totaled approximately $19.9 million in fiscal 1998.
New Product Design and Development. The Company devotes significant
resources to new product design and development. Most of the Company's
products have either been introduced or substantially redesigned since 1990.
The Company uses market research to identify consumers' luggage needs and
develops product features that address these needs. The Company employs full-
time designers and development engineers, and also has sustained long-term
outside design relations, ensuring a continuous flow of ideas based on
material developments and trends from outside the luggage industry. The
Company believes that its intensive product development and emphasis on
innovation are fundamental to its continued growth and profitability.
DISTRIBUTION
The Company's products are sold in more than 100 countries throughout the
world through approximately 23,000 retail outlets.
North America. The Company sells its Samsonite brand products in North
America primarily through department stores and luggage specialist stores, and
through catalog showrooms and national retailers such as JCPenney and Sears.
The acquisition of American Tourister in 1993 increased the Company's presence
in discount channels such as mass merchants, warehouse clubs and factory
outlets, which are becoming increasingly important in the distribution of
luggage. As a result of the strength of its brand names and its targeted
marketing strategy, the Company is able to distribute one or more full lines
of luggage under each of its principal brand names across different channels
of distribution without selling the same product line in more than one
channel. In addition, the Company sells luggage products (known as "exclusive
label" products) designed exclusively for each of a number of department store
and specialty retailing customers and bearing special labels coupled with the
Samsonite brand name.
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The following table sets forth an estimate of the percentage of the
Company's United States wholesale revenues by distribution channel for fiscal
1998:
<TABLE>
<S> <C>
Department/specialty stores........................................... 55%
Exclusive label....................................................... 15
Catalog showrooms..................................................... 11
Mass merchants........................................................ 11
Other................................................................. 8
---
100%
===
</TABLE>
The Company has a direct sales force of approximately 75 persons that serves
approximately 10,000 stores in the United States. In coordination with its key
customers, the Company develops exclusive label product lines, coordinates
promotional strategies and establishes merchandise resupply objectives. The
Company employs electronic order gathering and fulfillment systems that
enhance the Company's level of customer service. Combined with automatic
electronic order entry, these systems increase sales by minimizing stockouts
at the retail level, help the retailer reduce inventory holding and purchasing
costs, and increase inventory turnover. Over 60% of Samsonite luggage sales in
the United States are derived from orders received through this electronic
system.
As of January 31, 1998, the Company operated 189 retail stores in the United
States. Operating its own retail outlets allows the Company to more
efficiently reduce discontinued and obsolete inventory positions.
Europe. The Company distributes its Samsonite brand products in Europe
through specialty luggage stores and department stores. Samsonite brand
products are generally not distributed through the discount retailers in
Europe in order to preserve the premium image of the Samsonite brand. The
Company's American Tourister brand has been introduced in Europe to help
balance the Company's retail distribution in each of the primary retail
channels and is being used to establish a single pan-European brand name in
the discount channel.
The Company services over 11,000 stores in Europe through a direct sales
force and product demonstrators of approximately 120 persons who transmit
orders by computer to a central distribution facility in Belgium. The Company
delivers its products to its European retailing customers through a
proprietary distribution network developed at the Company's European
headquarters. Orders received electronically from the Company's sales force
are processed centrally in Belgium using specialized software created by the
Company which deals in the national currency of each of the Company's
customers. The Company's systems are also capable of handling the anticipated
introduction of a common European currency. Its integration with a centralized
shipping facility, electronic order entry, and preparation of all paperwork
necessary for multiple cross-border deliveries permits delivery of products
within five days after an order is placed to virtually any location in Europe.
To complement its business in countries with a direct sales force, the Company
also sells to other European markets through distributors and agents located
in over 20 countries. Such distributors and agents, as well as those mentioned
under "International" below, handle various non-luggage products in addition
to the Company's products. Distribution agreements generally provide for
mutual exclusivity, whereby distributors do not handle competitors' luggage
products, and the Company does not deal with other distributors or agents in
their territory.
International. In markets outside the United States and Western Europe, the
Company primarily sells its products directly, through agents and
distributors, and under license. The Company entered the Japanese market in
1964 through a licensing arrangement with Ace Luggage Company ("Ace"), Japan's
principal luggage manufacturing company. Samsonite brand products made by Ace
are sold primarily in department stores throughout Japan. Products sold in
international markets are shipped from the United States, Western Europe or
Asia depending upon product type, availability and exchange rate. In some
instances, the Company has entered new markets through third party
distributors and has acquired these third party distributors as markets have
matured. The Company currently has joint ventures in Singapore, South Korea,
India, Brazil and China, as well as a wholly-owned distribution organization
in Hong Kong. In India and China, the ventures operate newly completed
manufacturing facilities to support local sales, and commenced distribution of
locally produced
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<PAGE>
Samsonite luggage in mid fiscal 1998. During fiscal 1998, the Company formed a
joint venture with Samsonite's current distributor in Argentina to distribute
Samsonite products in Brazil and other major South American markets beginning
fiscal 1999.
ADVERTISING
The Company commits substantial resources to aggressive brand advertising
programs that promote the features, durability and quality of the Company's
luggage and travel products under the marketing theme "Samsonite--Worldproof."
The Company is the only luggage maker which regularly advertises on national
television in the United States or in Europe. For each of the last five fiscal
years, the Company has invested, either directly or through co-op advertising
programs, approximately $50 million in television and print advertising and
related promotional activities. A 1994 market survey, the most recent Company
sponsored survey conducted by an independent survey organization, indicated
that over 93% and 79% of travelers surveyed in the United States recognized
the Samsonite and American Tourister brand names, respectively, compared to
less than 15% for the next most recognized luggage brand. This market survey
was conducted by asking adults who made at least one overnight trip during the
previous six months to recognize a brand of luggage when presented with a list
of luggage brands. Similar surveys show that recognition of the Samsonite
brand name in most major Western European countries ranges from 60% to 80%.
Reinforcing the Company's marketing strategy, Samsonite brand advertising
highlights innovative features and benefits of products that meet the needs of
business and frequent travelers. Samsonite advertisements run on television,
in news weeklies and in inflight and business publications during key consumer
purchase periods throughout the year. The Company also helps its retailing
customers coordinate their advertising with the Company's national advertising
campaigns. The Company was the first luggage company both in the U.S. and in
Europe to use television to build brand awareness, and believes its
advertising program is the largest of any luggage maker.
MANUFACTURING AND SOURCING PRODUCTS
The Company's global sourcing network consists of 14 Company-operated
manufacturing facilities and various third-party suppliers located principally
in the Far East, Eastern Europe and the Dominican Republic. By operating its
own facilities to produce hardside luggage and more complex softside products,
the Company is better able to control manufacturing quality and reduce lead
times and delivery costs. The Company's global sourcing network also enables
it to source less complex products from countries with low product costs and
favorable currency exchange rates. Company-operated manufacturing facilities
are located in Belgium, France, Hungary, Italy, the Slovak Republic, Mexico,
Spain, India, China and the United States. In fiscal 1998, approximately 50%
of the Company's sales revenues were from products manufactured at its own
facilities.
The Company currently employs approximately 5,000 people in the manufacture
of hardside and softside luggage.
The Company manufactures virtually all of the hardside luggage products that
it distributes. Major hardside production facilities are located in Denver,
Colorado; Oudenaarde, Belgium; and Nashik, India; with additional hardside
production facilities located in Henin-Beaumont, France; and Ningbo, China.
In fiscal 1998, approximately one-third of the Company's revenues from
softside luggage products were from products manufactured at the Company's own
facilities. The Company sources the remainder of its softside luggage products
primarily from third party vendors in the Far East, Eastern Europe and the
Dominican Republic. The Company believes that the significant volume of its
softside luggage purchases has enabled it to obtain a reliable supply of high
quality, low cost products and prompt order fulfillment. The Company is able
to select different third-party suppliers to take advantage of changes in
manufacturing, payment terms and shipping costs. The Company does not rely on
any single third-party supplier, the loss of which would be material to the
Company.
In September 1996, Samsonite implemented centralized direction and
coordination of all sourcing of finished products components. The Company's
strategy is to achieve maximum advantage from its purchasing leverage by
aggregating orders from the Company's different locations and by better
planning and timing its
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<PAGE>
requirements and purchases. Manufacturing processes and materials and
component supply arrangements are factored into new product design or existing
product improvements. As a result, products are designed to be manufactured
more efficiently.
The Company maintains a rigorous quality control program for goods
manufactured at its own plants and at third party vendor facilities. Products
are designed to assure durability and strength, and a prototype of each new
product is put through a series of simulation and stress tests. In the
Company's manufacturing facilities and its Asian sourcing office, it uses
quality control inspectors, engineers and lab technicians to perform
inspection and laboratory testing on raw materials, parts and finished goods.
COMPETITION
Competition in the luggage market is highly fragmented with the vast
majority of individual competitors having less than 10% of the Company's
annual luggage sales. In the United States, the Company competes based on
brand name, consumer advertising, product innovation, quality,
differentiation, customer service and price. Price is more important at the
lower end of the luggage market where fewer differentiating features are
offered. Management of the Company believes that no luggage manufacturer,
other than Samsonite, has more than 10% of the United States luggage market.
In Europe, the Company competes based on its premium image, brand name,
product quality, access to established distribution channels and new product
offerings. The Company's principal competition in softside luggage in both
Europe and the United States markets is private label luggage manufactured in
low labor cost countries, primarily in Asia. The manufacture of softside
luggage is labor intensive but not capital intensive, so that the barriers to
entry by additional competitors are relatively low. At the very low end of the
market is luggage characterized by non-differentiation of features and low
margins.
CUSTOMERS
Customers include most major department stores in the United States and
Europe which carry luggage, most specialty stores featuring luggage products,
and many other retailers (mass merchants, discounters and other retailers).
Samsonite also sells directly to consumers through its retail stores in the
United States and Europe. The Company is not dependent on any single customer,
and no single customer accounts for more than 5% of the Company's revenues in
fiscal 1997 or fiscal 1998.
TRADEMARKS AND PATENTS
Trademarks and patents are important to the Company. The Company is the
registered owner of its Samsonite, American Tourister, Lark and other
trademarks and, as of January 31, 1998, has approximately 2,140 trademark
registrations in the United States and abroad. The Company also owns
approximately 193 United States patents and approximately 538 patents (patents
of inventions, industrial design registrations, and utility models) in
selected foreign countries. In addition, the Company has approximately 298
patent applications pending worldwide. The Company pursues a policy of seeking
patent protection where appropriate for inventions embodied in its products.
The Company's patents include EZ CART(TM), Smart Sleeve(TM), Easy Turn(R),
Piggyback(R), Ultravalet(R) and Oyster(TM) luggage. The Company has also
patented its CPX technology for making luggage shells. Although some companies
have sought to imitate some of the Company's patented products, Samsonite has
generally been successful in enforcing its worldwide intellectual property
rights.
EMPLOYEES AND LABOR RELATIONS
At January 31, 1998, the Company had approximately 7,800 employees
worldwide, with approximately 2,400 employees in the United States and
approximately 5,400 employees in other countries. In the United States,
approximately 770 employees are unionized under a contract which is renewed
every three years and which is due for renewal on April 9, 1999. The Company
employs approximately 2,100 workers in its 5 European manufacturing plants
located in Belgium, France, Spain, Italy and Hungary. Union membership varies
from country to country and is not officially known to the Company; however,
it is probable that most of the workers are affiliated with a union. Most
European union contracts have a one-year duration. The Company believes its
employee relations are good.
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<PAGE>
PROPERTIES
The following table sets forth certain information relating to the Company's
principal properties and facilities. All of the Company's manufacturing
plants, in the opinion of the Company's management, have been adequately
maintained and are in good operating condition. The Company believes that its
existing facilities have sufficient capacity, together with sourcing capacity
from third parties, to handle sales volumes for the foreseeable future. The
Company's headquarters in Denver shares the same location as a manufacturing
facility.
<TABLE>
<CAPTION>
APPROXIMATE
OWNED OR FACILITY SIZE
LOCATION LEASED (THOUSANDS OF SQ. FT.)
- -------- ------------ ----------------------
<S> <C> <C>
Denver, CO.................................. Owned/Leased 1,290
Tucson, AZ.................................. Owned/Leased 63
Jacksonville, FL............................ Leased 510
Warren, RI.................................. Leased 94
Stratford, Canada........................... Owned 212
Nogales, Mexico............................. Leased 313
Mexico City, Mexico......................... Owned 164
Oudenaarde, Belgium......................... Owned 649
Ningbo, China............................... Owned 100
Nashik, India............................... Owned 150
Torhout, Belgium............................ Owned 79
Henin-Beaumont, France...................... Owned 98
Szekszard, Hungary.......................... Owned 81
Tres Cantos, Spain.......................... Owned 37
Saltrio, Italy.............................. Leased 74
Singapore................................... Leased 14
Hong Kong................................... Leased 27
Seoul, South Korea.......................... Leased 24
Sao Paulo, Brazil........................... Leased 15
Samorin, Slovak Republic.................... Owned 43
</TABLE>
The Company also maintains numerous sales offices, retail outlets and
distribution centers in the United States and abroad.
LEGAL PROCEEDINGS AND CONTINGENT OBLIGATIONS
Litigation
On March 13, 1998, a complaint was filed in Colorado State District Court,
County of Denver, against the Company, certain current and former directors of
the Company, Apollo Investment Fund, L.P. and Apollo Advisors, L.P. The
purported class action brought on behalf of an alleged class of purchasers of
Samsonite Common Stock during the period from September 10, 1996 to December
1, 1997, alleges, among other things, that certain statements and earnings
forecasts made in the last 18 months were misleading and/or misrepresented
material facts and that the Company is also liable for certain allegedly
misleading statements contained in various analysts' reports. In addition, on
or about August 18, 1998, a complaint making substantially identical claims
and seeking substantially similar relief as the above complaint was filed in
the same court by another putative class representative on behalf of the same
purported class of purchasers of Samsonite Common Stock. These purported class
actions seek, among other things, unspecified compensatory and recissory
damages, as well as pre-judgment and post-judgment interest, attorney's fees,
expert witness fees and other costs. The Company believes that these
complaints are without merit and intends to contest them vigorously.
On July 1, 1998, a complaint was filed in the Delaware Court of Chancery
against the Company and certain members of its Board of Directors. The
purported class action brought on behalf of holders of Common Stock challenges
the Tender Offer. The purported class action initially sought an order
temporarily restraining consummation of the Tender Offer but that application
was subsequently withdrawn. The Company believes that the complaint is without
merit and intends to contest it vigorously. The complaint, which seeks
compensatory and/or rescissory damages as well as other relief, alleges
disclosure violations with respect to the Offer and that the Offer was
coercive, the product of unfair dealing and violated the directors' duties.
In addition, the Company is a party to various other legal proceedings and
claims in the ordinary course of business. The Company does not believe that
the outcome of any pending matters will have a material adverse affect on its
consolidated financial position, results of operations or liquidity.
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<PAGE>
Obligations to Settlement Trust
In connection with the Company's restructuring in 1993, a settlement trust
(the "Trust") was established for the benefit of the holders of certain
classes of pre-bankruptcy claims to resolve certain claims between the Company
and other parties affiliated with the previous owner of the Company. The
creation of the Trust enabled the Company to emerge from bankruptcy without
first resolving these claims. The terms of the Trust require the Company to
make loans to the Trust of up to $37 million, if necessary, to provide funds
for Trust operations, to pay resolved claims and to distribute to the Trust
beneficiaries any remaining balance after settling all liabilities. In prior
fiscal years, the Company made loans to the Trust aggregating $4,850,000 and
provided an allowance for the full amount of the loans. During the current
fiscal year, the Trust repaid the loans together with accrued interest of
$1,400,000. As a result, the Company recorded the collection of the loans as
other income (see note 15 to the Company's consolidated financial statements
included elsewhere in this Prospectus) and recorded the interest income. The
Company believes it is very unlikely to be required to make any additional
loans to the Trust.
Contingent Pension Liabilities
In connection with the Company's restructuring in 1993, the Company accrued
a liability of $37.7 million for claims of the Pension Benefit Guaranty
Corporation ("PBGC") related to pension liabilities for unpaid contributions
and insurance premiums of certain pension plans (the "Plans") which were
sponsored by certain companies which were, along with the Company, part of a
"controlled group" of companies, as defined by the Employee Retirement Income
Security Act of 1974. The amount accrued was based on a PBGC calculated
termination liability. As a result of agreements executed in fiscal 1997
giving the Company the right to assume sponsorship of the Plans in the event
of certain defaults by the primary plan sponsors, the liability was adjusted
to $26.6 million based on the pension benefit obligation of the Plans
discounted at 7.25%, reduced by the market value of the Plans' assets. The
corresponding reduction in the liability of $11.1 million was recorded in
other nonoperating income in fiscal 1997. See note 15 to the Company's
consolidated financial statements included elsewhere in this Prospectus.
As a result of the failure of the Plan sponsors' to meet their obligations
to the Plans in fiscal 1998, the Company assumed sponsorship of the Plans and
merged them with an existing Company pension plan on October 14, 1997. The
accrued liability for this matter was reclassified and is included in the
determination of the Company's pension benefit liability at January 31, 1998.
Contingent Liability with Respect to the E-II Notes
The 1993 reorganization plan provides for payment in full of 100% of the
allowed claim of the holders of certain old notes of E-II Holdings, Inc.
(predecessor to Astrum), including approximately $16.4 million of interest on
overdue installments of interest accruing prior to the commencement of
Astrum's bankruptcy case. Various parties have challenged the allowability of
the claim on the basis that interest on overdue installments of interest is
not permitted under applicable non-bankruptcy law. The Company provided for
this contingent liability in its consolidated financial statements when it
emerged from bankruptcy in the amount of $16.4 million.
During fiscal 1997, $4.0 million of such claims were settled for $0.2
million, resulting in the recording of $3.8 million of other nonoperating
income from the favorable settlement of this claim. The holders of the claim
were Apollo Investment Fund, L.P. ("Apollo Investments") and an affiliate of
Apollo Investments. See "Security Ownership of Certain Beneficial Owners and
Management." During fiscal 1998, the Company recorded other income of
$2,060,000 from the favorable settlement of $2,139,000 of such claims.
As a result of a change in New York law in fiscal 1998, which adversely
affected the Company's ability to favorably settle the remaining claims, the
Company has entered into a non-binding agreement-in-principle to settle the
remaining amount of these claims for approximately $9.4 million. At January
31, 1998, other accrued expenses included $10.3 million provided for these
remaining claims. The Company expects final settlement to occur in fiscal
1999.
73
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers and their ages (as of July
31, 1998) are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard R. Nicolosi...... 50 Chairman of the Board
Luc Van Nevel............ 51 President and Chief Executive Officer and Director
Thomas R. Sandler........ 51 President, Samsonite, the Americas
Richard H. Wiley......... 41 Chief Financial Officer
Karlheinz Tretter........ 55 President, Samsonite Europe and Asia
Carlo Zezza.............. 62 Senior Vice President
D. Michael Clayton....... 49 Vice President, Legal and Assistant Secretary
R. Theodore Ammon........ 48 Director
Bernard Attal............ 34 Director
Leon D. Black............ 47 Director
Robert H. Falk........... 60 Director
Mark H. Rachesky......... 39 Director
Robert L. Rosen.......... 51 Director
Marc J. Rowan............ 36 Director
Stephen J. Solarz........ 57 Director
</TABLE>
Richard R. Nicolosi. Mr. Nicolosi has been Chairman of the Board of
Directors of the Company since May 15, 1996. He served as President and Chief
Executive Officer of the Company from May 15, 1996 to May 15, 1998. From 1994
to 1996, Mr. Nicolosi was Senior Vice President of Scott Paper Company. From
1992 to 1994, Mr. Nicolosi was President of Nicolosi & Associates, a privately
owned business consulting firm. From 1969 to 1992, Mr. Nicolosi was employed
by Procter & Gamble in various positions, the latest being President, Pulp and
Paper Sector, Corporate Group Vice President, as well as a member of the
Executive Committee. He is a member of the Advisory Board of Directors of
Domino's Pizza, Inc.
Luc Van Nevel. Mr. Van Nevel was elected as President of the Company in
February 1998 and became Chief Executive Officer and a Director in May 1998.
Prior to that time, Mr. Van Nevel held various positions including Chief
Operating Officer (since September 1997) and President of Samsonite Europe
N.V. (since 1989). Since 1984, he has held the additional position of Managing
Director of Samsonite Europe N.V. He joined Samsonite Europe N.V. in 1975 as
Manager, Financial Planning and progressed to the position of Controller
before being promoted to President of Samsonite Europe in 1989. Mr. Van Nevel
worked in audit positions with Touche Ross & Co. in Europe for five years
before joining Samsonite.
Thomas R. Sandler. Mr. Sandler was appointed President of the Americas
division of Samsonite effective March 1998. Prior to that Mr. Sandler was the
Chief Financial Officer and Treasurer of Samsonite since May 1, 1995. Mr.
Sandler also serves as the Secretary. Prior to joining Samsonite, Mr. Sandler
was the managing partner of the Denver office of BDO Seidman, an international
public accounting firm, since July 1994. Prior to joining BDO Seidman, Mr.
Sandler was an audit and consulting partner in the international public
accounting firm of KPMG Peat Marwick LLP, specializing in corporate
restructurings.
Mr. Richard H. Wiley. Mr. Wiley has been Chief Financial Officer and
Treasurer of Samsonite since March, 1998. Prior to that Mr. Wiley was Chief
Financial Officer of the Americas division of Samsonite since May, 1995. Prior
to joining Samsonite, Mr. Wiley was an audit and consulting senior manager
with BDO Seidman, an international public accounting firm, since July 1994.
Prior to that, Mr. Wiley was with KPMG Peat Marwick LLP since 1982, working in
the audit and consulting area.
74
<PAGE>
Karlheinz Tretter. Mr. Tretter was appointed President of Samsonite Europe
on October 16, 1997 and additionally as President of Samsonite Asia on
February 15, 1998. Prior to that Mr. Tretter was Vice President and Managing
Director of Samsonite Europe since May 1994. From 1990 until 1994, Mr. Tretter
had served as Vice President of Marketing and/or Sales for Samsonite Europe.
Carlo Zezza. Mr. Zezza has been Senior Vice President of Samsonite since
1990, with responsibility for new products and licensing. Mr. Zezza joined the
Company in 1971 from the J. Walter Thompson advertising agency, where he was
Vice President serving Samsonite and other accounts. From 1976 to 1983, Mr.
Zezza was President, Samsonite Europe, and in 1984 was responsible for
Samsonite USA marketing and operations. From 1985 to 1990, Mr. Zezza was
President, Delsey USA, a competitor luggage business in the United States.
D. Michael Clayton. Mr. Clayton has been General Counsel of Samsonite since
1985 and Vice President--Legal since 1989. Mr. Clayton joined Samsonite in
1974.
R. Theodore Ammon. Mr. Ammon has been Chairman of the Board of Big Flower
Holdings, Inc. since 1993. Mr. Ammon was a General Partner of Kohlberg Kravis
Roberts & Co. (a New York and San Francisco-based investment firm) from 1990
to 1992, and an executive of such firm prior to 1990. Mr. Ammon is also a
member of the Board of Directors of Host Marriott Corporation. In addition,
Mr. Ammon serves on the Board of Directors of the New York YMCA, Jazz at
Lincoln Center, the Institute of International Education, and on the Board of
Trustees of Bucknell University.
Bernard Attal. Mr. Attal has been a director of the Company since March 28,
1996, when the Board of Directors elected him to the Board. Mr. Attal is a
Director of Heights Advisors, which acts as a financial advisor and a
representative for certain European institutional investors with respect to
their investments in the United States. From 1992 to 1995, Mr. Attal was a
Vice President at Credit Lyonnais Securities. Prior to 1992, Mr. Attal was
Chief Financial Officer of Altus Patrimoine & Gestion, a money management
firm. Mr. Attal is a director of New California Life Holdings, Inc. and the
Florsheim Group, Inc.
Leon D. Black. Mr. Black has been a director of the Company since 1993. Mr.
Black is one of the founding principals of Apollo Advisors, L.P., which,
together with its affiliates, acts as managing general partner of Apollo
Investment Fund, L.P., AIF II, L.P. and Apollo Investment Fund III, L.P.,
private securities investment funds, and Lion Advisors, L.P., which acts as
financial advisor to and representative for certain institutional investors
with respect to securities investments, and of Apollo Real Estate Advisors,
L.P., which serves as managing general partner of the Apollo Real Estate
Investment Funds, private real estate oriented investment funds. Mr. Black is
a director of Converse, Inc., Vail Resorts, Inc., Telemundo Group, Inc. and
Sequa Industries, Inc.
Robert H. Falk. Mr. Falk has been an officer since April 1992 of Apollo
Capital Management, Inc. and Lion Capital Management, Inc., which respectively
act as general partners of Apollo Advisors, L.P. and Lion Advisors, L.P. Mr.
Falk is a limited partner of Apollo Advisors, L.P., which, together with its
affiliates, acts as managing general partner of Apollo Investment Fund, L.P.,
AIF II, L.P. and Apollo Investment Fund III, L.P., private securities
investment funds, and a limited partner of Lion Advisors, L.P., which acts as
financial advisor to and representative for certain institutional investors
with respect to securities investments. Prior to 1992, Mr. Falk was a partner
in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Falk is a
director of Converse, Inc., the Florsheim Group, Inc. and Salant Corporation.
Mark H. Rachesky, M.D. Dr. Rachesky has been a director of the Company since
1993. Dr. Rachesky is the founder of MHR Capital Partners LP and MHR
Institutional Partners, LP, investment funds which invest in distressed
securities. Dr. Rachesky is the principal owner and investment manager of the
general partner and investment manager of these limited partnerships. Dr.
Rachesky has served as a director of Cadus Pharmaceutical Corporation since
September 1993.
Robert L. Rosen. Mr. Rosen is Chief Executive Officer of RLR Partners, LLC,
a private investment partnership founded in April 1987. Mr. Rosen is a
director of the Municipal Advantage Fund, Inc., Municipal
75
<PAGE>
Partners Fund, Inc., Municipal Partners Fund II, Inc., the Spring Mountain
Group, Dialysis Centers of America, Jewish Television Network, AFP Imaging
Corp., Paragon Health Networks and WMC Finance Co.
Marc J. Rowan. Mr. Rowan is one of the founding principals of Apollo
Advisors, L.P., which, together with its affiliates, acts as managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P., Apollo Investment Fund
III, L.P. and Apollo Investment Fund IV, L.P., private securities investment
funds, and of Lion Advisors, L.P., which acts as financial advisor to and
representative for certain institutional investors with respect to securities
investments. Mr. Rowan is a director of Vail Resorts, Inc., the owner and
operator of the Vail, Beaver Creek, Keystone and Breckenridge ski areas; MTL,
Inc., a national tank truck/carrier company; and NRT Incorporated, a leading
national real estate brokerage company. Mr. Rowan is also a founding member
and serves on the executive committee of the Youth Renewal Fund and is a
member of the board of directors of National Jewish Outreach Program and the
Undergraduate Executive Board of The Wharton School.
Stephen J. Solarz. Mr. Solarz was elected, in 1974, to the House of
Representatives from Brooklyn's 13th Congressional District and was re-elected
eight times. In the House he served on four committees: Foreign Affairs,
Merchant Marine and Fisheries, Intelligence and the Joint Economic Committee.
Mr. Solarz ranked second in seniority on the House Foreign Affairs Committee,
where he chaired the Subcommittee on Asian and Pacific Affairs. Since his
departure from the House, Mr. Solarz has been: Senior Counselor at APCO
Associates, an international public affairs firm; President of Solarz and
Associates, a global consulting firm; Chairman of the Central Asian American
Enterprise Fund; Vice Chairman of the International Crisis Group; a
Distinguished Fellow at the Carnegie Endowment for International Peace;
Professor of International Affairs at George Washington University; a Member
of the Board of Directors of the Brandeis University Board of Trustees as well
as the National Endowment for Democracy and National Democratic Institute; and
a member of the Council on Foreign Relations and the International Rescue
Committee. Mr. Solarz is a director of First Philippine Fund and IRI
International.
76
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information about persons known to
the Company to be the beneficial owner of more than 5% of the Common Stock,
and as to the beneficial ownership of the Common Stock by each of the
Company's directors and executive officers and all of the Company's directors
and executive officers as a group, as of July 16, 1998. Except as otherwise
indicated, to the knowledge of the Company, the persons identified below have
sole voting and sole investment power with respect to shares they own of
record.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- ------------------- ------------------ -------
<S> <C> <C>
Apollo Investment Fund, L.P.
c/o Apollo Advisors, L.P.
2 Manhattan Road
Purchase, New York 10577
and
Lion Advisors, L.P.
1301 Avenue of the Americas, 38th Floor
New York, NY 10019................................ 3,557,757(a) 34.10%
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor
New York, New York 10017.......................... 724,830(b) 6.50%
Richard R. Nicolosi
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239............................ 577,493(c) 5.32%
Mark H. Rachesky
Mark Capital Partners
335 Madison Avenue, 26th Floor
New York, New York 10017.......................... 36,960 *
Luc Van Nevel
c/o Samsonite Europe N.V.
Westerring 17
B-9700 Oudenaarde, Belgium........................ 71,141(d) *
Thomas R. Sandler
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239............................ 74,814(e) *
Karlheinz Tretter
c/o Samsonite Europe N.V.
Westerring 17
B-9700 Oudenaarde, Belgium........................ 49,299(f) *
Richard H. Wiley
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239............................ 12,094(g) *
D. Michael Clayton
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239............................ 8,527(h) *
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- ------------------- ------------------ -------
<S> <C> <C>
Carlo Zezza
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239............................. 16,800(i) *
Bernard Attal
1301 Avenue of the Americas, 38th Floor
New York, New York 10019........................... 457 *
R. Theodore Ammon
Big Flower Press Holdings, Inc.
3 E. 54th Street, 19th Floor
New York, New York 10022........................... 402 *
Leon D. Black
1301 Avenue of the Americas, 38th Floor
New York, NY 10019................................. 402(j) *
Robert H. Falk
1301 Avenue of the Americas, 38th Floor
New York, NY 10019................................. 402(j) *
Robert L. Rosen
RLR Partners, L.P.
825 Third Avenue, 40th Floor
New York, New York 10022........................... 402 *
Marc J. Rowan
1301 Avenue of the Americas, 38th Floor
New York, NY 10019................................. 402(j) *
Stephen J. Solarz
APCO Associates, Inc.
1615 L Street, N. W., Suite 900
Washington, DC 20036............................... 65 *
All Directors and Executive Officers as a group..... 849,660(k) 7.68%
</TABLE>
- --------
*Less than 1.0%
(a) Includes 1,779,234 shares held by Apollo Investment Fund, L.P. ("Apollo")
and 1,778,523 shares beneficially held by Lion Advisors, L.P. ("Lion") on
behalf of an investment account under management over which Lion has
exclusive investment, voting and dispositive power. Lion is affiliated
with Apollo Advisors, L.P., the general partner of Apollo Investments.
(b) Represents warrants to acquire Common Stock issued in connection with the
offering of Old Senior Preferred Stock on June 24, 1998.
(c) Includes options to purchase 425,532 shares of Common Stock exercisable as
of July 16, 1998.
(d) Includes options to purchase 67,171 shares of Common Stock exercisable as
of July 16, 1998.
(e) Includes options to purchase 64,814 shares of Common Stock exercisable as
of July 16, 1998.
(f) Includes options to purchase 37,334 shares of Common Stock exercisable as
of July 16, 1998.
(g) Represents options to purchase 12,094 shares of Common Stock exercisable
as of July 16, 1998.
(h) Includes options to purchase 8,430 shares of Common Stock exercisable as
of July 16, 1998.
(i) Includes options to purchase 16,000 shares of Common Stock exercisable as
of July 16, 1998.
(j) Includes shares issued under the Directors Stock Plan. Does not include
shares held by Apollo or Lion. Each of Messrs. Falk and Rowan, directors
of the Company, together with Mr. Black, a director of the Company, who is
also a director of Apollo Capital Management, Inc., the general partner of
Apollo Advisers, L.P., and of Lion Capital Management, Inc., the general
partner of Lion, disclaims beneficial ownership of the securities held by
Apollo and Lion.
(k) Excludes shares listed above for Apollo and Lion. If such shares were
included, the aggregate number of shares beneficially owned by all
directors and executive officers as a group would be 4,407,417,
representing 39.83%.
78
<PAGE>
DESCRIPTION OF SENIOR PREFERRED STOCK AND EXCHANGE DEBENTURES
THE SENIOR PREFERRED STOCK
The summary contained herein of certain provisions of the Senior Preferred
Stock issued by the Company on June 24, 1998 does not purport to be complete
and is qualified in its entirety by reference to the provisions of the
Certificate of Designation relating thereto. The definitions of certain
capitalized terms used in the following summary are set forth under "--Certain
Definitions" below. Other capitalized terms used herein and not otherwise
defined under "--Certain Definitions" below are defined in the Certificate of
Designation. As used in this Description of Senior Preferred Stock and
Exchange Debentures, the term "Company" means Samsonite Corporation, a
Delaware company, excluding its Subsidiaries.
GENERAL
The Executive Committee of the Board of Directors of the Company adopted
resolutions creating a maximum of 350,000 shares of Senior Preferred Stock and
the Company filed a Certificate of Designation with respect thereto with the
Secretary of State of the State of Delaware as required by Delaware law. Of
the 350,000 authorized shares of Senior Preferred Stock, 175,000 shares were
issued on June 24, 1998, and the balance are reserved for issuance as
dividends in the event the Company elects to pay dividends on the Senior
Preferred Stock by issuing additional shares of Senior Preferred Stock. See
"--Dividends" below. Subject to certain conditions, the Senior Preferred Stock
is exchangeable for Exchange Debentures at the option of the Company on any
Dividend Payment Date. See "--Exchange" below. The Senior Preferred Stock is
fully paid and nonassessable, and the holders thereof do not have any
subscription or preemptive rights.
RANKING
The Senior Preferred Stock, with respect to dividend distributions and
distributions upon the liquidation, winding-up or dissolution of the Company,
ranks (i) senior to the extent described below to all classes of Common Stock
of the Company, and to each other class of capital stock or series of
Preferred Stock established after June 24, 1998 by the Board of Directors of
the Company the terms of which do not expressly provide that it ranks senior
to or on a parity with the Senior Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding-up or dissolution of the
Company (collectively referred to with the Common Stock of the Company as
"Junior Securities"); (ii) subject to certain conditions, on a parity with any
class of capital stock or series of Preferred Stock issued by the Company
established after June 24, 1998 by the Board of Directors of the Company the
terms of which expressly provide that such class will rank on a parity with
the Senior Preferred Stock as to dividend distributions and distributions upon
the liquidation, winding-up or dissolution of the Company (collectively
referred to as "Parity Securities"); and (iii) subject to certain conditions,
junior to each other class of capital stock or series of Preferred Stock
issued by the Company established after June 24, 1998 by the Board of
Directors of the Company the terms of which expressly provide that such class
or series will rank senior to the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up or
dissolution of the Company (collectively, referred to as "Senior Securities").
The Senior Preferred Stock is subject to the issuance of series of Junior
Securities, Parity Securities and Senior Securities; provided that the Company
may not issue any new class of Parity Securities (other than the issuance of
additional shares of Senior Preferred Stock to satisfy dividend payments on
outstanding shares of Senior Preferred Stock) or Senior Securities (or amend
the provisions of any existing class of capital stock to make such class of
capital stock Parity Securities or Senior Securities) without the approval of
the holders of at least two-thirds of the shares of Senior Preferred Stock
then outstanding, voting or consenting, as the case may be, together as one
class.
No full dividends may be declared or paid on any Parity Securities for any
period unless full cumulative dividends shall have been or contemporaneously
are declared and paid (or are deemed declared and paid) in full or declared
and, if payable in cash, a sum in cash sufficient for such payment set apart
for such payment on the
79
<PAGE>
Senior Preferred Stock. If full dividends are not paid, the Senior Preferred
Stock will share dividends pro rata with the Parity Securities. No dividends
may be paid on any Junior Securities (except dividends on Junior Securities
payable in additional shares of Junior Securities) and no Junior Securities
may be repurchased, redeemed or otherwise retired (except in exchange for
Junior Securities) if full cumulative dividends have not been paid in full (or
deemed paid) on the Senior Preferred Stock for all full quarterly dividend
periods ended prior to the date of such payment in respect of Junior
Securities.
DIVIDENDS
Holders of the Senior Preferred Stock are entitled to receive, when, as and
if declared by the Board of Directors of the Company, out of funds legally
available therefor, dividends on the Senior Preferred Stock at a rate per
annum equal to 13 7/8% of the liquidation preference per share of Senior
Preferred Stock, payable quarterly. All dividends will accumulate on a daily
basis whether or not earned or declared from June 24, 1998 and will be payable
quarterly in arrears on March 15, June 15, September 15, and December 15 of
each year (each, a "Dividend Payment Date"), commencing on September 15, 1998,
to holders of record on March 1, June 1, September 1, and December 1
immediately preceding the relevant Dividend Payment Date. All unpaid dividends
will compound on a quarterly basis. Dividends may be paid, at the Company's
option, on any Dividend Payment Date occurring on or prior to September 15,
2003 either in cash or by the issuance of additional shares of Senior
Preferred Stock (including fractional shares) having an aggregate liquidation
preference equal to the amount of such dividends. If any dividend payable on
any Dividend Payment Date subsequent to June 15, 2003 is not paid in full in
cash, or if, at any time, any of the events described in clauses (ii) through
(vi) of the definition of the "Voting Rights Triggering Event" shall have
occurred, the per annum dividend rate will be increased by 2% from such
Dividend Payment Date or during the continuance of any such Voting Rights
Triggering Event, as the case may be. After the date on which such dividend is
paid in cash or such default ceases to exist, the dividend rate will revert to
the rate originally borne by the Senior Preferred Stock. The Original Credit
Agreement contains certain limitations on the ability of the Company to pay
dividends on the Senior Preferred Stock in cash. In addition, the Notes
Indenture contains certain limitations on the Company's ability to pay cash
dividends on the Senior Preferred Stock. See "Concurrent Offering" and
"Description of New Credit Facility."
Unpaid dividends accumulating after June 15, 2003 on the Senior Preferred
Stock for any past dividend period and dividends in connection with any
optional redemption may be declared and paid at any time, without reference to
any regular dividend payment date, to holders of record on such date, not more
than 45 days prior to the payment thereof, as may be fixed by the Board of
Directors of the Company.
The dividend rate on the Senior Preferred Stock is subject to increase, and
such Additional Dividends will be payable on the Dividend Payment Dates set
forth above, in certain circumstances, if the Senior Preferred Stock (or other
securities substantially similar to the Senior Preferred Stock) is not
registered with the Commission within the prescribed time periods.
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<PAGE>
OPTIONAL REDEMPTION
The Senior Preferred Stock will be redeemable (subject to contractual and
other restrictions with respect thereto and to the legal availability of funds
therefor) at any time on or after June 15, 2001, in whole or in part, at the
option of the Company, at the redemption prices (expressed as a percentage of
liquidation preference, plus, without duplication, an amount in cash equal to
all accumulated and unpaid dividends, other than dividends which have
accumulated since the last Dividend Payment Date) set forth below (including
an amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the redemption date to the
redemption date) if redeemed during the 12-month period beginning June 15 of
each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................................... 110%
2002.......................................... 108%
2003.......................................... 106%
2004.......................................... 104%
2005.......................................... 102%
2006.......................................... 101%
2007 and thereafter........................... 100%
</TABLE>
In addition, on or prior to June 15, 2001, the Company may, at its option,
use the Net Proceeds of one or more Equity Offerings to redeem for cash up to
an aggregate of 35% of the shares of Senior Preferred Stock (whether initially
issued or issued as a dividend payment) at a redemption price equal to
113.875% of the liquidation preference thereof, plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends (including an
amount in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the redemption date to the redemption date);
provided, however, that after any such redemption, there is at least $113.75
million aggregate in liquidation preference of the Senior Preferred Stock
outstanding. Any such redemption will be required to occur on or prior to 90
days after the receipt by the Company of the proceeds of such Equity Offering.
In the event of partial redemptions of Senior Preferred Stock, the shares to
be redeemed will be determined pro rata, except that the Company may redeem
all shares held by any holders of fewer than ten shares (or shares held by
holders who would hold less than ten shares as a result of such redemption),
as may be determined by the Company. No optional redemption may be made unless
prior thereto or simultaneously therewith all accumulated and unpaid dividends
on the Senior Preferred Stock shall have been paid in cash or a sum set apart
for such payment.
The Notes Indenture and the Original Credit Agreement restrict the ability
of the Company to redeem the Senior Preferred Stock. See "Concurrent Offering"
and "Description of New Credit Facility."
MANDATORY REDEMPTION
The Senior Preferred Stock is subject to mandatory redemption (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) in whole on June 15, 2010 at a price equal to
the liquidation preference thereof, plus, without duplication, all accumulated
and unpaid dividends to the date of redemption. The Notes Indenture and the
Original Credit Agreement restrict the ability of the Company to redeem the
Senior Preferred Stock and will prohibit any such redemption in certain
instances and other future agreements or certificates of designation with
respect to Senior Securities or Parity Securities may contain similar
restrictions and/or prohibitions. See "Description of New Credit Facility."
PROCEDURE FOR REDEMPTION
On and after a redemption date, unless the Company defaults in the payment
of the applicable redemption price, dividends will cease to accrue on shares
of Senior Preferred Stock called for redemption and all rights of
81
<PAGE>
holders of such shares will terminate except for the right to receive the
redemption price, without interest. If a notice of redemption shall have been
given as provided in the succeeding sentence and the funds necessary for
redemption (including an amount in respect of all dividends that will accrue
to the redemption date) shall have been segregated and irrevocably set apart
by the Company, in trust for the benefit of the holders of the shares called
for redemption, then dividends shall cease to accumulate on the redemption
date on the shares to be redeemed and, at the close of business on the day
when such funds are segregated and set apart, the holders of the shares to be
redeemed shall cease to be holders of the Company and shall be entitled only
to receive the redemption price for such shares. The Company will send a
written notice of redemption by first class mail to each holder of record of
shares of Senior Preferred Stock, not less than 30 days nor more than 60 days
prior to the date fixed for such redemption. Shares of Senior Preferred Stock
issued and reacquired will, upon compliance with the applicable requirements
of Delaware law, have the status of authorized but unissued shares of
Preferred Stock of the Company undesignated as to series and may with any and
all other authorized but unissued shares of Preferred Stock of the Company be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of Preferred Stock of the Company.
EXCHANGE
The Company may at its option on any Dividend Payment Date either (i) from
time to time exchange, in whole or in part, on a pro rata basis, the then
outstanding shares of Senior Preferred Stock for Company Exchange Debentures;
provided that immediately after giving effect to any partial exchange, there
shall be outstanding shares of Senior Preferred Stock with an aggregate
liquidation preference of not less than $75 million and not less than $75
million aggregate principal amount of Company Exchange Debentures or (ii)
exchange all of the outstanding Senior Preferred Stock for Holdings Exchange
Debentures; provided, however, that, in either case, (a) on the date of such
exchange there are no accumulated and unpaid dividends on the Senior Preferred
Stock (including the dividend payable on such date) or other contractual
impediments to such exchange; (b) there shall be sufficient surplus under
Delaware law to permit such exchange; (c) immediately after giving effect to
such exchange, no Default or Event of Default (each as defined in the Exchange
Indenture) would exist under the Exchange Indenture, no default or event of
default would exist under the Notes Indenture and no default or event of
default under any other material instrument governing Indebtedness outstanding
at the time would be caused thereby; and (d) the Exchange Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), if
such qualification is required at the time of exchange. The Company intends to
comply with the provisions of Rule 13e-4 promulgated pursuant to the Exchange
Act in connection with the exchange, to the extent applicable. The Notes
Indenture and the Original Credit Agreement restrict the exchange of the
Senior Preferred Stock for Company Exchange Debentures. See "Description of
New Credit Facility."
Upon any Exchange referred to in the preceding paragraph, the holders of
outstanding shares of Senior Preferred Stock will be entitled to receive,
subject to the second succeeding sentence, $1.00 principal amount of Exchange
Debentures for each $1.00 liquidation preference of Senior Preferred Stock
held by them. The Exchange Debentures will be issued in registered form,
without coupons. Exchange Debentures issued in exchange for Senior Preferred
Stock will be issued in principal amounts of $1,000 and integral multiples
thereof to the extent possible, and will also be issued in principal amounts
less than $1,000 so that each holder of Senior Preferred Stock will receive
certificates representing the entire amount of Exchange Debentures to which
such holder's shares of Senior Preferred Stock entitle such holder; provided
that the Company may pay cash in lieu of issuing an Exchange Debenture in a
principal amount less than $1,000. The Company will send a written notice of
exchange by mail to each holder of record of shares of Senior Preferred Stock
not less than 30 nor more than 60 days before the date fixed for such
exchange. On and after the exchange date, dividends will cease to accrue on
the outstanding shares of Senior Preferred Stock that are to be exchanged, and
all rights of the holders of Senior Preferred Stock that is to be exchanged
(except the right to receive the Exchange Debentures and, if the Company so
elects, cash in lieu of any Exchange Debenture which is in an amount that is
not an integral multiple of $1,000) will terminate. See "--The Exchange
Debentures."
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LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of the Senior Preferred Stock will be entitled to
receive, out of the assets of the Company available for distribution, $1,000
per share, plus an amount in cash equal to accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up), and no more, before any distribution is made on any Junior
Securities, including, without limitation, Common Stock of the Company. If
upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, the amounts payable with respect to the Senior Preferred Stock
and all other Parity Securities are not paid in full, the holders of the
Senior Preferred Stock and the Parity Securities will share equally and
ratably in any distribution of assets of the Company first in proportion to
the full liquidation preference to which each is entitled until such
preferences are paid in full, and then in proportion to their respective
amounts of accumulated but unpaid dividends. After payment of the full amount
of the liquidation preferences and accumulated and unpaid dividends to which
they are entitled, the holders of shares of Senior Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Company. However, neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with one or more
entities shall be deemed to be a liquidation, dissolution or winding-up of the
Company.
The Certificate of Designation for the Senior Preferred Stock does not
contain any provision requiring funds to be set aside to protect the
liquidation preference of the Senior Preferred Stock, although such
liquidation preference will be substantially in excess of the par value of
such shares of Senior Preferred Stock. In addition, the Company is not aware
of any provision of Delaware law or any controlling decision of the courts of
the State of Delaware (the state of incorporation of the Company) that
requires a restriction upon the surplus of the Company solely because the
liquidation preference of the Senior Preferred Stock will exceed its par
value. Consequently, there will be no restriction upon the surplus of the
Company solely because the liquidation preference of the Senior Preferred
Stock will exceed the par value and there will be no remedies available to
holders of the Senior Preferred Stock before or after the payment of any
dividend, other than in connection with the liquidation of the Company, solely
by reason of the fact that such dividend would reduce the surplus of the
Company to an amount less than the difference between the liquidation
preference of the Senior Preferred Stock and its par value.
VOTING RIGHTS
Holders of the Senior Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by Delaware law or as
set forth in the Certificate of Designation. The Certificate of Designation
provides that if (i) after June 15, 2003 dividends on the Senior Preferred
Stock required to be paid in cash are in arrears and unpaid for two or more
quarterly dividend periods (whether or not consecutive) or (ii) the Company
fails to redeem the Senior Preferred Stock on or before June 15, 2010 or (iii)
the Company fails to make a Change of Control Offer if such an offer is
required by the provisions set forth under "--Change of Control" below or
fails to purchase shares of Senior Preferred Stock from holders who elect to
have such shares purchased pursuant to the Change of Control Offer or (iv) a
breach or violation of any of the provisions described under the caption
"--Certain Covenants" below occurs and the breach or violation continues for a
period of 60 days or more after the Company receives notice thereof specifying
the default from the holders of at least 25% of the shares of Senior Preferred
Stock then outstanding or (v) the Company fails to pay at the final stated
maturity (giving effect to any extensions thereof) the principal amount of any
Indebtedness, or the final stated maturity of any such Indebtedness is
accelerated, if the aggregate principal amount of such Indebtedness, together
with the aggregate principal amount of any other such Indebtedness in default
for failure to pay principal at the final stated maturity (giving effect to
any extensions thereof) or which has been accelerated, aggregates $50 million
or more at any time, in each case, after a 30-day period during which such
default shall not have been cured or such acceleration rescinded or (vi) the
Company fails to make any scheduled payment of principal or interest on any
Indebtedness the outstanding principal amount of which aggregate $50 million
or more, after a
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180-day period during which such default shall not have been cured, then the
holders of a majority of the then outstanding shares of Senior Preferred
Stock, voting separately and as a class, will have the right to elect the
lesser of two directors and that number of directors constituting 25% of the
members of the Board of Directors of the Company. Such voting rights will
continue until such time as, in the case of a dividend default, all
accumulated and unpaid dividends on the Senior Preferred Stock are paid in
full in cash and, in all other cases, any failure, breach or default giving
rise to such voting rights is remedied, cured (including, but not limited to,
in the case of clause (v), through the issuance of Indebtedness permitted to
be incurred by the Certificate of Designation or the waiver of any breach or
default by the holders of such Indebtedness) or waived by the holders of at
least a majority of the shares of Senior Preferred Stock then outstanding, at
which time the term of any directors elected pursuant to the provisions of
this paragraph shall terminate. Each such event described in clauses (i)
through (vi) above is referred to herein as a "Voting Rights Triggering
Event." The voting rights provided herein shall be the holder's exclusive
remedy at law or in equity.
In addition, the Certificate of Designation provides that the Company will
not authorize any additional shares of Senior Preferred Stock or any class of
Senior Securities or Parity Securities without the affirmative vote or consent
of holders of at least two-thirds of the shares of Senior Preferred Stock of
the Company then outstanding which are entitled to vote thereon, voting or
consenting, as the case may be, as one class. The Certificate of Designation
also provides that the Company may not amend the Certificate of Designation so
as to affect materially and adversely the specified rights, preferences,
privileges or voting rights of the holders of shares of Senior Preferred
Stock, or authorize the issuance of any shares of Senior Preferred Stock in
addition to the 350,000 authorized, without the affirmative vote or consent of
the holders of at least a majority of the then outstanding shares of Senior
Preferred Stock which are entitled to vote thereon, voting or consenting, as
the case may be, as one class. The Certificate of Designation also provides
that, except as set forth above, (a) the creation, authorization or issuance
of any shares of Junior Securities, Parity Securities or Senior Securities or
(b) the increase or decrease in the amount of authorized capital stock of any
class, including any Preferred Stock, shall not require the consent of the
holders of Senior Preferred Stock and shall not be deemed to affect adversely
the rights, preferences, privileges or voting rights of holders of shares of
Senior Preferred Stock.
Under Delaware law, holders of Senior Preferred Stock are entitled to vote
as a class upon a proposed amendment to the certificate of incorporation of
the Company, whether or not entitled to vote thereon by the certificate of
incorporation, if the amendment would increase or decrease the par value of
the shares of such class, or alter or change the powers, preferences, or
special rights of the shares of such class so as to affect them adversely.
CHANGE OF CONTROL
Within 15 business days after the Company knows, or reasonably should know,
of the occurrence of each Change of Control, the Company will make an offer to
purchase (the "Change of Control Offer") the outstanding Senior Preferred
Stock at a purchase price equal to 101% of the liquidation preference thereof
plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends thereon (including an amount in cash equal to a prorated
dividend for the period from the immediately preceding Dividend Payment Date
to the Change of Control Payment Date (such applicable purchase price being
hereinafter referred to as the "Change of Control Purchase Price") in
accordance with the procedures set forth in this covenant.
The Company will within 15 days after it knows, or reasonably should know,
of the Change of Control (i) cause a notice of the Change of Control Offer to
be sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage
prepaid, to each holder of Senior Preferred Stock, at the address appearing in
the register maintained by the Transfer Agent (as defined herein), a notice
stating:
(i) that the Change of Control Offer is being made pursuant to this
covenant and that all Senior Preferred Stock tendered will be accepted for
payment, and otherwise subject to the terms and conditions set forth
herein;
(ii) the Change of Control Purchase Price and the purchase date (which
shall be a business day no earlier than 20 business days nor more than 60
business days from the date such notice is mailed (the "Change of Control
Payment Date"));
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(iii) that any Senior Preferred Stock not tendered will continue to
accrue dividends;
(iv) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Senior Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accumulate dividends
after the Change of Control Payment Date;
(v) that holders accepting the offer to have their Senior Preferred Stock
purchased pursuant to a Change of Control Offer will be required to
surrender their certificates representing the Senior Preferred Stock to the
Company at the address specified in the notice prior to the close of
business on the business day preceding the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their acceptance if the
Company receives, not later than the close of business on the third
business day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the number of shares delivered for purchase, and a statement that
such holder is withdrawing his election to have such Senior Preferred Stock
purchased;
(vii) that holders whose Senior Preferred Stock is being purchased only
in part will be issued new Senior Preferred Stock equal to the unpurchased
portion of the Senior Preferred Stock surrendered, provided that each share
purchased and each such new certificate for Senior Preferred Stock issued
shall be in an original liquidation preference in denominations of $1,000
and integral multiples thereof; and
(viii) a summary of any other procedures that a holder must follow to
accept a Change of Control Offer or effect withdrawal of such acceptance.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, accept for payment Senior Preferred Stock or portions thereof tendered
pursuant to the Change of Control Offer and promptly mail to each holder of
Senior Preferred Stock so accepted payment in an amount equal to the purchase
price for such Senior Preferred Stock, and the Company shall execute and issue
a new certificate representing Senior Preferred Stock equal to any unpurchased
shares represented by a certificate surrendered.
The Certificate of Designation provides that, prior to the mailing of the
notice referred to above, but in any event within 30 days following the date
on which the Company has actual knowledge of a Change of Control, the Company
covenants that if the purchase of the Senior Preferred Stock would violate or
constitute a default under any then outstanding Indebtedness, then the Company
will, to the extent needed to permit such purchase of Senior Preferred Stock,
either (i) repay in full all Indebtedness on the basis required to permit such
purchase of Senior Preferred Stock or (ii) obtain the requisite consents under
the instrument(s) governing such Indebtedness to permit the repurchase of the
Senior Preferred Stock as provided above. The Company will first be required
to comply with the covenant in the preceding sentence before it will be
required to repurchase Senior Preferred Stock pursuant to the provisions
described above; the failure to comply with such covenant will constitute a
Voting Rights Triggering Event, and the voting rights provided for above shall
be the holder's exclusive remedy at law or in equity for such failure to
comply with such covenant.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
redemption of the Senior Preferred Stock pursuant to a Change of Control
Offer.
This "Change of Control" covenant will not apply in the event of (a) changes
in a majority of the Board of Directors of the Company in certain instances as
contemplated by clause (iv) of the definition of "Change of Control" and (b)
certain transactions with Permitted Holders. In addition, this covenant is not
intended to afford holders of shares of Senior Preferred Stock protection in
the event of certain highly leveraged transactions, reorganizations,
restructurings, mergers and other similar transactions that might adversely
affect the holders of shares of Senior Preferred Stock but would not
constitute a Change of Control. The Company could, in the future,
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enter into certain transactions, including certain recapitalizations of the
Company, that would not constitute a Change of Control, but would increase the
amount of Indebtedness outstanding at such time. If a Change of Control were
to occur, there can be no assurance that the Company would have sufficient
funds to pay the redemption price for all the Senior Preferred Stock that the
Company might be required to redeem. Moreover, as of June 24, 1998, after
giving effect to the Recapitalization, the Company would not have had
sufficient funds available to redeem all the Senior Preferred Stock pursuant
to a Change of Control Offer. In the event that the Company is required to
redeem the Senior Preferred Stock pursuant to a Change of Control Offer, the
Company expects that it would need to seek third-party financing to the extent
it does not have available funds to meet its redemption obligations. However,
there can be no assurance that the Company would be able to obtain such
financing on favorable terms, if at all. In addition, the Notes Indenture and
the Original Credit Agreement restrict the Company's ability to redeem the
Senior Preferred Stock, including pursuant to a Change of Control Offer. See
"Concurrent Offering" and "Description of New Credit Facility."
None of the provisions in the Certificate of Designation relating to a
repurchase upon a Change of Control may be waived by the Board of Directors of
the Company.
CERTAIN COVENANTS
The Certificate of Designation contains the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any Restricted Subsidiary of the Company to, directly or
indirectly incur any Indebtedness (including Acquired Indebtedness) other than
Permitted Indebtedness. Notwithstanding the foregoing limitations, the Company
and its Restricted Subsidiaries may incur Indebtedness if (a) after giving
effect to the incurrence of such Indebtedness and the receipt and application
of the proceeds thereof, the Company's Consolidated Fixed Charge Coverage
Ratio (determined on a pro forma basis for the last four full fiscal quarters
of the Company for which financial information is available at the date of
determination) is at least equal to 1.75:1; but no Restricted Subsidiary may
incur Indebtedness which is not Permitted Indebtedness unless its Consolidated
Fixed Charge Coverage Ratio is at least equal to 2.75:1; provided, however,
that if the Indebtedness which is the subject of a determination under this
provision is Acquired Indebtedness, or Indebtedness incurred in connection
with the simultaneous acquisition of any Person, business, property or assets,
then such ratio shall be determined by giving effect (on a pro forma basis, as
if the transaction had occurred at the beginning of the four quarter period)
to both the incurrence or assumption of such Acquired Indebtedness or such
other Indebtedness by the Company or such Restricted Subsidiary and the
inclusion in the Company's or such Restricted Subsidiary's Consolidated EBITDA
of the Consolidated EBITDA of the acquired Person, business, property or
assets; and provided, further, that in the event that the Consolidated EBITDA
of the acquired Person, business, property or assets reflects an operating
loss, no amounts shall be deducted from the Company's or such Restricted
Subsidiary's Consolidated EBITDA in making the determinations described above
and (b) no Voting Rights Triggering Event shall have occurred and be
continuing at the time or as a consequence of the incurrence of such
Indebtedness.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment if at the time of such Restricted Payment and immediately
after giving effect thereto:
(i) any Voting Rights Triggering Event shall have occurred and be
continuing; or
(ii) the Company could not incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments declared or made after
June 24, 1998 (the amount expended for such purposes, if other than in
cash, being the fair market value of such property as determined by the
Board of Directors of the Company in good faith) exceeds the sum of (A) 50%
of the Company's Consolidated Net Income for the period (taken as one
accounting period) commencing with the first full
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fiscal quarter of the Company which commenced after June 24, 1998 to and
including the fiscal quarter of the Company ended immediately prior to the
date of each calculation (or in the event Consolidated Net Income is a
deficit minus 100% of such deficit), plus (B) 100% of the aggregate Net
Proceeds and the fair market value of securities or other property received
by the Company from the issue or sale, after June 24, 1998, of Qualified
Capital Stock (other than Capital Stock of the Company issued to any
Restricted Subsidiary of the Company) of the Company or any Indebtedness or
other securities of the Company convertible into or exercisable or
exchangeable for Qualified Capital Stock of the Company which have been so
converted or exercised or exchanged, as the case may be, plus (C) $10
million provided, that the amount of Restricted Payments permitted by this
clause (C) shall not be reduced by any negative amounts that occur under
clause (A) above.
(b) Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph will not prohibit (A) payments with respect to
the purchase or redemption of Capital Stock of the Company made by exchange
for, or out of the proceeds of the substantially concurrent sale (other than
to a Subsidiary of the Company or an Emerging Market Subsidiary) of, Qualified
Capital Stock; (B) payments in respect of any redemption, repurchase,
acquisitions, cancellation or other retirement for value of shares of Capital
Stock of the Company or options, stock appreciation or similar rights, in each
case held by officers, directors or employees of the Company or any of its
Subsidiaries (or former officers, directors or employees) (or their estates or
beneficiaries under their estates) or by an employee benefit plan, upon death,
disability, retirement or termination of employment of any such Person
pursuant to the terms of any employee benefit plan or any other agreement
under which shares of Capital Stock or stock appreciation or similar rights
were issued or acquired, and the purchase of shares of Capital Stock by the
Company or any Restricted Subsidiary for the purpose of contributing such
shares to any employee benefit plan (provided, that all such payments and
purchases referred to in this clause (B) may not exceed $2 million in any 12
month period after June 24, 1998); (C) the payment of any dividend within 60
days after the date of its declaration if such dividend could have been paid
on the date of its declaration in compliance with the foregoing provisions;
(D) the consummation of a cash tender offer by the Company for shares of
Capital Stock of the Company in an aggregate amount not exceeding $430 million
in connection with the Recapitalization; or (E) cash payments (and/or the
issuance or delivery of any note, instrument, agreement or other obligation
providing for future cash payments) resulting from antidilution or other
adjustments made in connection with the Recapitalization to options to
purchase Capital Stock or restricted or unvested Capital Stock held by
employees, directors or former employees or directors of the Company or any of
its Subsidiaries, to the extent that such adjustments and cash payments are
approved by the Board of Directors of the Company. Each Restricted Payment
made or paid in accordance with this paragraph, except those made pursuant to
clause (D) or clause (E), shall be counted (without duplication) for purposes
of computing amounts utilized for Restricted Payments pursuant to clause
(a)(iii) of the immediately preceding paragraph. No payments made or paid
pursuant to clause (C) of this paragraph shall be counted for purposes of
computing amounts utilized for Restricted Payments pursuant to clause (a)(iii)
of the immediately preceding paragraph to the extent such amount was already
counted for such purposes.
Limitations on Transactions with Affiliates. The Company will not, and will
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of
assets, property or services) with any Affiliate of the Company (an "Affiliate
Transaction") or extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction entered into prior to June 24, 1998 unless (i) such
Affiliate Transaction is between or among the Company and its Restricted
Subsidiaries; or (ii) such Affiliate Transaction is entered into in good faith
and the terms of such Affiliate Transaction are fair and reasonable to the
Company or such Restricted Subsidiary, as the case may be. In any Affiliate
Transaction involving an amount or having a value in excess of $5 million
which is not permitted under clause (i) above, the Company must obtain a
resolution of the Board of Directors determining that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $10 million which are not permitted under clause (i) above, the
Company must obtain a written opinion as to the fairness of such a
transaction, from a financial point of view to the Company or such Restricted
Subsidiary, as the case may be, from an independent investment banking firm.
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Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not apply to: (i) Restricted Payments that are not
prohibited by the covenant described under "--Limitation on Restricted
Payments"; (ii) transactions permitted by, and complying with, the provisions
of the covenant described under "--Merger, Consolidation and Sale of Assets";
(iii) transactions in the ordinary course of business (including expense
advances) between the Company or any of its Restricted Subsidiaries or
Unrestricted Subsidiaries, on the one hand, and any employee thereof, on the
other hand; (iv) employment contracts existing on June 24, 1998 and employment
contracts approved by the Board of Directors of the Company the terms of which
are consistent with past practice; (v) the granting and performance of
registration rights for shares of Capital Stock of the Company under a written
registration rights agreement approved by a majority of directors of the
Company that are disinterested with respect to such transaction; (vi)
transactions with Affiliates solely in their capacity as holders of
Indebtedness or Capital Stock of the Company or any of its Restricted
Subsidiaries or Unrestricted Subsidiaries, where such Affiliates are treated
no more favorably than holders of such Indebtedness or such Capital Stock
generally; (vii) any Permitted Investments; (viii) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Subsidiary of the
Company as determined in good faith by the Company's Board of Directors; (ix)
transactions exclusively between or among the Company and any of its
Subsidiaries, provided such transactions are not otherwise prohibited by the
Certificate of Designation; (x) any agreement as in effect as of June 24, 1998
or any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so
long as any such amendment or replacement agreement is not more
disadvantageous to the holders in any material respect than the original
agreement as in effect on June 24, 1998; (xi) any payment, issuance of
securities or other payments, awards or grants, in cash or otherwise, pursuant
to, or the funding of, employment arrangements and Plans approved by the Board
of Directors of the Company; (xii) the grant of stock options or similar
rights to employees and directors of the Company and its Subsidiaries (or any
amendment or adjustment thereto) pursuant to Plans and employment contracts
and stock option, stock bonus, restricted stock and similar agreements
approved by the Board of Directors of the Company; (xiii) loans or advances to
officers, directors or employees of the Company or its Restricted Subsidiaries
not in excess of $5 million at any one time outstanding; and (xiv)
transactions, including, without limitation, the repurchase of the Company's
Common Stock, entered into in connection with the Recapitalization and the
financing therefor.
Merger, Consolidation and Sale of Assets. Without the affirmative vote of
the holders of a majority of the issued and outstanding shares of Senior
Preferred Stock, voting or consenting, as the case may be, as a separate
class, the Company will not, in a single transaction or series of related
transactions, consolidate with or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its assets to, another Person unless: (i) either (1) the Company is the
survivor of such merger, consolidation, sale, assignment, transfer, lease,
conveyance or other disposition or (2) the surviving or transferee Person is a
corporation, partnership or trust organized and existing under the laws of the
United States, any state thereof or the District of Columbia and such
surviving or transferee Person expressly assumes all the obligations of the
Company under the Senior Preferred Stock and the Certificate of Designation;
(ii) the Senior Preferred Stock shall be converted into or exchanged for and
shall become shares of such successor, transferee or resulting Person, having
in respect of such successor, transferee or resulting Person the same powers,
preferences and relative participating, optional or other special rights and
the qualifications, limitations or restrictions thereon that the Senior
Preferred Stock had immediately prior to such transaction; (iii) immediately
after giving effect to such transaction and the use of proceeds therefrom (on
a pro forma basis, including any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Company or the surviving or
transferee Person is able to incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on Incurrence
of Additional Indebtedness" covenant; and (iv) immediately after giving effect
to such transaction (including any Indebtedness incurred or anticipated to be
incurred in connection with the transaction), no Voting Rights Triggering
Event has occurred and is continuing. For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of related transactions) of all or substantially all of the properties
and assets of one or more Restricted Subsidiaries the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company will be deemed to be the transfer of all or
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substantially all of the properties and assets of the Company. Notwithstanding
the foregoing clauses (iii) and (iv) of the preceding sentence but subject to
clauses (i) and (ii) thereof (a) the Company may consolidate with, merge into
or transfer all or part of its properties and assets to any Restricted
Subsidiary of the Company so long as all assets of the Company immediately
prior to such transaction are owned by such Restricted Subsidiary immediately
after the consummation thereof and (b) the Company may merge with an Affiliate
that is a corporation that has no material assets or liabilities and which was
incorporated solely for the purpose of (A) reincorporating the Company in the
same or another jurisdiction of the United States, any state thereof or the
District of Columbia or (B) the creation of a holding company of the Company.
Transfer Agent and Registrar. Boston EquiServe is the transfer agent (the
"Transfer Agent") and registrar for the Senior Preferred Stock.
Reports. So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, it will continue to file the information
required thereby with the Commission and will furnish such information to
holders of Senior Preferred Stock within 15 days of filing thereof with the
Commission. The Certificate of Designation provides that if the Company is not
required to file such information with the Commission, it will nonetheless
continue to furnish such information to holders of Senior Preferred Stock
within 15 days of the date on which filing with the Commission would have been
required.
THE EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under an Exchange
Indenture (the "Exchange Indenture"), dated as of June 24, 1998 between the
Company, or, to be dated as of the Exchange Date between Holdings, as the case
may be, and, in each case, United States Trust Company of New York, as Trustee
(the "Trustee"). The following summary of certain provisions of the Exchange
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the TIA, and to all of the provisions of the
Exchange Indenture, including the definitions of certain terms therein and
those terms made a part of the Exchange Indenture by reference to the TIA as
in effect on the date of the Exchange Indenture. The definitions of certain
capitalized terms used in the following summary are set forth under "--Certain
Definitions" below. The Notes Indenture and the Original Credit Agreement
restrict the Company's ability to issue the Exchange Debentures. See
"Concurrent Offering" and "Description of New Credit Facility."
The Exchange Debentures will be general unsecured obligations of the Company
or Holdings, as the case may be, and will be limited in aggregate principal
amount to the liquidation preference of the Senior Preferred Stock, plus,
without duplication, all accumulated and unpaid dividends on the Senior
Preferred Stock, on the date or dates on which it is exchanged for Exchange
Debentures (plus any additional Exchange Debentures issued in lieu of cash
interest as described herein). The Exchange Debentures will be issued in fully
registered form only, in denominations of $1,000 and integral multiples
thereof (other than as described in "--The Senior Preferred Stock--Exchange"
or with respect to additional Exchange Debentures issued in lieu of cash
interest as described herein). If issued, the Holdings Exchange Debentures
will be general unsecured obligations of Holdings or, if issued, the Company
Exchange Debentures will be subordinated to all existing and future Senior
Debt (including the Notes and amounts outstanding under any Credit Agreement).
Principal of, premium, if any, and interest on the Exchange Debentures will
be payable, and the Exchange Debentures may be presented for registration of
transfer or exchange at the office of the Paying Agent and Registrar. At the
Issuer's option, interest, to the extent paid in cash, may be paid by check
mailed to the registered address of holders of the Exchange Debentures as
shown on the register for the Exchange Debentures. The Trustee will initially
act as Paying Agent and Registrar. The Issuer may change any Paying Agent and
Registrar without prior notice to holders of the Exchange Debentures. Holders
of the Exchange Debentures must surrender Exchange Debentures to the Paying
Agent to collect principal payments.
The Exchange Debentures will mature on June 15, 2010. Each Exchange
Debenture will bear interest at the rate of 13 7/8% per annum from the
Exchange Date or from the most recent interest payment date to which interest
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has been paid or provided for or, if no interest has been paid or provided
for, from the Exchange Date. Interest will be payable quarterly in cash (or,
in the case of interest payable on interest payment dates that occur on or
prior to June 15, 2003, in additional Exchange Debentures, at the option of
the Issuer) in arrears on each March 15, June 15, September 15 and December
15, commencing with the first such date after the Exchange Date. Interest on
the Exchange Debentures will be computed on the basis of a 360-day year
comprised of twelve 30-day months and, for periods not involving a full
calendar month, the actual number of days elapsed (but not to exceed 30 days).
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable, at the Issuer's option, in whole
at any time or in part from time to time, on and after June 15, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on June 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................................... 110%
2002.......................................... 108%
2003.......................................... 106%
2004.......................................... 104%
2005.......................................... 102%
2006.......................................... 101%
2007 and thereafter........................... 100%
</TABLE>
In addition, on or prior to June 15, 2001, the Issuer may, at its option,
use the Net Proceeds of one or more Equity Offerings to redeem for cash up to
an aggregate of 35% of the aggregate principal amount of the Exchange
Debentures whether initially issued or issued in payment of interest
obligations thereon at a redemption price equal to 112% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest thereon to the
redemption date; provided, however, that after any such redemption, the
aggregate principal amount of Exchange Debentures outstanding must equal at
least $75 million. Any such redemption will be required to occur on or prior
to 90 days after the receipt by the Issuer of the proceeds of each such Equity
Offering.
The Notes Indenture and the Original Credit Agreement restrict the Company's
ability to optionally redeem the Company Exchange Debentures. See "Concurrent
Offering" and "Description of New Credit Facility."
CHANGE OF CONTROL
The Issuer shall notify the Trustee within five business days after the
Issuer knows, or reasonably should know, of the occurrence of a Change of
Control. Within 15 business days after the Issuer knows, or reasonably should
know, of the occurrence of each Change of Control, the Issuer will make an
offer to purchase (the "Change of Control Offer") the outstanding Exchange
Debentures at a purchase price equal to 101% of the principal amount thereof
plus any accrued and unpaid interest thereon to the Change of Control Payment
Date (such applicable purchase price being hereinafter referred to as the
"Change of Control Purchase Price") in accordance with the procedures set
forth in this covenant.
The Issuer will within 15 days after it knows, or reasonably should know, of
the Change of Control (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage
prepaid, to the Trustee and to each holder of the Exchange Debentures, at the
address appearing in the register maintained by the Registrar of the Exchange
Debentures, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
covenant and that all Exchange Debentures tendered will be accepted for
payment, and otherwise subject to the terms and conditions set forth
herein;
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(ii) the Change of Control Purchase Price and the purchase date (which
shall be a business day no earlier than 20 business days nor more than 60
business days from the date such notice is mailed (the "Change of Control
Payment Date"));
(iii) that any Exchange Debentures not tendered will continue to accrue
interest;
(iv) that, unless the Issuer defaults in the payment of the Change of
Control Purchase Price, any Exchange Debentures accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(v) that holders accepting the offer to have their Exchange Debentures
purchased pursuant to a Change of Control Offer will be required to
surrender the Exchange Debentures to the Paying Agent at the address
specified in the notice prior to the close of business on the business day
preceding the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
business day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Exchange Debentures delivered for
purchase, and a statement that such holder is withdrawing his election to
have such Exchange Debentures purchased;
(vii) that holders whose Exchange Debentures are being purchased only in
part will be issued new Exchange Debentures equal in principal amount to
the unpurchased portion of the Exchange Debentures surrendered, provided
that each Exchange Debenture purchased and each such new Exchange Debenture
issued shall be in an original principal amount in denominations of $1,000
and integral multiples thereof;
(viii) a summary of any other procedures that a holder must follow to
accept a Change of Control Offer or effect withdrawal of such acceptance;
and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuer shall, to the extent
lawful, (i) accept for payment Exchange Debentures or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Exchange Debentures or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee Exchange Debentures so accepted together with an officers' certificate
stating the Exchange Debentures or portions thereof tendered to the Issuer.
The Paying Agent shall promptly mail to each holder of Exchange Debentures so
accepted payment in an amount equal to the purchase price for such Exchange
Debentures, and the Issuer shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Exchange Debenture equal
in principal amount to any unpurchased portion of the Exchange Debentures
surrendered; provided that each such new Exchange Debenture shall be issued in
an original principal amount in denominations of $1,000 and integral multiples
thereof.
In the case of Company Exchange Debentures, the Exchange Indenture provides
that, prior to the mailing of the notice referred to above, but in any event
within 30 days following the date on which the Company has actual knowledge of
a Change of Control, the Company covenants that if the purchase of the Company
Exchange Debentures would violate or constitute a default under the Notes
Indenture or any other then outstanding Senior Debt, then the Company will, to
the extent needed to permit such purchase of Company Exchange Debentures,
either (i) repay in full all Indebtedness on the basis required by the Notes
Indenture and such Senior Debt or (ii) obtain the requisite consents under the
Notes Indenture and the instrument(s) governing such other Senior Debt to
permit the repurchase of the Company Exchange Debentures as provided above.
The Company will first be required to comply with the covenant in the
preceding sentence before it will be required to repurchase Company Exchange
Debentures pursuant to the provisions described above; provided that the
Company's failure to comply with the covenant described in the preceding
sentence will constitute an Event of Default described in clause (iii) under
"Events of Default" below (after the passage of time referred to therein).
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The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
purchase of Exchange Debentures pursuant to a Change of Control Offer.
This "Change of Control" covenant will not apply in the event of (a) changes
in a majority of the Board of Directors of the Issuer in certain instances as
contemplated by the definition of "Change of Control" and (b) certain
transactions with Permitted Holders. In addition, this covenant is not
intended to afford holders of Exchange Debentures protection in the event of
certain highly leveraged transactions, reorganizations, restructurings,
mergers and other similar transactions that might adversely affect the holders
of Exchange Debentures, but would not constitute a Change of Control. The
Issuer could, in the future, enter into certain transactions, including
certain recapitalizations of the Issuer, that would not constitute a Change of
Control, but would increase the amount of Indebtedness outstanding at such
time. If a Change of Control were to occur, there can be no assurance that the
Issuer would have sufficient funds to pay the purchase price for all Exchange
Debentures that the Company might be required to purchase. Moreover, as of
June 24, 1998, after giving effect to the Recapitalization, the Issuer would
not have had sufficient funds available to purchase all the Exchange
Debentures, assuming they had been issued, pursuant to a Change of Control
Offer. In the event that the Issuer was required to purchase Exchange
Debentures pursuant to a Change of Control Offer, the Company expects that it
would need to seek third-party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can no
assurance that the Issuer would be able to obtain such financing on favorable
terms, if at all. In addition, the Notes Indenture and the Original Credit
Agreement restrict the Company's ability to repurchase the Company Exchange
Debentures, including pursuant to a Change of Control Offer. See "Concurrent
Offering" and "Description of New Credit Facility."
None of the provisions in the Exchange Indenture relating to a repurchase
upon a Change of Control is waivable by the Board of Directors of the Issuer.
In addition, the Trustee may not waive the right of any holder of the Exchange
Debentures to redeem its Exchange Debentures upon a Change of Control, except
to the extent the Trustee is acting at the direction of the holders of the
Exchange Debentures then outstanding.
SUBORDINATION
If issued, the Obligations represented by the Company Exchange Debentures
will be, to the extent and in the manner provided in the Exchange Indenture,
subordinated in right of payment to the prior indefeasible payment and
satisfaction in full in cash of all existing and future Senior Debt of the
Company, including the Notes offered in the Concurrent Offering.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, arrangement, reorganization or other similar case
or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, whether voluntary or involuntary, or any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or any
general assignment for the benefit of creditors or other marshaling of assets
or liabilities of the Company (except in connection with the merger or
consolidation of the Company or its liquidation or dissolution following the
transfer of substantially all of its assets, upon the terms and conditions
permitted under the circumstances described under "--Certain Covenants--
Merger, Consolidation and Sale of Assets") (all of the foregoing referred to
herein individually as a "Bankruptcy Proceeding" and collectively as
"Bankruptcy Proceedings"), the holders of Senior Debt will be entitled to
receive indefeasible payment and satisfaction in full in cash of all amounts
due on or in respect of all Senior Debt before the holders of the Company
Exchange Debentures are entitled to receive or retain any payment or
distribution of any kind on account of the Company Exchange Debentures or any
Obligations under the Company Exchange Debentures, the Registration Rights
Agreement or the Exchange Indenture. In the event that, notwithstanding the
foregoing, the Trustee or any holder of Company Exchange Debentures receives
any payment or distribution of assets or securities of the Company of any kind
or any other distribution on account of the Company Exchange Debentures or any
Obligations under the Company Exchange Debentures, the Registration Rights
Agreement or the Exchange Indenture, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in respect of
the
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Company Exchange Debentures or any Obligations under the Company Exchange
Debentures the Registration Rights Agreement or the Exchange Indenture before
all Senior Debt is indefeasibly paid and satisfied in full in cash, then such
payment or distribution will be held by the recipient in trust for the benefit
of holders of Senior Debt and will be immediately paid over or delivered to
the holders of Senior Debt or their representative or representatives to the
extent necessary to make payment in full in cash of all Senior Debt remaining
unpaid,
after giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Debt. By reason of such
subordination, in the event of liquidation or insolvency, creditors of the
Company who are holders of Senior Debt may recover more, ratably, than other
creditors of the Company, and creditors of the Company who are not holders of
Senior Debt or of the Company Exchange Debentures may recover more, ratably,
than the holders of the Company Exchange Debentures.
No payment or distribution of any assets or securities of the Company or any
Subsidiary of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable
by reason of the payment of any other Indebtedness of the Company being
subordinated to the payment of the Company Exchange Debentures by the Company,
other than Qualified Capital Stock of the Company or subordinated debt
securities of the Company that require no payment of principal prior to the
stated maturity of the Company Exchange Debentures and that are subordinated
and junior in right of payment to Senior Debt at least to the same extent as
the Company Exchange Debentures, with terms no less favorable to the Company
and the holders of the Designated Senior Debt than the terms of the Company
Exchange Debentures and the Exchange Indenture) may be made by or on behalf of
the Company or any Subsidiary, including, without limitation, by way of set-
off or otherwise, for or on account of the Company Exchange Debentures or any
Obligations under the Company Exchange Debentures, the Registration Rights
Agreement or the Exchange Indenture, or for or on account of the purchase,
redemption or other acquisition of the Exchange Debentures or any Obligations
under the Company Exchange Debentures, the Registration Rights Agreement or
the Exchange Indenture, and neither the Trustee nor any holder or owner of any
Company Exchange Debentures shall take or receive from the Company or any
Subsidiary, directly or indirectly in any manner, payment in respect of all or
any portion of Company Exchange Debentures or for or on account of the
purchase, redemption or other acquisition of the Company Exchange Debentures
or in respect of any other Obligations under the Company Exchange Debentures,
the Registration Rights Agreement or the Exchange Indenture upon the
occurrence and during the continuation of a Payment Default and such
prohibition shall continue until such Payment Default is cured, waived in
writing or ceases to exist. At such time as the prohibition set forth in the
preceding sentence shall no longer be in effect, subject to the provisions of
the following paragraph, the Company shall resume making any and all required
payments in respect of the Company Exchange Debentures, including any missed
payments.
Upon the occurrence and during the continuance of a Non-Payment Event of
Default, no payment or distribution of any assets or securities of the Company
of any kind or character (including, without limitation, cash, property and
any payment or distribution which may be payable or deliverable by reason of
the payment of any other Indebtedness of the Company being subordinated to the
payment of the Company Exchange Debentures by the Company other than Qualified
Capital Stock of the Company or subordinated debt securities of the Company
that require no payment of principal prior to the stated maturity of the
Company Exchange Debentures and that are subordinated and junior in right of
payment to Senior Debt at least to the same extent as the Company Exchange
Debentures, with terms no less favorable to the Company and the holders of the
Designated Senior Debt than the terms of the Company Exchange Debentures and
the Exchange Indenture) may be made by the Company, including, without
limitation, by way of set-off or otherwise, for or on account of the Company
Exchange Debentures or any Obligations under the Company Exchange Debentures,
the Registration Rights Agreement or the Exchange Indenture, or for or on
account of the purchase or redemption or other acquisition of Exchange
Debentures or any other Obligations under the Company Exchange Debentures, the
Registration Rights Agreement or the Exchange Indenture, and neither the
Trustee nor any holder or owner of any Company Exchange Debentures shall take
or receive from the Company or any Subsidiary, directly or indirectly in any
manner, payment in respect of all or any portion of Company Exchange
Debentures or any such other Obligations under the Company Exchange
Debentures, the Registration Rights Agreement or the
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Exchange Indenture for a period (a "Payment Blockage Period") commencing on
the date of receipt by the Trustee of written notice from the Representative
of such Non-Payment Event of Default unless and until (subject to any blockage
of payments that may then be in effect under the preceding paragraph) the
earliest of (w) more than 179 days shall have elapsed since the date of
receipt of such written notice by the Trustee, (x) such Non-Payment Event of
Default shall have been cured or waived in writing or shall have ceased to
exist, (y) such Designated Senior Debt shall have been paid in full in cash or
(z) such Payment Blockage Period shall have
been terminated by written notice to the Company or the Trustee from such
Representative, after which, in the case of clause (w), (x), (y) or (z), the
Company shall resume making any and all required payments in respect of the
Company Exchange Debentures, including any missed payments. Notwithstanding
any other provision of the Exchange Indenture, in no event shall any Payment
Blockage Period commenced in accordance with the provisions of the Exchange
Indenture described in this paragraph extend beyond 179 days after the date of
the receipt by the Trustee of the notice referred to above (such 179 day
period, an "Initial Blockage Period"). Any number of additional Payment
Blockage Periods may be commenced during the Initial Blockage Period or any
other Payment Blockage Period; provided, however, that no such additional
Payment Blockage Period commenced during an existing Payment Blockage Period
shall extend beyond 179 days after the date of receipt by the Trustee of the
notice which commences such Initial Blockage Period. After the expiration of
any Payment Blockage Period, no Payment Blockage Period may be commenced until
at least 180 consecutive days have elapsed from the last day of the such
Payment Blockage Period. Notwithstanding any other provision of the Exchange
Indenture, no Non-Payment Event of Default with respect to Designated Senior
Debt which existed or was continuing on the date of the commencement of any
Payment Blockage Period initiated by the Representative shall be, or be made,
the basis for the commencement of a second Payment Blockage Period initiated
by the Representative, whether or not within the Initial Blockage Period,
unless such Non-Payment Event of Default shall have been waived or cured for a
period of not less than 90 consecutive days.
If the Company fails to make any payment on the Company Exchange Debentures
when due or within any applicable grace period, whether or not on account of
such payment blockage provisions, such failure would constitute an Event of
Default under the Exchange Indenture and would enable the holders of the
Company Exchange Debentures to accelerate the maturity thereof. See "--Events
of Default."
A holder of Company Exchange Debentures by his acceptance of Exchange
Debentures agrees to be bound by such provisions and authorizes and expressly
directs the Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Exchange
Indenture and appoints the Trustee his attorney-in-fact for such purpose.
CERTAIN COVENANTS
The Exchange Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Issuer will not,
and will not permit any Restricted Subsidiary of the Issuer to, directly or
indirectly incur any Indebtedness (including Acquired Indebtedness) other than
Permitted Indebtedness. Notwithstanding the foregoing limitations, the Issuer
and its Restricted Subsidiaries may incur Indebtedness if (a) after giving
effect to the incurrence of such Indebtedness and the receipt and application
of the proceeds thereof, the Issuer's Consolidated Fixed Charge Coverage Ratio
(determined on a pro forma basis for the last four full fiscal quarters of the
Issuer for which financial information is available at the date of
determination) is at least equal to 1.75:1; but no Restricted Subsidiary of
the Company may incur Indebtedness which is not Permitted Indebtedness unless
its Consolidated Fixed Charge Coverage Ratio is at least equal to 2.75:1;
provided, however, that if the Indebtedness which is the subject of a
determination under this provision is Acquired Indebtedness, or Indebtedness
incurred in connection with the simultaneous acquisition of any Person,
business, property or assets, then such ratio shall be determined by giving
effect (on a pro forma basis, as if the transaction had occurred at the
beginning of the four quarter period) to both the incurrence or assumption of
such Acquired Indebtedness or such other Indebtedness by the Issuer or such
Restricted Subsidiary and the inclusion in the Issuer's or such Restricted
Subsidiary's Consolidated EBITDA of the Consolidated EBITDA of the acquired
Person, business, property or assets; and provided, further, that in the event
that the
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Consolidated EBITDA of the acquired Person, business, property or assets
reflects an operating loss, no amounts shall be deducted from the Issuer's or
such Restricted Subsidiary's Consolidated EBITDA in making the determinations
described above and (b) no Default or Event of Default shall have occurred and
be continuing at the time or as a consequence of the incurrence of such
Indebtedness.
Notwithstanding the foregoing, if the Holdings Exchange Debentures are
issued, Holdings will not (i) issue any Pari Passu Debt or (ii) incur any
Indebtedness which by is terms (or by the terms of any agreement governing
such Indebtedness) is subordinate in right of payment to any of the
Indebtedness of Holdings unless such Indebtedness is also by its terms (or by
the terms of any agreement governing such Indebtedness) made expressly
subordinate in right of payment to the Holdings Exchange Debentures pursuant
to subordination provisions that are substantively identical to the
subordination provisions of such Indebtedness (or such agreement) that are
most favorable to the holders of any other Indebtedness of Holdings.
Limitation on Restricted Payments. (a) The Issuer will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment if at the time of such Restricted Payment and immediately
after giving effect thereto:
(i) any Default or Event of Default shall have occurred and be
continuing; or
(ii) the Company could not incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments declared or made after
June 24, 1998 (the amount expended for such purposes, if other than in
cash, being the fair market value of such property as determined by the
Board of Directors of the Company in good faith) exceeds the sum of (A) 50%
of the Issuer's Consolidated Net Income for the period (taken as one
accounting period) commencing with the first full fiscal quarter of the
Company which commenced after June 24, 1998 to and including the fiscal
quarter of the Issuer ended immediately prior to the date of each
calculation (or in the event Consolidated Net Income is a deficit minus
100% of such deficit), plus (B) 100% of the aggregate Net Proceeds and the
fair market value of securities or other property received by the Company
from the issue or sale, after June 24, 1998 but prior to the Exchange Date,
and by the Issuer from the issue or sale thereafter, of Qualified Capital
Stock (other than Capital Stock of the Issuer issued to any Restricted
Subsidiary of the Issuer) of the Company, if prior to the Exchange Date,
and of the Issuer thereafter, or any Indebtedness or other securities of
the Company, if prior to the Exchange Date, and of the Issuer thereafter,
convertible into or exercisable or exchangeable for Qualified Capital Stock
of the same Issuer as the underlying security which have been so converted
or exercised or exchanged, as the case may be, plus (C) $10 million,
provided that the amount of Restricted Payments permitted by this clause
(C) shall not be reduced by any negative amounts that occur under clause
(A) above.
(b) Notwithstanding the foregoing, if no other Default or Event of Default
shall have occurred and be continuing or shall occur as a consequence thereof,
the provisions set forth in the immediately preceding paragraph will not
prohibit (A) payments with respect to the purchase or redemption of Capital
Stock, or Subordinated Debt of the Issuer made by exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Issuer or an Emerging Market Subsidiary) of, Qualified Capital Stock; (B)
payments in respect of any redemption, repurchase, acquisitions, cancellation
or other retirement for value of shares of Capital Stock of the Issuer or
options, stock appreciation or similar rights, in each case held by officers,
directors or employees of the Issuer, or any of its Subsidiaries (or former
officers, directors or employees) (or their estates or beneficiaries under
their estates) or by an employee benefit plan, upon death, disability,
retirement or termination of employment of any such Person pursuant to the
terms of any employee benefit plan or any other agreement under which shares
of Capital Stock or stock appreciation or similar rights were issued or
acquired, and the purchase of shares of Capital Stock by the Issuer or any
Subsidiary for the purpose of contributing such shares to any employee benefit
plan (provided, that all such payments and purchases referred to in this
clause (B) may not exceed $2 million in any 12 month period after June 24,
1998); (C) the payment of
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dividends (whether in cash or otherwise) on the Senior Preferred Stock or the
payment of any other dividend within 60 days after the date of its declaration
if such dividend could have been paid on the date of its declaration in
compliance with the foregoing provisions; (D) any purchase or defeasance of
Subordinated Debt upon a Change of Control or an Asset Sale to the extent
required by the indenture or other agreement or instrument pursuant to which
such Subordinated Debt was issued, but only if the Issuer in the case of a
Change of Control, has complied with its obligations under the provisions
described under the covenant entitled "Change of Control"; (E) the
consummation of a cash tender offer by the Company for shares of Capital Stock
of the Company in an aggregate amount not exceeding $430 million in connection
with the Recapitalization; (F) the exchange of Senior Preferred Stock for
Exchange Debentures or the retirement of the Senior Preferred Stock in
accordance with the optional and mandatory redemption provisions thereof, in
each case as provided in the Certificate of Designation as in effect on June
24, 1998; or (G) cash payments (and/or the issuance or delivery of any note,
instrument, agreement or other obligation providing for future cash payments)
resulting from antidilution or other adjustments made in connection with the
Recapitalization to options to purchase Capital Stock or restricted or
unvested Capital Stock held by employees, directors or former employees or
directors of the Company or any of its Subsidiaries, to the extent that such
adjustments and cash payments are approved by the Board of Directors of the
Company. Each Restricted Payment made or paid in accordance with this
paragraph, except those made pursuant to clause (E), clause (F) or clause (G),
shall be counted (without duplication) for purposes of computing amounts
utilized for Restricted Payments pursuant to clause (a)(iii) of the
immediately preceding paragraph. No payments made or paid pursuant to clause
(C) of this paragraph shall be counted for purposes of computing amounts
utilized for Restricted Payments pursuant to clause (a)(iii) of the
immediately preceding paragraph to the extent such amount was already counted
for such purposes.
Limitations on Transactions with Affiliates. The Issuer will not, and will
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of
assets, property or services) with any Affiliate of the Company (an "Affiliate
Transaction") or extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction entered into prior to June 24, 1998 unless (i) such
Affiliate Transaction is between or among the Issuer and its Restricted
Subsidiaries; or (ii) such Affiliate Transaction is entered into in good faith
and the terms of such Affiliate Transaction are fair and reasonable to the
Issuer or such Restricted Subsidiary, as the case may be. In any Affiliate
Transaction involving an amount or having a value in excess of $5 million
which is not permitted under clause (i) above, the Issuer must obtain a
resolution of the board of directors certifying that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $10 million which are not permitted under clause (i) above, the
Issuer must obtain a written opinion as to the fairness of such a transaction
from an independent investment banking firm.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not apply to: (i) Restricted Payments that are not
prohibited by the covenant described under "--Limitation on Restricted
Payments"; (ii) transactions permitted by, and complying with, the provisions
of the covenant described under "--Merger, Consolidation and Sale of Assets";
(iii) transactions in the ordinary course of business (including expense
advances) between the Issuer or any of its Restricted Subsidiaries or
Unrestricted Subsidiaries, on the one hand, and any employee thereof, on the
other hand; (iv) employment contracts existing on June 24, 1998 and employment
contracts approved by the Board of Directors of the Issuer the terms of which
are consistent with past practice; (v) the granting and performance of
registration rights for shares of Capital Stock of the Issuer under a written
registration rights agreement approved by a majority of directors of the
Company that are disinterested with respect to such transaction; (vi)
transactions with Affiliates solely in their capacity as holders of
Indebtedness or Capital Stock of the Issuer or any of its Restricted
Subsidiaries or Unrestricted Subsidiaries, where such Affiliates are treated
no more favorably than holders of such Indebtedness or such Capital Stock
generally; (vii) any Permitted Investments; (viii) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Issuer or any Subsidiary of the
Issuer as determined in good faith by the Issuer's Board of Directors; (ix)
transactions exclusively between or among the Issuer and any of its
Subsidiaries, provided such transactions are not otherwise prohibited by the
Exchange Indenture; (x) any agreement as in effect as of June 24, 1998 or any
amendment
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thereto or any transaction contemplated thereby (including pursuant to any
amendment thereto) in any replacement agreement thereto so long as any such
amendment or replacement agreement is not more disadvantageous to the holders
in any material respect than the original agreement as in effect on June 24,
1998; (xi) any payment of the Notes, issuance of securities or other payments,
awards or grants, in cash or otherwise, pursuant to, or the funding of,
employment arrangements and Plans approved by the Board of Directors of the
Issuer; (xii) the grant of stock options or similar rights to employees and
directors of the Issuer and its Subsidiaries (or any amendment or adjustment
thereto) pursuant to Plans and employment contracts and stock option, stock
bonus, restricted stock and similar agreements approved by the Board of
Directors of the Issuer; (xiii) loans or advances to officers, directors or
employees of the Company or its Restricted Subsidiaries not in excess of $5
million at any one time outstanding; (xiv) transactions, including the
repurchase of Company Common Stock, entered into in connection with the
Recapitalization and the financing therefor.
Merger, Consolidation and Sale of Assets. The Issuer will not, in a single
transaction or series of related transactions, consolidate with or merge with
or into, or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its assets to, another Person unless: (i) (1) the
Issuer is the survivor of such merger, consolidation, sale, assignment, sale,
assignment, transfer, lease, conveyance or other disposition or (2) the
surviving or transferee Person is a corporation, partnership or trust
organized and existing under the laws of the United States, any state thereof
or the District of Columbia and such surviving or transferee Person expressly
assumes by supplemental indenture all the obligations of the Issuer under the
Exchange Debentures and the Exchange Indenture; (ii) immediately after giving
effect to such transaction and the use of proceeds therefrom (on a pro forma
basis, including any Indebtedness incurred or anticipated to be incurred in
connection with such transaction), the Issuer or the surviving or transferee
Person is able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant; (iii) immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be incurred
in connection with the transaction) no Default or Event of Default has
occurred and is continuing; and (iv) the Issuer has delivered to the Trustee
an officers' certificate and opinion of counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition complies with the Exchange Indenture, that the surviving Person
agrees by supplemental indenture to be bound thereby, and that all conditions
precedent in the Exchange Indenture relating to such transaction have been
satisfied. For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related transactions)
of all or substantially all of the properties and assets of one or more
Restricted Subsidiaries the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Issuer will be deemed to
be the transfer of all or substantially all of the properties and assets of
the Issuer. Notwithstanding the foregoing clauses (ii) and (iii) of the
preceding sentence but subject to clauses (i) and (iv) thereof (a) the Issuer
may consolidate with, merge into or transfer all or part of its properties and
assets to any Restricted Subsidiary of the Issuer so long as all assets of the
Issuer immediately prior to such transaction are owned by such Restricted
Subsidiary immediately after the consummation thereof and (b) the Company may
merge with an Affiliate that is a corporation that has no material assets or
liabilities and which was incorporated solely for the purpose of (A)
reincorporating the Company in the same or another jurisdiction of the United
States, any state thereof or the District of Columbia or (B) the creation of a
holding company of the Company.
EVENTS OF DEFAULT
The following events are defined in the Exchange Indenture as "Events of
Default": (i) the failure to pay interest on any Exchange Debentures when the
same becomes due and payable and the Default continues for a period of 30 days
(whether or not, in the case of the Company Exchange Debentures, such payment
is prohibited by the subordination provisions of the Exchange Indenture); (ii)
the failure to pay the principal, or premium, if any, on any Exchange
Debentures, when such principal becomes due and payable, at maturity, upon
redemption or otherwise (whether or not such payment is prohibited by the
subordination provisions of the Exchange Indenture); (iii) the Issuer fails to
make a Change of Control Offer if such offer is required by the provisions set
forth under "--Change of Control" above or fails to purchase Exchange
Debentures from holders who elect to
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have such Exchange Debentures purchased pursuant to the Change of Control
Offer; (iv) a breach or violation of any of the provisions described under the
caption "--Certain Covenants" above occurs and the breach or violation
continues for a period of 60 days after the Issuer receives written notice
thereof specifying the default from the Trustee or holders of at least 25% in
aggregate principal amount of outstanding Exchange Debentures; (v) the Company
fails to pay at the final stated maturity (after giving effect to any
extension thereof) the principal amount of any Indebtedness, or the final
stated maturity of any Indebtedness is accelerated, if the aggregate principal
amount of such Indebtedness, together with the aggregate principal amount of
any other Indebtedness in default for failure to pay principal at the final
stated maturity (after giving effect to any extensions thereof) or which has
been accelerated, aggregates $50 million or more at any time, in each case,
after a 30-day period during which such default shall not have been cured or
such acceleration rescinded; (vi) the Company fails to make any scheduled
payment of principal or interest on any Indebtedness the outstanding principal
amount of which aggregate $50 million or more, after a 180-day period during
which such default shall not have been cured; and (vii) certain events of
bankruptcy, insolvency or reorganization affecting the Issuer or any of its
Significant Restricted Subsidiaries.
Upon the happening of any Event of Default specified in the Exchange
Indenture, the Trustee may, and the Trustee upon the request of 25% in
principal amount of the Exchange Debentures shall or the holders of at least
25% in aggregate principal amount of outstanding Exchange Debentures may,
declare the principal of and accrued but unpaid interest, if any, on all the
Exchange Debentures to be due and payable by notice in writing to the Issuer
and the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) in the case of Company Exchange
Debentures, if there are any amounts outstanding under any of the instruments
constituting Designated Senior Debt, will become due and payable upon the
first to occur of an acceleration under any of the instruments constituting
Designated Senior Debt or five business days after receipt by the Company and
the Representative of such Acceleration Notice (unless all Events of Default
specified in such Acceleration Notice have been cured or waived). If an Event
of Default with respect to bankruptcy proceedings with respect to the Issuer
occurs and is continuing, then such amount will ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of Exchange Debentures.
The Exchange Indenture provides that, at any time after a declaration of
acceleration with respect to the Exchange Debentures as described in the
preceding paragraph, the holders of a majority in principal amount of the
Exchange Debentures then outstanding (by notice to the Trustee) may rescind
and cancel such declaration and its consequences if (i) the rescission would
not conflict with any judgment or decree of a court of competent jurisdiction,
(ii) all existing Events of Default have been cured or waived except
nonpayment of principal or interest on the Exchange Debentures that has become
due solely by such declaration of acceleration, (iii) to the extent the
payment of such interest is lawful, interest (at the same rate specified in
the Exchange Debentures) on overdue installments of interest and overdue
principal which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) the Issuer has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of a
Default or Event of Default (with respect to the Issuer) of the type described
in clause (vi) of the description above of Events of Default, the Trustee has
received an officers' certificate and an opinion of counsel that such Default
or Event of Default has been cured or waived. The holders of a majority in
principal amount of the Exchange Debentures may waive any existing Default or
Event of Default under the Exchange Indenture, and its consequences, except a
default in the payment of the principal of or interest on any Exchange
Debentures.
The Issuer will deliver to the Trustee, on or before 120 days after the end
of the Issuer's fiscal year a certificate indicating whether the signing
officers know of any Default or Event of Default that occurred during the
previous year and whether the Issuer has complied with its obligations under
the Exchange Indenture. In addition, the Issuer will be required to notify the
Trustee of the occurrence and continuation of any Default or Event of Default
within five business days after the Issuer becomes aware of the same.
Subject to the provisions of the Exchange Indenture relating to the duties
of the Trustee in case an Event of Default thereunder should occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Exchange Indenture at the request or direction of
any of the holders of the
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Exchange Debentures unless such holders have offered to the Trustee reasonable
indemnity or security against any loss, liability or expense. Subject to such
provision for security or indemnification and certain limitations contained in
the Exchange Indenture, the holders of a majority in principal amount of the
outstanding Exchange Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee.
SATISFACTION AND DISCHARGE OF EXCHANGE INDENTURE; DEFEASANCE
The Exchange Indenture provides the Issuer may elect either (a) to defease
and be discharged from any and all obligations with respect to the Exchange
Debentures (except for the obligations to register the transfer or exchange of
such Exchange Debentures, to replace temporary or mutilated, destroyed, lost
or stolen Exchange Debentures, to maintain an office or agency in respect of
the Exchange Debentures and to hold monies for payment in trust)
("defeasance") or (b) to be released from their obligations with respect to
the Exchange Debentures under certain covenants contained in the Exchange
Indenture and described above under "--Certain
Covenants" ("covenant defeasance"), upon the deposit with the Trustee (or
other qualifying trustee), in trust for such purpose, of money and/or U.S.
government obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount sufficient to pay
the principal of, premium, if any, and interest on the Exchange Debentures on
the scheduled due dates therefor or on a selected date of redemption in
accordance with the terms of the Exchange Indenture. Such a trust may only be
established if, among other things, the Issuer had delivered to the Trustee an
opinion of counsel (as specified in the Exchange Indenture) (i) to the effect
that neither the trust nor the Trustee will be required to register as an
investment company under the Investment Company Act of 1940, as amended, and
(ii) to the effect that holders of the Exchange Debentures or persons in their
positions will not recognize income, gain or loss for United States federal
income tax purposes as a result of such deposit, defeasance and discharge and
will be subject to United States federal income tax on the same amount and in
the same amount and in the same manner and at the same times, as would have
been the case if such deposit, defeasance and discharge had not occurred
which, in the case of a defeasance only, must be based upon a private ruling
concerning the Exchange Debentures, a published ruling of the Internal Revenue
Service (the "IRS") or a change in applicable federal income tax law.
REPORTS TO HOLDERS
So long as the Issuer is subject to the periodic reporting requirements of
the Exchange Act, it will continue to file the information required thereby
with the Commission and will furnish such information to holders of the
Exchange Debentures within 15 days of filing thereof with the Commission. The
Exchange Indenture provides that even if the Issuer is not required to file
such information with the Commission, it will nonetheless continue to furnish
such information to holders of the Exchange Debentures within 15 days of the
date on which filing with the Commission would have been required.
MODIFICATION OF THE EXCHANGE INDENTURE
From time to time, the Issuer and the Trustee may, without the consent of
the holders of the Exchange Debentures, amend the Exchange Indenture or the
Exchange Debentures or supplement the Exchange Indenture for certain specified
purposes, including curing any ambiguity, defect or inconsistency or making
any change that does not materially and adversely affect the rights of any of
the holders of Exchange Debentures. The Exchange Indenture contains provisions
permitting the Issuer and the Trustee, with the consent of the holders of a
majority in principal amount of the outstanding Exchange Debentures, to modify
or supplement the Exchange Indenture and the Exchange Debentures except that,
without the consent of each holder of the Exchange Debentures affected
thereby, no such modification shall: (i) reduce the amount of Exchange
Debentures whose holders must consent to an amendment, supplement or waiver to
the Exchange Indenture or the Exchange Debentures; (ii) reduce the rate of or
change the time for payment of, interest on any Exchange Debentures; (iii)
reduce the principal of or premium on or change the stated maturity of any
Exchange Debenture; (iv) make any Exchange Debentures payable in money other
than that stated in the Exchange Debentures or change the place of payment
from New York, New York; (v) change the amount or time of any payment required
by the Exchange
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Debentures or reduce the premium payable upon any redemption of Exchange
Debentures or change the time before which no redemption may be made; (vi)
waive a default in the payment of principal or interest on, or redemption
payment with respect to any Exchange Debentures; or (vii) take any other
action otherwise prohibited by the Exchange Indenture to be taken without the
consent of each holder affected thereby. In addition, as long as any shares of
Senior Preferred Stock remain outstanding, the holders of Senior Preferred
Stock will have the right to vote together with holders of Exchange Debentures
with respect to amendments and modifications to the Exchange Indenture.
The consent of holders of Exchange Debentures is not necessary to approve
the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Certificate of Designation and the Exchange Indenture. Reference is made to
the Certificate of Designation and the Exchange Indenture for the full
definition of all such terms, as well as any other terms used herein for which
no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Affiliate" means, of any Person, a Person who, directly or indirectly,
through one or more intermediaries controls, or is controlled by, or is under
common control with, such other Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; provided, however,
that the ownership of at least 10% of the voting power of the Common Stock of
a Person, either directly or indirectly, shall be deemed control.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Issuer or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions involving assets with a fair market value in
excess of $1 million of (a) any Capital Stock of or other equity interest in
any Restricted Subsidiary of the Issuer other than in a transaction where the
Issuer or such Restricted Subsidiary receives therefor one or more properties
with a fair market value equal to the fair market value of the Capital Stock
issued, transferred or disposed of by the Issuer or the Restricted Subsidiary
(with such fair market values being determined by the Board of Directors of
the Issuer), (b) all or substantially all of the assets of the Issuer or of
any Restricted Subsidiary thereof, (c) real property or (d) all or
substantially all of the assets of any division, line of business or
comparable business segment of the Issuer or any Restricted Subsidiary
thereof; provided that Asset Sales shall not include (x) sales, leases,
conveyances, transfers or other dispositions to the Issuer or to a Restricted
Subsidiary or to any other Person if after giving effect to such sale, lease,
conveyance, transfer or other disposition such other Person becomes a
Restricted Subsidiary, or (y) the sale of all or substantially all of the
assets of the Issuer or a Restricted Subsidiary in a transaction complying
with the "Merger, Consolidation and Sale of Assets" covenant, in which case
only the assets not so sold shall be deemed an Asset Sale, or (z) any sale,
issuance or other disposition of Capital Stock of any Joint Venture
Subsidiary.
"Board of Directors", "Board of Directors of the Company" or "Board of
Directors of the Issuer" means the Board of Directors of the Company or of the
Issuer, as the context requires, or any duly authorized committee thereof (a
"Board Committee"); provided that the term "Board of Directors" as used in the
definition of "Change of Control" and as used under "--The Senior Preferred
Stock--Voting Rights" shall not include any Board Committee.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of capital stock, including each class of Common Stock and
Preferred Stock of such Person and warrants or options to purchase any of the
foregoing and (ii) with respect to any Person that is not a corporation, any
and all partnership or other equity interests of such Person.
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"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is
a party that is required to be classified and accounted for as capital lease
obligations under GAAP and, for purposes of this definition, the amount of
such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than $250
million; (v) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv) above;
and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
A "Change of Control" of the Issuer will be deemed to have occurred at such
time as (i) any Person (including a Person's Affiliates), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of 50% or
more of the total voting power of the Issuer's Common Stock unless, as a
result of such transaction, the ultimate direct or indirect ownership of the
Issuer is substantially the same immediately after such transaction as it was
immediately prior to such transaction, (ii) any Person (including a Person's
Affiliates), other than a Permitted Holder, becomes the beneficial owner of
more than 35% of the total voting power of the Issuer's Common Stock, and the
Permitted Holders beneficially own, in the aggregate, a lesser percentage of
the total voting power of the Common Stock of the Issuer than such other
Person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Issuer, (iii) there shall be consummated any consolidation or
merger of the Issuer in which the Issuer is not the continuing or surviving
corporation or pursuant to which the Common Stock of the Issuer would be
converted into cash, securities or other property, other than a merger or
consolidation of the Issuer in which the holders of the Common Stock of the
Issuer outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the voting power of the Common
Stock of the surviving corporation immediately after such consolidation or
merger or (iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Issuer
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Issuer has been
approved by a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or recommendation
for election was previously so approved) cease to constitute a majority of the
Board of Directors of the Issuer.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's Common Stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such Common Stock.
"Company Exchange Debentures" means the 13 7/8% Junior Subordinated
Debentures due 2010 issuable by the Company in exchange for the Senior
Preferred Stock in accordance with the Certificate of Designation with respect
to the Senior Preferred Stock and pursuant to the Exchange Indenture,
including additional Company Exchange Debentures issued as interest on
outstanding Company Exchange Debentures pursuant to the Exchange Indenture.
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"Consolidated EBITDA" means, for any Person and its Restricted Subsidiaries,
for any period, an amount equal to (a) the sum of Consolidated Net Income for
such period, plus, to the extent deducted from the revenues of such Person and
its Restricted Subsidiaries in determining Consolidated Net Income, (i) the
provision for taxes for such period based on income or profits and any
provision for taxes utilized in computing a loss in Consolidated Net Income
above, plus (ii) Consolidated Interest Expense (including, for this purpose,
dividends on the Senior Preferred Stock and any Redeemable Dividends in each
case only to the extent that such dividends were deducted in determining
Consolidated Net Income), plus (iii) Consolidated Non-Cash Charges, plus
(iv) without duplication, charges attributable to the exercise or adjustment
of employee options and fees and expenses, in each case, incurred in
connection with the Recapitalization or the transactions described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Recent Events and Proposed Recapitalization" plus (v) without
duplication, for any four quarter period that includes one or more fiscal
quarters of fiscal 1998 or the first two fiscal quarters of fiscal 1999,
restructuring charges, in an aggregate amount not to exceed $12 million, but
only to the extent actually incurred during each such applicable quarter and
minus (vi) without duplication, the amount of all cash payments made by such
Person or any of its Restricted Subsidiaries during such period to the extent
such payments relate to Consolidated Non-Cash Charges that were added back in
determining Consolidated EBITDA for such period or any prior period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date of determination (the
"Transaction Date") means, with respect to any Person, the ratio of (i) the
aggregate amount of Consolidated EBITDA of such Person for the Reference
Period to (ii) the aggregate amount of Consolidated Fixed Charges of such
Person during the Reference Period; provided, that for purposes of such
computation, in calculating Consolidated EBITDA and Consolidated Fixed
Charges, (a) the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio will be assumed to have occurred (on
a pro forma basis) on the first day of the Reference Period; (b) the
incurrence of any Indebtedness (other than Indebtedness incurred under any
revolving credit or similar facility to the extent that the proceeds were used
to finance working capital requirements in the ordinary course of business) or
the issuance of any Disqualified Capital Stock or Preferred Stock during the
Reference Period or subsequent thereto and on or prior to the Transaction Date
(and the application of the proceeds therefrom (other than a repayment of
Indebtedness outstanding under a revolving credit or similar facility to the
extent that the proceeds were used to finance working capital requirements in
the ordinary course of business) to the extent used to retire Indebtedness or
Preferred Stock) will be assumed to have occurred (on a pro forma basis) on
the first day of such Reference Period; (c) Consolidated Interest Expense
attributable to any Indebtedness (whether existing or being incurred) bearing
a floating interest rate shall be computed as if the rate in effect on the
Transaction Date had been the applicable rate for the entire period, unless
such Person or any of its Subsidiaries is a party to an Interest Rate
Agreement (which shall remain in effect for the 12-month period after the
Transaction Date) that has the effect of fixing the interest rate on the date
of computation, in which case such rate (whether higher or lower) shall be
used; (d) the repayment of any Indebtedness (other than under a revolving
credit or similar facility to the extent that the proceeds were used to
finance working capital requirements in the ordinary course of business),
Disqualified Capital Stock or Preferred Stock during the Reference Period or
subsequent thereto and on or prior to the Transaction Date with the proceeds
of any sale or other disposition of assets or properties referred to in clause
(f) below will be assumed to have occurred (on a pro forma basis) on the first
day of the Reference Period; (e) the acquisition during the Reference Period
or subsequent thereto and on or prior to the Transaction Date of any other
Person which, as a result of such acquisition, becomes a Subsidiary, will be
assumed to have occurred (on a pro forma basis) on the first day of the
Reference Period; and (f) any sale or other disposition of assets or
properties constituting an existing business (whether existing as a separate
entity, subsidiary, division, unit or otherwise) outside the ordinary course
of business occurring during the Reference Period or subsequent thereto and on
or prior to the Transaction Date will be assumed to have occurred (on a pro
forma basis) on the first day of the Reference Period.
"Consolidated Fixed Charges" of any Person for any period means (without
duplication) the sum of (i) Consolidated Interest Expense of such Person for
such period (excluding amortization or write-off of deferred financing fees
and expenses) and (ii) without duplication, Redeemable Dividends of such
Person and its
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Restricted Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to
Disqualified Capital Stock and Preferred Stock accrued during such period in
accordance with GAAP (but in the case of such Preferred Stock, only to the
extent that the aggregate amount of dividends paid or accrued from and after
the Issue Date exceeds the aggregate net cash proceeds to such Person from the
issuance and sale of such Preferred Stock), in each case excluding items
eliminated in consolidation of such Person and its Restricted Subsidiaries;
provided, that dividends accrued or paid on the Senior Preferred Stock shall
not be included in the calculation of Consolidated Fixed Charges.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Restricted Subsidiaries on a
consolidated basis, including, but not limited to, Redeemable Dividends,
whether paid or accrued, on Restricted Subsidiary Preferred Stock, imputed
interest included in Capitalized Lease Obligations, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs associated with
hedging obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount
or premium, if any, and all other non-cash interest expense (other than
interest amortized to cost of sales) plus, without duplication, all net
capitalized interest for such period and all interest incurred or paid under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Issuer), minus interest income for
such period.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate of the net income (or loss) of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided, however, that (a) the net income of any Person
including of any Emerging Market Subsidiary or Unrestricted Subsidiary (each,
an "Other Person") in which the Person in question or any of its Restricted
Subsidiaries has less than a 100% interest (which interest does not cause the
net income of such Other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions paid to the Person in
question or to any of its Restricted Subsidiaries, (b) the net income of any
Restricted Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Exchange Debentures) shall be
excluded to the extent of such restriction or limitation, (c) (i) the net
income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (ii) any
net gain or net loss resulting from an Asset Sale by the Person in question or
any of its Restricted Subsidiaries other than in the ordinary course of
business shall be excluded, (d) extraordinary, unusual or non-recurring gains
and losses shall be excluded and (e) gains and losses associated with
discontinued and terminated operations shall be excluded.
"Consolidated Non-Cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash items
(which do not reflect an accrual of a cash expense which may be incurred in
the future) of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries less
any such non-cash items increasing Consolidated Net Income of such Person and
its Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Credit Agreement" means (i) one or more credit agreements, loan agreements
or similar agreements providing for working capital advances, term loans,
letter of credit facilities or similar advances, loans or facilities to the
Company, any Subsidiaries, domestic or foreign, or any or all of such Persons,
including the Credit Agreement, dated on or as in effect on or about the Issue
Date, among the Company and Samsonite Europe N.V., as borrowers, Bank of
America National Trust and Savings Association and BankBoston, N.A., and
certain other lenders party thereto from time to time, as the same may be
amended, modified, restated or supplemented from time to time and (ii) any one
or more agreements governing advances, loans or facilities provided to refund,
refinance, replace or renew (including subsequent or successive refunding,
refinancing,
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replacements and renewals) Indebtedness under the agreement or agreements
referred to in the foregoing clause (i), as the same may be amended, modified,
restated or supplemented from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement designed to address fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Debt" means (i) Indebtedness under the Original Credit
Agreement (and any guarantees thereof), and (ii) any other Indebtedness
constituting Senior Debt which, at the time of determination, has an aggregate
principal amount of at least $25 million (or accreted value of at least such
amount in the case of Indebtedness issued at a discount) and is specifically
designated as "Designated Senior Debt" by the Company and, so long as the
Original Credit Agreement is in effect, by the representative under the
Original Credit Agreement, and certified as such in an officers' certificate
delivered to the Trustee.
"Disqualified Capital Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part,
on or prior to (i) the mandatory redemption date of the Senior Preferred
Stock, in the case of the Senior Preferred Stock or (ii) the final maturity
date of the Exchange Debentures, in the case of the Exchange Debentures.
Without limitation of the foregoing, Disqualified Capital Stock shall be
deemed to include (i) any Preferred Stock of a Restricted Subsidiary of the
Issuer, (ii) any Preferred Stock of the Issuer, with respect to either of
which, under the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary of the Issuer is obligated to pay current dividends
or distributions in cash during the period prior to the redemption date of the
Senior Preferred Stock or the maturity date of the Exchange Debentures, as the
case may be, and (iii) as long as the Senior Preferred Stock remains
outstanding, Senior Securities and Parity Securities; provided, however, that
Preferred Stock of the Issuer or any Restricted Subsidiary thereof that is
issued with the benefit of provisions requiring a change of control offer to
be made for such Preferred Stock in the event of a change of control of the
Issuer or Restricted Subsidiary, which provisions have substantially the same
effect as the provisions of the Certificate of Designation and Exchange
Indenture, as the case may be, described under "--Change of Control," shall
not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions; and provided, further, that the Senior Preferred Stock shall not
be considered Disqualified Capital Stock.
"Emerging Market Subsidiary" means (i) any Initial Emerging Market
Subsidiary, (ii) any majority-owned Subsidiary of the Company the principal
operations of which are not located in the United States, Canada, Western
Europe or Japan that, at the time of determination, shall be an Emerging
Market Subsidiary (as designated by the Board of Directors of the Company, as
provided below) and (iii) any majority-owned Subsidiary of an Emerging Market
Subsidiary. The Board of Directors of the Company may designate (1) any
Unrestricted Subsidiary of the Company to be an Emerging Market Subsidiary,
and (2) any Restricted Subsidiary of the Company (including any newly acquired
or newly formed Subsidiary at or prior to the time it is so formed or
acquired) to be an Emerging Market Subsidiary if it meets the geographic test
set forth above and (a) no Voting Rights Triggering Event in the case of the
Senior Preferred Stock and Default or Event of Default in the case of the
Exchange Debentures is existing or will occur as a consequence thereof, (b)
with respect to previously existing Restricted Subsidiaries, immediately after
giving effect to such designation, on a pro forma basis, the Issuer could
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "--Certain Covenants--
Limitation on Incurrence of Additional Indebtedness" and (c) such Restricted
Subsidiary does not own any Capital Stock of, or own or hold any Lien on any
property of, the Issuer or any Restricted Subsidiary that is not a Subsidiary
of the Restricted Subsidiary to be so designated. At the time that a
previously existing Restricted Subsidiary of the Company is designated an
Emerging Market Subsidiary, the Company shall be deemed to make an
"Investment" in such Emerging Market Subsidiary in an
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amount equal to its Pro Rata Interest in the fair market value of the net
assets of such Restricted Subsidiary. A Restricted Subsidiary of the Company
shall not be considered to be a "previously existing Restricted Subsidiary"
for purposes of this definition if such Restricted Subsidiary is designated to
be an Emerging Market Subsidiary at or prior to the time of the formation of
such Restricted Subsidiary or at or prior to the time such Restricted
Subsidiary is acquired by the Company. The Board of Directors of the Company
may designate any Emerging Market Subsidiary to be a Restricted Subsidiary,
provided that (i) no Voting Rights Triggering Event in the case of the Senior
Preferred Stock and Default or Event of Default in the case of the Exchange
Debentures is existing or will occur as a consequence thereof and (ii) either
(x) immediately after giving effect to such designation, on a pro forma basis,
the Issuer could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described under "--Certain
Covenants--Limitation on Incurrence of Additional Indebtedness" or (y) the
Consolidated Fixed Charge Coverage Ratio of the Issuer immediately after
giving effect to such designation, on a pro forma basis, exceeds the
Consolidated Fixed Charge Coverage Ratio of the Company immediately prior (and
without giving effect) to such designation. In the case
of the Exchange Debentures, each such designation shall be evidenced by the
filing with the Trustee of a certified copy of the resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing conditions.
"Equity Offering" means a sale by the Issuer of shares of its Qualified
Capital Stock.
"Exchange Date" means the date of original issuance of the Exchange
Debentures.
"Exchange Debentures" means either the Company Exchange Debentures or the
Holdings Exchange Debentures, as applicable.
"Exchange Indenture" means the Indenture dated as of June 24 , 1998 between
the Company, in the case of Exchange Debentures issued by the Company, or
Holdings, and, in either case, United States Trust Company of New York, as
trustee, governing the Exchange Debentures.
"Foreign Credit Agreement" means one or more Credit Agreements among one or
more Foreign Restricted Subsidiaries and the lenders party thereto.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary of the Company
that is incorporated or otherwise organized in a jurisdiction other than the
United States, any state thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Holdings" means a corporation organized and existing under the laws of the
United States, any state thereof or the District of Columbia, which is
organized after June 24, 1998, and of which the capital stock of the Company
is its sole material asset and which immediately prior to and at the time of
the Exchange Date has no material liabilities other than the Holdings Exchange
Debentures.
"Holdings Exchange Debentures" mean the 13 7/8% Senior Debentures due 2010
issuable by Holdings in exchange for the Senior Preferred Stock in accordance
with the Certificate of Designation with respect to the Senior Preferred Stock
and pursuant to the Exchange Indenture, including additional Holdings Exchange
Debentures issued as interest on outstanding Holdings Exchange Debentures
pursuant to the Exchange Indenture.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable" and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness;
provided, further, that the amortization of original issue discount on
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Indebtedness issued with original issue discount or the accumulation of
distributions on Disqualified Capital Stock shall not be deemed an incurrence
of Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables and other accrued liabilities or accrued expenses
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, and shall also include, to the
extent not otherwise included, (i) any Capitalized Lease Obligations, (ii)
obligations secured by a Lien to which the property or assets owned or held by
such Person are subject, whether or not the obligation or obligations secured
thereby shall have been assumed (provided, however, that if such obligation or
obligations shall not have been assumed, the amount of such Indebtedness shall
be deemed to be the lesser of the principal amount of the obligation or the
fair market value of the pledged property or assets) other than a Lien
securing an obligation which is not Indebtedness, (iii) guarantees of items of
other Persons which would be included within this definition for such other
Persons (whether or not such items would appear upon the balance sheet of the
guarantor), (iv) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (v)
Disqualified Capital Stock of the Company or any Restricted Subsidiary thereof
and, in the case of Holdings,
any Preferred Stock of the Company and (vi) obligations of any such Person
under any Interest Rate Agreement or Currency Agreement applicable to any of
the foregoing (if and to the extent such Interest Rate Agreement or Currency
Agreement obligations would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency
giving rise to the obligation, provided that (i) the amount outstanding at any
time of any Indebtedness issued with original issue discount is the principal
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP and (ii) Indebtedness shall not include any liability for
federal, state, local or other taxes. Notwithstanding any other provision of
the foregoing definition, any trade payable arising from the purchase of goods
or materials or for services obtained in the ordinary course of business or
contingent obligations arising out of customary indemnification agreements
with respect to the sale of assets or securities shall not be deemed to be
"Indebtedness" of the Issuer or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Initial Emerging Market Subsidiary" means each of (i) Chia Tai Samsonite
(H.K.) Limited, (ii) Ningbo Chia Tai Samsonite Luggage Co. Ltd., (iii)
Samsonite Argentina S.A., (iv) Samsonite Brasil Ltda., (v) Samsonite India
Limited, (vi) Samsonite Korea Limited, (vii) Samsonite Mercosur Limited,
(viii) Samsonite Mauritius Limited, and (ix) Samsonite Singapore Limited.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement.
"Investment" by any Person in any other Person means, directly or
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business), loan or capital contribution to
(by means of transfers of property to others, payments for property or
services for the account or use of others or otherwise), the purchase of any
stocks, bonds, notes, debentures, partnership or joint venture interests or
other securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, such other Person or the making of any investment by
such Person in any other Person. Investments shall exclude extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and repurchases or redemptions of the
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Notes, the Company Exchange Debentures or the Senior Preferred Stock by the
Company or the Holdings Exchange Debentures by Holdings or any other security
or evidence of Indebtedness issued by the Company or Holdings, respectively.
Notwithstanding the foregoing, the following shall not be considered
Investments by a Person in any other Person: (i) trade receivables and prepaid
expenses, in each case arising in the ordinary course of business; provided,
that such receivables and prepaid expenses would be recorded as assets of such
Person in accordance with GAAP, (ii) Investments received in connection with
the bankruptcy or reorganization of suppliers and customers or in good faith
bona fide settlement of delinquent ordinary course of business trade
receivables of customers, (iii) endorsements for collection or deposit in the
ordinary course of business by such Person of bank drafts and similar
negotiable instruments of such other Person received as payment for ordinary
course of business trade receivables, (iv) an Interest Rate Agreement or
Currency Agreement with an unaffiliated Person provided that such agreements
comply with the requirements of clause (iv) of the definition of Permitted
Indebtedness, (v) Investments received as consideration for, or customary
indemnities given in connection with, an Asset Sale, and (vi) Investments for
which the sole consideration provided is Qualified Capital Stock. The Issuer
shall be deemed to make an "Investment" in an amount equal to its Pro Rata
Interest in the fair market value of the net assets of any previously existing
Restricted Subsidiary, at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary or an Emerging Market Subsidiary, as the
case may be; and any property transferred, directly or indirectly (whether by
merger or otherwise) to an Unrestricted Subsidiary or an Emerging Market
Subsidiary, as the case may be, from the Company or a Restricted Subsidiary
after the time of such designation shall be deemed an Investment valued at its
fair market value at the time of such transfer. A Restricted Subsidiary of the
Company shall not be considered to be a "previously existing Restricted
Subsidiary" for purposes of this definition if such Restricted Subsidiary is
designated to be an Emerging Market Subsidiary or an Unrestricted Subsidiary,
as the case may be, at or prior to the time of the formation of such
Restricted Subsidiary or at or prior to the time such Restricted Subsidiary is
acquired by the Company.
"Issuer" means (i) the Company in the case of Senior Preferred Stock or the
Company Exchange Debentures and (ii) Holdings, in the case of the Holdings
Exchange Debentures.
"Joint Venture Subsidiary" means a Restricted Subsidiary of the Company in
which one or more Persons who have provided or are providing operating assets
or services to such Restricted Subsidiary beneficially own not less than 50%
of the Capital Stock of such Restricted Subsidiary not owned by the Company or
a Restricted Subsidiary of the Company.
"Lien" means any consensual lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Issuer, the aggregate net proceeds received by the Issuer, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or
surrender of outstanding securities of any kind for or into shares of
Qualified Capital Stock of the Issuer, the net book value of such outstanding
securities on the date of such exchange, exercise, conversion or surrender
(plus any additional amount required to be paid by the holder to the Issuer
upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less
all expenses incurred by the Issuer in connection therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate
the maturity of any Designated Senior Debt.
"Notes" means the 10 3/4% Senior Subordinated Notes due 2008 offered
concurrently with the Senior Preferred Stock pursuant to an indenture dated as
of June 24, 1998 between the Company and United States Trust Company of New
York, as trustee.
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"Notes Indenture" means the indenture governing the Notes.
"Obligations" means all obligations for principal, premium, interest
(including post-petition interest and, in the case of Exchange Debentures, any
additional interest or liquidated damages from time to time payable pursuant
to the Registration Rights Agreement), penalties, fees, costs,
indemnifications, reimbursements, repurchase, redemption, retirement or
defeasance obligations, damages and other liabilities and obligations payable
under the documentation governing, or otherwise relating to, any Indebtedness.
"Original Credit Agreement" means the referenced Credit Agreement described
in clause (i) of the definition of Credit Agreement dated on or as in effect
on or about the Issue Date, as the same may be amended, modified, restated or
supplemented from time to time, and any one replacement agreement or facility
existing at any time provided to refund, refinance, replace or renew
(including subsequent or successive refundings, refinancings, replacements and
renewals) the Original Credit Agreement; such replacement agreement or
facility to be designated by the Company and certified in an officers'
certificate delivered to the Trustee.
"Pari Passu Debt" means any Indebtedness (secured or unsecured) of the
Issuer that ranks pari passu in right of payment with the Exchange Debentures.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Debt.
"Permitted Holders" mean Apollo Advisors, L.P. and any Affiliate thereof.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Exchange Debentures and the Exchange
Indenture, including any Exchange Debentures issued in accordance with the
Exchange Indenture as payment of interest on the Exchange Debentures;
(ii) Indebtedness incurred pursuant to any Credit Agreement (and the
guarantees thereof) in an aggregate principal amount at any time
outstanding not to exceed $260 million;
(iii) all other Indebtedness of the Issuer and its Restricted
Subsidiaries outstanding on the Issue Date, including under the Notes and
the Notes Indenture;
(iv) (a) Obligations under Interest Rate Agreements of the Company
covering Indebtedness of the Company or any of its Restricted Subsidiaries;
provided, however, that such Interest Rate Agreements are entered into to
protect the Company and its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Certificate
of Designation or the Exchange Indenture and not for speculative purposes
to the extent the notional principal amount of such Interest Rate Agreement
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Agreement relates and (b) Indebtedness under Currency
Agreements incurred by the Company in the ordinary course of business to
the extent that such obligations have been entered into to protect against
fluctuations in currency exchange rates and not for speculative purposes;
provided, that in the case of Currency Agreements which relate to
Indebtedness, such Currency Agreements do not increase the Indebtedness of
the Company and the Restricted Subsidiaries outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(v) Indebtedness of a Restricted Subsidiary of the Issuer to the Issuer
or to a Restricted Subsidiary of the Issuer for so long as such
Indebtedness is held by the Issuer or a Restricted Subsidiary of the
Issuer, in each case with no Lien securing such Indebtedness held by a
Person other than the Issuer or a Restricted Subsidiary of the Issuer;
provided that if as of any date any Person other than the Issuer or a
Restricted
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Subsidiary of the Issuer owns or holds any such Indebtedness or holds a
Lien securing any such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness under
this clause (v);
(vi) Indebtedness of the Issuer to a Restricted Subsidiary of the Issuer
for so long as such Indebtedness is held by a Restricted Subsidiary of the
Issuer, in each case with no Lien securing such Indebtedness; provided that
(a) any Indebtedness of the Issuer to any Restricted Subsidiary of the
Issuer is subordinated, pursuant to a written agreement, to the Issuer's
Obligations under the Exchange Indenture and the Exchange Debentures and
(b) if as of any date any Person other than a Restricted Subsidiary of the
Issuer owns or holds any such Indebtedness or any Person holds a Lien
securing any such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness under this clause
(vi);
(vii) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed $15 million;
(viii) Acquired Indebtedness of any Restricted Subsidiaries, provided
that such Indebtedness was not incurred by a Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Issuer and provided further that after giving effect to
such incurrence or assumption of such Acquired Indebtedness the
Consolidated Fixed Charge Ratio of the Issuer and its Restricted
Subsidiaries, taken as whole, and the Restricted Subsidiary making such
acquisition independently, are at least equal to 1.75:1 as calculated in
accordance with the covenant described under "--Certain Covenants--
Limitation on Incurrence of Additional Indebtedness";
(ix) Refinancing Indebtedness;
(x) Indebtedness solely in respect of performance bonds, surety
agreements, documentary letters of credit used for payment of goods
consistent with past practice, or other guarantees of performance (in each
case other than an obligation for the payment of borrowed money) incurred
in the ordinary course of business;
(xi) additional Indebtedness of the Issuer or any Restricted Subsidiary
in an aggregate principal amount not to exceed $100 million at any one time
outstanding; and
(xii) Indebtedness incurred pursuant to any Foreign Credit Agreement in
an aggregate principal amount at any time not to exceed $35 million (and
any guarantees thereof).
"Permitted Investments" means, for any Person, Investments made on or after
the Issue Date consisting of:
(i) Investments by the Issuer, or by a Restricted Subsidiary thereof, in
the Issuer or a Restricted Subsidiary thereof;
(ii) Cash Equivalents;
(iii) Investments by the Issuer, or by a Restricted Subsidiary thereof,
in a Person (or in all or substantially all of the business or assets of a
Person) if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Issuer, (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Issuer or a
Restricted Subsidiary thereof or (c) such business or assets are owned by
the Issuer or a Restricted Subsidiary;
(iv) Investments by the Company or any of its Restricted Subsidiaries in
Emerging Market Subsidiaries in the aggregate amount after the Issue Date
not to exceed $50 million;
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(v) reasonable and customary loans made to employees not to exceed
$500,000 to any employee, and not to exceed $5 million in the aggregate at
any one time outstanding;
(vi) an Investment that is made by the Issuer or a Restricted Subsidiary
thereof in the form of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Issuer or a Restricted Subsidiary solely as partial
consideration for the consummation of an Asset Sale;
(vii) accounts receivable of the Issuer and its Restricted Subsidiaries
generated in the ordinary course of business;
(viii) investments deemed to have been made as a result of the
acquisition of a Person that at the time of such acquisition held
instruments constituting Investments that were not acquired in
contemplation of the acquisition of such Person; and
(ix) additional Investments of the Issuer and its Restricted Subsidiaries
from time to time of an amount not to exceed $10 million.
Notwithstanding the foregoing, amounts available for Investments under
clauses (iv) and (ix) shall be increased by the aggregate amount of Returned
Investments received by the Issuer on or before the date of such Investment.
"Person" means an individual, partnership, corporation, unincorporated
organization, joint stock company, limited liability company, trust or joint
venture, or a governmental agency or political subdivision thereof.
"Plan" means any employee benefit plan, retirement plan, deferred
compensation plan, restricted stock plan, health, life, disability or other
insurance plan or program, employee stock purchase plan, employee stock
ownership plan, pension plan, stock option plan or similar plan or arrangement
of the Issuer or any Restricted Subsidiary of the Issuer, or any successor
plan thereof, and "Plans" shall have a correlative meaning.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemption or upon liquidation.
"Pro Rata Interest" of any Person in any other Person means a fraction, the
numerator of which is the amount of the equity or other ownership interest in
such other Person that are beneficially owned by such Person and its
Restricted Subsidiaries, and the denominator of which is the aggregate amount
of all equity or other ownership interests in such other Person that are
outstanding (for this purpose, equity or other ownership interests subject to
presently exercisable options, warrants or other rights to acquire such
interests shall be deemed to be outstanding and shall be included in both the
numerator and denominator). The Pro Rata Interest of any Person in any item of
income or expense or in the fair market value of the assets or liabilities of
any other Person means the amount obtained by multiplying (i) the amount of
such income or expense or the fair market value of the relevant asset or
liability, as the case may be, of such other Person by (ii) the Pro Rata
Interest of such Person in such other Person.
"Purchase Money Indebtedness" of any Person means any Indebtedness incurred
or assumed by a Person to finance the cost (including the cost of
construction) of an item of real or personal property, the principal amount of
which Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith
and provided that such Indebtedness is incurred or assumed within 90 days of
the acquisition of, or improvement to, such property; and provided that any
lien securing such Indebtedness does not extend to any property or assets
other than the real or personal property financed with such Indebtedness.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
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"Recapitalization" means the transactions described as such in this Offering
Memorandum.
"Redeemable Dividend" means, for any dividend or distribution with regard to
Disqualified Capital Stock or Preferred Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
United States federal income tax rate (expressed as a decimal number between 1
and 0) then applicable to the issuer of such Disqualified Capital Stock or
Preferred Stock, as the case may be.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Senior Preferred
Stock or the Exchange Debentures; provided, that if the Transaction Date in
question is more than 90 days after the end of such Person's most recently
completed fiscal year or more than 45 days after the end of such Person's most
recently completed fiscal quarter (other than the fourth fiscal quarter), then
"Reference Period" shall mean the four full fiscal quarters ended on the last
day of such fiscal year or fiscal quarter, as the case may be, unless
financial information for a later period of four full fiscal quarters is
available.
"Refinancing Indebtedness" means an extension, renewal, replacement,
refinancing or refunding of any Indebtedness which is Permitted Indebtedness
or is otherwise incurred in accordance with the "Limitation on Incurrence of
Additional Indebtedness" covenant (such Indebtedness is collectively referred
to as "Refinancing Indebtedness"); provided, that (1) the maximum principal
amount of the relevant Refinancing Indebtedness (or, if such Refinancing
Indebtedness (if not a revolving credit or similar arrangement) does not
require cash payments prior to maturity or is otherwise issued at a discount,
the original issue price of such Refinancing Indebtedness) may not exceed (x)
the maximum principal amount of the relevant Indebtedness or Disqualified
Capital Stock being extended, renewed, replaced, refinanced or refunded, plus
unpaid interest, prepayment penalties, redemption premiums, fees, expenses and
other amounts owing with respect thereto, plus reasonable financing fees and
other reasonable out-of-pocket expenses incurred in connection therewith
(collectively, "Refinancing Costs"), or (y) if such Indebtedness or
Disqualified Capital Stock being extended, renewed, replaced, refinanced or
refunded was issued at an original issue discount, the original issue price,
plus amortization of the original issue discount at the time of the incurrence
of the Refinancing Indebtedness plus Refinancing Costs, (2) if Pari Passu
Debt, in the case of the Company Exchange Debentures, or Disqualified Capital
Stock, such Refinancing Indebtedness has a Weighted Average Life to Maturity
and a final maturity that is equal to or greater than the Pari Passu Debt or
Disqualified Capital Stock being extended, renewed, replaced, refinanced or
refunded at the time of such extension, renewal, replacement, refinancing or
refunding, (3) with respect to Indebtedness or Disqualified Capital Stock of
the Issuer or any Restricted Subsidiaries, the relevant Refinancing
Indebtedness shall rank in right of payment with respect to the Senior
Preferred Stock and the Exchange Debentures, as the case may be, to an extent
no less favorable in respect thereof to the holders of Senior Preferred Stock
and the Exchange Debentures, as the case may be, than the Indebtedness or
Disqualified Capital Stock being refinanced, extended, renewed, replaced or
refunded and (4) Refinancing Indebtedness incurred by a Restricted Subsidiary
of the Issuer shall only be used to refinance outstanding Indebtedness or
Disqualified Capital Stock of such Restricted Subsidiary or any other
Restricted Subsidiary of the Issuer.
"Representative" means the representative appointed by the holders of
Designated Senior Debt.
"Restricted Payment" means the following:
(A) For purposes of the Exchange Indenture, (i) the declaration or
payment of any dividend or the making of any other distribution (other than
dividends or distributions payable in Qualified Capital Stock) on shares of
the Issuer's Capital Stock, other than the Senior Preferred Stock pursuant
to the Certificate of
Designation as in effect on the Issue Date, (ii) the purchase, redemption,
retirement or other acquisition for value of any Capital Stock of the
Issuer or any warrants, rights or options to acquire shares of Capital
Stock
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of the Issuer, other than the exchange of shares of Senior Preferred Stock
for the Exchange Debentures or other than through the exchange of such
Capital Stock or any warrants, rights or options to acquire shares of any
class of such Capital Stock for Qualified Capital Stock or warrants, rights
or options to acquire Qualified Capital Stock, (iii) the making of any
principal payment on, or the purchase, defeasance, redemption, prepayment,
decrease or other acquisition or retirement for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, of, any Subordinated Debt, (iv) the making of any Investment
(other than a Permitted Investment) (provided that the amount of any
Investment for purposes of this clause (iv) shall be calculated by
subtracting the amount of any applicable Returned Investments, if any, on
any such Investment), (v) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary on the basis of the fair market value of such
Subsidiary utilizing standard valuation methodologies and approved by the
Board of Directors or (vi) forgiveness of any Indebtedness of an Affiliate
of the Issuer to the Issuer or a Restricted Subsidiary; provided, however,
that the term "Restricted Payment" does not include (a) any defeasance,
redemption, repurchase or retirement for value, in whole or in part, of
Indebtedness of the Issuer or the Senior Preferred Stock payable solely in
shares of Qualified Capital Stock or Subordinated Debt or (b) the repayment
or retirement of Subordinated Debt with the proceeds of Refinancing
Indebtedness incurred in accordance with clause (ix) of the definition of
Permitted Indebtedness. For purposes of determining the amount available to
make Restricted Payments pursuant to clause (a)(iii) of the covenant
described under "--Certain Covenants--Limitation on Restricted Payments",
the amount of any Restricted Payments made pursuant to clauses (iv) or (v)
above shall be calculated after giving effect to any Returned Investments.
(B) For purposes of the Certificate of Designation, (i) the declaration
or payment of any dividend or the making of any other distribution (other
than dividends or distributions payable in Qualified Capital Stock and
other than dividends or distributions (in cash or otherwise) on the Senior
Preferred Stock) on shares of the Company's Junior Securities, (ii) the
purchase, redemption, retirement or other acquisition for value of any
Junior Securities of the Company, or any warrants, rights or options to
acquire shares of Junior Securities of the Company, other than through the
exchange of such Junior Securities or any warrants, rights or options to
acquire shares of any class of such Junior Securities for Qualified Capital
Stock or warrants, rights or options to acquire Qualified Capital Stock,
(iii) the making of any Investment (other than a Permitted Investment)
(provided that the amount of any Investment for purposes of to this clause
(iii) shall be calculated by subtracting the amount of any applicable
Returned Investments, if any, on any such Investment), (iv) any designation
of a Restricted Subsidiary as an Unrestricted Subsidiary on the basis of
the fair market value of such Subsidiary utilizing standard valuation
methodologies and approved by the Board of Directors and (v) forgiveness of
any Indebtedness of an Affiliate of the Company to the Company or a
Restricted Subsidiary. For purposes of determining the amount available to
make Restricted Payments pursuant to clause (a)(iii) of the covenant
described under "--Certain Covenants--Limitation on Restricted Payments",
the amount of any Restricted Payments made pursuant to clauses (iii) or
(iv) above shall be calculated after giving effect to any Returned
Investments.
"Restricted Subsidiary" means a Subsidiary of the Issuer other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
(other than the Initial Emerging Market Subsidiaries) existing as of the Issue
Date. The Board of Directors of the Issuer may designate any Unrestricted
Subsidiary or any Person that is to become a Subsidiary as a Restricted
Subsidiary if immediately after giving effect to such action (and treating any
Acquired Indebtedness as having been incurred at the time of such action), the
Company could have incurred at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the "Limitation on Incurrence of
Additional Indebtedness" covenant; provided that the Company may not designate
any Emerging Market Subsidiary to become a Restricted Subsidiary unless such
designation complies with the requirements set forth in the definition of
"Emerging Market Subsidiary" relating thereto.
"Returned Investments" mean, with respect to all Investments made in
Emerging Market Subsidiaries or Unrestricted Subsidiaries pursuant to clause
(iv) or (ix), respectively, of the definition of "Permitted Investments" or
pursuant to clauses (A)(iv) or (v) of the definition of "Restricted Payment"
for purposes of the
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Exchange Indenture or clauses (B)(iii) or (iv) for purposes of the Certificate
of Designation, the aggregate amount of (i) all payments made in respect of
such Investments, other than interest, dividends or other distributions not in
the nature of a return or repurchase of capital or a repayment of principal,
that have been paid or returned, without restriction, in cash to the Issuer
and its Restricted Subsidiaries and (ii) the Pro Rata Interest of the Issuer
and its Restricted Subsidiaries in the fair market value of the net assets of
all Emerging Market Subsidiaries or Unrestricted Subsidiaries, as the case may
be, that have been designated a Restricted Subsidiary of the Issuer after the
Issue Date, such fair market value to be determined as of the date of such
designation; provided, that amounts under the foregoing clause (ii) with
respect to each such Emerging Market Subsidiary or Unrestricted Subsidiary, as
the case may be, shall not constitute Returned Investments to the extent that
such amount exceeds the total amount of Investments by the Company and its
Restricted Subsidiaries in such Emerging Market Subsidiary or Unrestricted
Subsidiary, as the case may be. Notwithstanding the foregoing, Returned
Investments shall be credited to the amounts available for Investments
pursuant to clauses (iv) or (ix) of the definition of "Permitted Investments"
or Investments made pursuant to the provisions of clauses (A)(iv) or (v) for
purposes of the Exchange Indenture or (B)(iii) or (iv) for purposes of the
Certificate of Designation, as the case may be, only to the extent that such
Returned Investments are in respect of Investments made pursuant to each such
clause or provision.
"Senior Debt" means, the principal of, premium, if any, and interest
(including, without limitation, interest accruing or that would have accrued
but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowed claim in such
proceeding) on, and any and all other fees, expense reimbursement obligations,
obligations in respect of letters of credit, bankers acceptances and similar
transactions, indemnities and other amounts owing pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all Indebtedness
and Obligations of the Company and its Subsidiaries owed under each Credit
Agreement (and any guarantees thereof) and the Notes and the Notes Indenture,
(b) all obligations of the Company with respect to any Interest Rate Agreement
or Currency Agreement to the extent incurred pursuant to (iv) of the
definition of Permitted Indebtedness, (c) all obligations of the Company to
reimburse any bank or other person in respect of amounts paid under letters of
credit, acceptances or other similar instruments, (d) all other Indebtedness
of the Company which does not provide that it is to rank pari passu with or
subordinate to the Exchange Debentures and (e) all deferrals, renewals,
extensions, replacements, refinancings and refundings of, and amendments,
modifications and supplements to, any of the Senior Debt described above.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include (i) Indebtedness of the Issuer to any of its Subsidiaries, (ii)
Indebtedness represented by the Exchange Debentures, (iii) any Indebtedness
which by the express terms of the agreement or instrument creating, evidencing
or governing the same is junior or subordinate in right of payment to any item
of Senior Debt, (iv) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business or (v)
Indebtedness incurred in violation of the Exchange Indenture.
"Senior Preferred Stock" means the 13 7/8% Senior Redeemable Exchangeable
Preferred Stock, liquidation preference $1,000 per share of the Company.
"Significant Restricted Subsidiary" of the Company means any Restricted
Subsidiary of the Company which satisfies the requirements for being a
"significant subsidiary" as defined in Regulation S-X under the Securities Act
and the Exchange Act.
"Subordinated Debt" means Indebtedness of the Issuer or any Subsidiary that
is subordinated in right of payment by its express terms or by the express
terms of any related document to the Exchange Debentures.
"Subsidiary", with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a
majority of the voting interest under ordinary circumstances is at the time,
directly or indirectly, owned by such Person.
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"Unrestricted Subsidiary" means (a) any Emerging Market Subsidiary, (b) any
Subsidiary of an Unrestricted Subsidiary or an Emerging Market Subsidiary and
(c) any Subsidiary of the Issuer which is classified after the Issue Date as
an Unrestricted Subsidiary or an Emerging Market Subsidiary by a resolution
adopted by the Board of Directors of the Issuer; provided that a Subsidiary
organized or acquired after the Issue Date may be so classified as an
Unrestricted Subsidiary only if such classification is in compliance with the
covenant set forth under "--Certain Covenants--Limitation on Restricted
Payments"; provided, further, that a Subsidiary may not be classified as an
Emerging Market Subsidiary unless such classification would be in compliance
with the provisions of the definition of "Emerging Market Subsidiary." The
Trustee shall be given prompt notice by the Issuer of each resolution adopted
by the Board of Directors of the Issuer under this provision, together with a
copy of each such resolution adopted.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
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BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Senior Preferred Stock will be issued
in fully registered form. Except as described below, the New Senior Preferred
Stock initially will be represented by a single, global certificate, in
definitive, fully registered form (the "Global Certificate") and will be
deposited with BankBoston, N.A. c/o Boston EquiServe, L.P. (the "Registrar")
for the New Senior Preferred Stock, as custodian for The Depository Trust
Company ("DTC") and registered in the name of Cede & Co. or such other nominee
as DTC may designate.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly
("indirect participants").
Upon the issuance of the Global Certificate, DTC or its custodian will
credit, on its internal system, the respective liquidation preference of the
New Senior Preferred Stock represented by such Global Certificate to the
accounts of persons who have accounts with DTC. Ownership of beneficial
interests in the Global Certificate will be limited to persons who have
accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Certificate will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC or its nominee is the registered owner or holder of the
Global Certificate, DTC or such nominee, as the case may be, will be
considered the sole record owner or holder of the New Senior Preferred Stock
represented by such Global Certificate for all purposes under the Certificate
of Designation and the New Senior Preferred Stock. No beneficial owners of an
interest in the Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures in addition to those
provided for under the Certificate of Designation. Owners of beneficial
interests in the Global Certificate will not be entitled to have the New
Senior Preferred Stock represented by such Global Certificate registered in
their names, will not receive or be entitled to receive physical delivery of
certificated Senior Preferred Stock in definitive form and will not be
considered to be the owners or holders of any New Senior Preferred Stock under
the Global Certificate. Accordingly, each person owning a beneficial interest
in the Global Certificate must rely on the procedures of DTC and, if such
person is not a participant, on the procedures of the participant through
which such person owns its interests, to exercise any right of a holder of New
Senior Preferred Stock under the Global Certificate. The Company understands
that under existing industry practice, in the event an owner of a beneficial
interest in the Global Certificate desires to take any action that DTC, as the
holder of the Global Certificate, is entitled to take, DTC would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or
would otherwise act upon the instructions of beneficial owners owning through
them.
Payments of the liquidation preference of, and dividends on the New Senior
Preferred Stock represented by the Global Certificate will be made to DTC or
its nominee, as the case may be, as the registered owner thereof. Neither the
Company, the Registrar, nor any paying agent will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Certificate or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
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The Company expects that DTC or its nominee, upon receipt of any payment of
liquidation preference of, or dividends on the New Senior Preferred Stock, in
respect of the Global Certificate, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial ownership
interests in the liquidation preference of such Global Certificate, as shown
on the records of DTC or its nominee. The Company also expects that payments
by participants to owners of beneficial interests in such Global Certificate
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfer between participants in DTC will be effected in the ordinary way in
accordance with DTC rules. If a holder requires physical delivery of New
Senior Preferred Stock in certificated form ("Certificated New Senior
Preferred Stock") for any reason, including to sell New Senior Preferred Stock
to persons in states which require such delivery of such New Senior Preferred
Stock or to pledge such New Senior Preferred Stock, such holder must transfer
its interest in the Global Certificate, in accordance with the normal
procedures of DTC and the procedures set forth in the Certificate of
Designation.
Unless and until it is exchanged in whole or in part for Certificated New
Senior Preferred Stock in definitive form, the Global Certificate may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of
DTC to DTC or another nominee of DTC.
Beneficial owners of New Senior Preferred Stock registered in the name of
DTC or its nominee will be entitled to be issued, upon request, New Senior
Preferred Stock in definitive certificated form.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of New Senior Preferred Stock (including the presentation of
New Senior Preferred Stock for exchange as described below) only at the
direction of one or more participants to whose account the DTC interests in
the Global Certificate are credited and only in respect of such portion of the
aggregate liquidation preference of New Senior Preferred Stock as to which
such participant or participants has or have given such direction.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfer of interests in the Global Certificate among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Registrar will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Certificate may, upon request to the Registrar, exchange such
beneficial interest for New Senior Preferred Stock in the form of Certificated
New Senior Preferred Stock. Upon any such issuance, the Trustee is required to
register such Certificated New Senior Preferred Stock in the name of, and
cause the same to be delivered to such person or persons (or the nominee of
any thereof). In addition, if DTC is at any time unwilling or unable to
continue as a depositary for the Global Certificate and a successor depositary
is not appointed by the Company within 90 days, the Company will issue
Certificated New Senior Preferred Stock in exchange for the Global
Certificate.
Each holder of Old Senior Preferred Stock who wishes to exchange Old Senior
Preferred Stock for New Senior Preferred Stock in the Exchange Offer will be
required to make certain representations, including that (i) it is neither an
affiliate of the Company nor a broker-dealer tendering Old Senior Preferred
Stock acquired directly from the Company for its own account, (ii) any New
Senior Preferred Stock to be received by it was acquired in the ordinary
course of its business and (iii) at the time of commencement of the Exchange
Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the New Senior
Preferred Stock. In addition, in connection with any resales of New Senior
Preferred Stock, any broker-dealer (a "Participating Broker-Dealer") who
acquired the New Senior Preferred Stock for its own account as a result of
market-making activities or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act. The Commission has taken the
position that Participating Broker-Dealers may
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fulfill their prospectus delivery requirements with respect to the New Senior
Preferred Stock (other than a resale of an unsold allotment from the original
sale of the Old Senior Preferred Stock) with this Prospectus. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, subject to similar prospectus
delivery requirements, to use this Prospectus in connection with the resale of
such New Senior Preferred Stock.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any other reason the Exchange Offer Registration Statement is
not declared effective on or prior to November 21, 1998 or the Exchange Offer
is not consummated on or prior to December 21, 1998, upon the request of the
Initial Purchaser or if the Initial Purchaser is not permitted by applicable
law or interpretations of the staff of the Commission to participate in the
Exchange Offer and thereby receive freely tradeable New Senior Preferred
Stock, or if a holder of the Old Notes is not permitted by applicable law to
participate in the Exchange Offer or elects to participate in the Exchange
Offer but does not receive fully tradeable New Senior Preferred Stock pursuant
to the Exchange Offer, the Company will, in lieu of effecting the registration
of the New Senior Preferred Stock pursuant to the registration statement of
which this Prospectus is a part and at the Company's cost, (a) on or prior to
August 23, 1998 file with the Commission the Shelf Registration Statement (the
"Shelf Registration Statement") covering resales of the Transfer Restricted
Senior Preferred Stock (as defined herein) (or within 60 days of the delivery
of the Shelf Notice (as defined in the Registration Rights Agreement), as the
case may be (b) use its best efforts to cause the Shelf Registration Statement
to be declared effective under the Securities Act on or prior to November 21,
1998 (or within 90 days of the delivery of the Shelf Notice to holders of
Transfer Restricted Senior Preferred Stock), as the case may be, and (c) use
its best efforts to keep effective the Shelf Registration Statement for a
period of two years after its effective date (or for such shorter period that
will terminate when all of the Transfer Restricted Senior Preferred Stock
covered by the Shelf Registration Statement has been sold pursuant thereto or
cease to be outstanding). The Company will, in the event of the filing of the
Shelf Registration Statement, provide to each holder of the Transfer
Restricted Senior Preferred Stock copies of the prospectus which is a part of
the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement for the Transfer Restricted Senior Preferred Stock has
become effective and take certain other actions as are required to permit
unrestricted resales of the Transfer Restricted Senior Preferred Stock. A
holder of Transfer Restricted Senior Preferred Stock who sells such Senior
Preferred Stock pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver the prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights Agreement
which are applicable to such a holder (including certain indemnification
obligations).
For purposes of the foregoing, "Transfer Restricted Senior Preferred Stock"
means each share of Old Senior Preferred Stock until (i) the date on which
such share of Old Senior Preferred Stock has been exchanged for a freely
transferable share of New Senior Preferred Stock in the Exchange Offer, (ii)
the date on which such share of Old Senior Preferred Stock has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement, (iii) the date on which such share of
Old Senior Preferred Stock is sold to the public pursuant to Rule 144 under
the Securities Act or (iv) until such share of Old Senior Preferred Stock
ceases to be outstanding for purposes of the Certificate of Designation.
In the event that: (i) the registration statement of which this Prospectus
is a part is not filed on or prior to August 23, 1998 or, if required to be
filed on behalf of the holders of Transfer Restricted Senior Preferred Stock,
the Shelf Registration Statement is not filed on or prior to August 23, 1998
(or within 60 days following delivery of the Shelf Notice to holders of
Transfer Restricted Senior Preferred Stock), as the case may be; (ii) the
registration statement of which this Prospectus is a part or Shelf
Registration Statement is not declared effective on or prior to November 21,
1998 (or within 90 days following delivery of the Shelf Notice to holders of
Transfer Restricted Senior Preferred Stock), as the case may be; or
(iii) either (A) the Company has not exchanged the New Senior Preferred Stock
for all Old Senior Preferred Stock validly tendered in accordance with the
terms of
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the Exchange Offer on or prior to December 21, 1998 or (B) the registration
statement of which this Prospectus is a part ceases to be effective at any
time prior to the time that the Exchange Offer is consummated or (C) if
applicable, the Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective at any time prior to
the second anniversary of its effective date; (each such event referred to in
clauses (i) through (iii) above is a "Registration Default"), the sole remedy
available to holders of the Transfer Restricted Senior Preferred Stock will be
the immediate assessment of additional dividends ("Additional Dividends") as
follows: the per annum dividend rate on the Transfer Restricted Senior
Preferred Stock will increase by 50 basis points; and the per annum dividend
rate will increase by an additional 25 basis points for each subsequent 90 day
period during which the Registration Default remains uncured, up to a maximum
additional dividend rate of 100 basis points per annum in excess of the
dividend rate originally borne by the Senior Preferred Stock (as shown on the
front cover page of this Prospectus). All Additional Dividends will be payable
to holders of the Transfer Restricted Senior Preferred Stock in cash on each
March 15, June 15, September 15 and December 15, commencing with the first
such date occurring after any such Additional Dividend commences to accrue,
until such Registration Default is cured. After the date on which such
Registration Default is cured, the dividend rate on the Senior Preferred Stock
will revert to the dividend rate originally borne by the Senior Preferred
Stock (as shown on the front cover page of this Prospectus).
Dividends on each share of New Senior Preferred Stock will accrue from June
24, 1998 or from the most recent Dividend Payment Date to which dividends were
paid on the Old Senior Preferred Stock surrendered in exchange therefor or on
the New Senior Preferred Stock, as the case may be. Holders of New Senior
Preferred Stock are entitled to receive, when, as and if declared by the Board
of Directors of the Company out of funds legally available therefor, dividends
on the New Senior Preferred Stock at a rate per annum of 13 7/8% of the
liquidation preference per share of New Senior Preferred Stock, except that,
if any dividends accrue on the New Senior Preferred Stock in respect of any
period prior to its issuance, such dividends will accrue at the rate or rates
borne by the Old Senior Preferred Stock from time to time during such period.
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DESCRIPTION OF NEW CREDIT FACILITY
The following summary of the principal terms of the New Credit Facility does
not purport to be complete and is qualified in its entirety by reference to
the provisions of the credit agreement and other related documents.
On June 24, 1998, the Company entered into the New Credit Facility with Bank
of America National Trust and Savings Association, as Administrative Agent ("B
of A"), and BankBoston, N.A., as Syndication Agent (together, the "Credit
Facility Banks"). Pursuant to the New Credit Facility, the Credit Facility
Banks have agreed to provide the Company with a $100 million revolving credit
facility (the "Revolving Credit Facility"), a term loan facility in the amount
of $60 million (the "U.S. Term Loan Facility") to be borrowed by the Company
and a $50 million term loan facility (the "European Term Loan Facility") to be
borrowed by Samsonite Europe N.V. (the Revolving Credit Facility, the U.S.
Term Loan Facility and the European Term Loan Facility are collectively
referred to herein as the "New Credit Facility"). The Company has the option
in certain circumstances to add additional lenders as parties to the New
Credit Facility and in connection therewith to increase the Revolving Credit
Facility by up to an additional $50 million. The Revolving Credit Facility and
the European Term Loan Facility mature on June 24, 2003. The U.S. Term Loan
Facility requires principal repayments in each of the first five years of 1.0%
of the original principal balance and principal repayments in each of the
sixth and seventh years of 47.5% of the original principal balance.
All loans made to the Company under the Revolving Credit Facility will bear
interest either at the higher of .50% per annum above the latest Federal Funds
Rate and the B of A reference rate (the "Base Rate") or the Eurodollar rate
(as defined in the definitive documentation relating thereto), plus, in each
case, the "Applicable Margin," which initially is 2.75% per annum with respect
to any portion of the U.S. Term Loan Facility that is a Eurodollar rate loan,
2.5% per annum with respect to any other loan that is a Eurodollar rate loan,
1.75% per annum with respect to any portion of the U.S. Term Loan Facility
that is a Base Rate loan and 1.5% per annum with respect to any other Base
Rate loans. The Applicable Margin on documentary letters of credit is
initially 1.9375% per annum. All loans made to Samsonite Europe N.V. under the
Revolving Credit Facility (including foreign standby letters of credit) and
the European Term Loan Facility will bear interest at the Eurodollar rate plus
the "Applicable Margin." The Applicable Margin will rise or fall depending
upon the financial performance of the Company. The Company will pay a
commitment fee which initially will be 0.5% per annum on the unused portion of
the Revolving Credit Facility. The fees paid in respect of domestic and
foreign standby and documentary letters of credit will rise and fall depending
on the financial performance of the Company, but in any event will not exceed
1.9375% per annum of the aggregate undrawn face amount of a foreign or
domestic documentary letter of credit.
The obligations under the U.S. Term Loan Facility and the Revolving Credit
Facility are secured by inventory, accounts receivable, personal property and
other intangibles of the Company and will be secured by intellectual property
by the 60th day following the closing of the New Credit Facility, and the
Company has already pledged 100% of the capital stock of its major domestic
subsidiaries and 66% of the capital stock of Samsonite Europe N.V. and other
major non-domestic subsidiaries.
The New Credit Facility contains customary financial and other covenants
that, among other things, limit the ability of the Company (subject to
customary and negotiated exceptions) to (i) incur additional liens, (ii) incur
additional indebtedness, (iii) make certain kinds of investments, (iv) prepay
subordinate indebtedness, (v) make distributions and dividend payments to its
stockholders, (vi) engage in affiliate transactions, (vii) make certain asset
dispositions, (viii) make acquisitions and (ix) participate in certain
mergers.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, par value $.01 per share, and 2,000,000 shares of preferred
stock par value $.01 per share (the "Preferred Stock"). As of August 4, 1998,
there were 10,433,756 shares of Common Stock issued and outstanding. The
following description of the capital stock of the Company and of certain
provisions of the Company's Amended and Restated Certificate of Incorporation
(the "Charter") and the Company's By-Laws (the "By-Laws") is a summary of the
principal terms thereof. Reference is hereby made to the full text of the
Charter and By-Laws, copies of which are filed as exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended January 31, 1998,
incorporated by reference herein.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding Preferred Stock, holders
of Common Stock are entitled to receive ratably such dividends as may from
time to time be declared by the Board of Directors of the Company out of funds
legally available therefor. In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock would be entitled to share
ratably in all assets of the Company available for distribution to holders of
Common Stock remaining after payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities, and there are no redemption provisions with respect to such
shares. All of the outstanding shares of Common Stock are fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors of the Company has the authority to issue the
Preferred Stock in one or more classes or series and to fix the designations,
powers, preferences and rights of the shares of each such class or series,
including dividend rates, conversion rights, voting rights, terms of
redemption and liquidation preference and the number of shares constituting
each such class or series, without any further vote or action by the
stockholders. The Company has not issued, and has no present plans to issue,
any shares of the Preferred Stock, other than the Senior Preferred Stock
issued on June 24, 1998.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is BankBoston, N.A.
CERTAIN CHARTER AND BY-LAWS PROVISIONS
The Charter and the By-Laws contain certain provisions that could make more
difficult the acquisition of the Company by means of a tender offer, a proxy
contest or otherwise.
Classified Board of Directors and Related Provisions. The Charter provides
that the Board of Directors shall be divided into three classes, designated
Class I, Class II and Class III, which shall be as nearly equal in number as
possible. Class I directors, who will serve for a term ending with the annual
meeting of stockholders to be held in 1999, currently consist of three
directors, Class II directors, who will serve for a term ending with the
annual meeting of stockholders to be held in 2000, currently consist of three
directors and Class III directors, who will serve for a term ending with the
annual meeting of stockholders to be held in 1998, currently consist of three
directors. A director may be removed by the stockholders, but only for cause,
and only by the affirmative vote of the holders, voting as a single class of a
majority of the total number of votes entitled to be cast by all holders
voting stock (which shall include the Common Stock and any class or series of
Preferred Stock which by its terms may be voted on all matters submitted to
stockholders of the Company generally).
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The purpose of a classified board is to promote conditions of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors, by guaranteeing that in the ordinary
course at least two-thirds of the directors will at all times have had at
least one year's experience as directors of the Company. However, for similar
reasons, a classified board may deter certain mergers, tender offers or other
takeover attempts which some or a majority of the holders of the Company's
stock may deem to be in their best interest, since it would take two annual
meetings of stockholders to elect a majority of the Board of Directors.
Similarly, a classified board structure would delay stockholders who do not
like the policies of the Board of Directors from removing a majority of the
Board of Directors at a single annual meeting.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals. The By-Laws establish an advance notice procedure for stockholders
to make nominations of candidates for election as directors, or bring other
business before an annual meeting of stockholders of the Company (the
"Stockholder Notice Procedure").
The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of the Company's Board, or by a stockholder
who has given timely written notice to the Secretary of the Company prior to
the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure
provides that at an annual meeting, only such business may be conducted as has
been specified in the notice of the meeting given by or at the direction of
the Board of Directors (or any duly authorized committee thereof) or brought
before the meeting by, or at the direction of, the Board of Directors (or any
duly authorized committee thereof) or by a stockholder who has given timely
written notice to be Secretary of the Company of such stockholder's intention
to bring such business before such meeting.
Under the Stockholder Notice Procedure, for notice of stockholder
nominations to be made or business to be conducted at an annual meeting to be
timely, such notice must be received by the Company not less than 60 days nor
more than 90 days prior to the first anniversary of the preceding year's
annual meeting, in the event that the date of the annual meeting is advanced
by more than thirty days or delayed by more than sixty days from such
anniversary date, notice must be delivered by the stockholder to the Company
not earlier than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the sixtieth day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Under the Stockholder Notice
Procedure, for notice of a stockholder nomination to be made at a special
meeting at which directors are to be elected to be timely, such notice must be
received by the Company not earlier than the ninetieth day prior to such
meeting and not later than the close of business on the later of the sixtieth
day prior to such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special meeting.
In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate a person for election as a director or
conduct certain business at an annual meeting must contain certain specified
information. If the Board of Directors determines that a person was not
nominated, or other business was not brought before the meeting, in accordance
with the Stockholder Notice Procedure, such person will not be eligible for
election as a director, or such business will not be conducted at such
meeting, as the case may be.
STOCKHOLDER RIGHTS PLAN
On May 12, 1998, the Company declared a dividend distribution of one right
(a "Right") for each outstanding share of Common Stock to stockholders of
record at the close of business on May 20, 1998 (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company one one-
thousandth of a share of Series B Junior Participating Preferred Stock, par
value $0.01 per share (the "Series B Preferred Stock"), at a purchase price of
$70, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and
BankBoston, N.A. as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
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distribution date (the "Distribution Date"), will occur upon the earlier of
(i) ten business days following a public announcement that a person has become
an Acquiring Person (the "Stock Acquisition Date"), or (ii) ten business days
(or such later date as the Board of Directors shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an Acquiring Person. "Acquiring Person" means any person who
or which, together with all affiliates and associates of such person, shall be
the beneficial owner of 15% or more of the Shares then outstanding, but shall
exclude (i) the Company, (ii) any subsidiary of the Company, (iii) any
employee benefit plan of the Company or of any subsidiary of the Company, (iv)
any person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan, (v) any Exempted Person (i.e., certain
persons whose 15% ownership prior to the execution of the Rights Plan was
"grandfathered"), (vi) any person, together with such person's affiliates and
associates, whose percentage beneficial ownership is increased to more than
15% of the outstanding Shares by reason of any repurchase of Common Stock by
the Company, provided that, in the case of clause (vi), such person, together
with such person's affiliates and associates, (a) does not acquire any Common
Stock after the public announcement of the repurchase of Common Stock by the
Company in connection with the Offer, as the same may be amended or modified
and (b) does not acquire any shares of Common Stock following any repurchase
of Common Stock by the Company if such repurchase would result in such person,
together with such person's affiliates and associates, owning in excess of 15%
of the outstanding Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common
Stock certificates, (ii) new Common Stock certificates issued after the Record
Date will contain a notation incorporating the Rights Agreement by reference
and (iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence
of a Triggering Event (as defined herein) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Series B Preferred
Stock will be issued.
The Rights are not exercisable until the Distribution Date and will expire
at the 5:00 p.m. (New York City time) on May 31, 2000, unless earlier redeemed
or extended by the Board of Directors of the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Stock as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates
alone will represent the Rights. Except as otherwise determined by the Board
of Directors, only shares of Common Stock issued prior to the Distribution
Date will be issued with Rights.
In the event that a person becomes an Acquiring Person, each holder of a
Right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of the event
set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void. However, Rights are not
exercisable following the occurrence of the event set forth above until such
time as the Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $70 per Right, each Right not owned by
an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $140
worth of Common Stock (or other consideration, as noted above) for $70.
Assuming that the Common Stock had a per share value of $35 at such time, the
holder of each valid Right would be entitled to purchase four shares of Common
Stock for $70.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction
(other than a merger which follows an offer described in the second paragraph)
or (ii) 50% or more of the Company's assets, cash flow or earning power is
sold or transferred, each
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holder of a Right (except Rights which previously have been voided as set
forth above) shall thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times the exercise
price of the Right. The events set forth in this paragraph and in the second
paragraph are referred to as the "Triggering Events."
At any time until 10 business days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.005
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). Immediately upon the action of the
Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$.005 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other consideration) of the Company or
for Common Stock of the Acquiring Company as set forth below.
Any of the provisions of the Rights Agreement may be amended by the Board of
Directors prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board of Directors in
order to cure any ambiguity, to make changes which do not adversely affect the
interests of holders of Rights, or to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to lengthen a
time period relating to when the Rights may be redeemed may be made at such
time as the Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board
of Directors since the Rights may be redeemed by the Company at any time until
10 business days following the Stock Acquisition Date.
STATUTORY PROVISIONS
Section 203 of the Delaware General Corporation Law (the "DCL") prohibits
certain transactions between a Delaware corporation and an "interested
stockholder," which is defined as a person who, together with any affiliates
and/or associates of such person, beneficially owns, directly or indirectly,
15% or more of the outstanding voting shares of a Delaware corporation. This
provision prohibits certain business combinations (defined broadly to include
mergers, consolidations, sales or other dispositions of assets having an
aggregate value in excess of 10% of the consolidated assets of the
corporation, and certain transactions that would increase the interested
stockholder's proportionate share ownership in the corporation) between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder acquired its stock, unless (i) the business
combination is approved by the corporation's board of directors prior to the
date the interested stockholder acquired shares, (ii) the interested
stockholder acquired at least 85% of the voting stock of the corporation in
the transaction in which it became an interested stockholder or (iii) the
business combination is approved by a majority of the board of directors and
by the affirmative vote of two-thirds of the votes entitled to be cast by
disinterested stockholders at an annual or special meeting. A Delaware
corporation, pursuant to a provision in its certificate of incorporation or
by-laws, may elect not to be governed by Section 203 of the DCL in which case
such election becomes effective one year after its adoption. In the Charter,
the Company has elected not to be governed by Section 203 of the DCL.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
consequences associated with the exchange of the Old Senior Preferred Stock
for the New Senior Preferred Stock pursuant to the Exchange Offer and the
ownership and disposition of New Senior Preferred Stock and Company Exchange
Debentures to a U.S. person (as defined below) who acquired the Old Senior
Preferred Stock at the initial offering from the Initial Purchaser for the
original offering price thereof and who acquires the New Senior Preferred
Stock pursuant to the Exchange Offer. This discussion is based on provisions
of the Code, Treasury regulations promulgated thereunder, and administrative
and judicial interpretations thereof, all as in effect on the date hereof and
all of which are subject to change, possibly with retroactive effect. This
discussion does not address the tax consequences to subsequent purchasers of
the Senior Preferred Stock or Company Exchange Debentures and is limited to
investors who hold Senior Preferred Stock and Company Exchange Debentures as
capital assets. Furthermore, this discussion does not address U.S. federal
alternative minimum tax consequences and does not address all aspects of U.S.
federal income taxation that may be applicable to investors in light of their
particular circumstances, or to investors subject to special treatment under
U.S. federal income tax law (including, without limitation, certain financial
institutions, insurance companies, tax-exempt entities, dealers in securities
or persons who have acquired Senior Preferred Stock and Company Exchange
Debentures as part of a straddle, hedge, conversion transaction or other
integrated investment).
As used herein, the term "U.S. person" means a holder of Senior Preferred
Stock or Company Exchange Debentures that is, for U.S. federal income tax
purposes, (i) a citizen or resident of the U.S., (ii) a corporation or
partnership created or organized in or under the laws of the U.S. or of any
political subdivision thereof, (iii) an estate the income of which is subject
to U.S. federal income taxation regardless of its source or (iv) a trust if a
U.S. court is able to exercise primary supervision over the administration of
such trust and one or more U.S. persons have the authority to control all
substantial decisions of such trust.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF SENIOR PREFERRED STOCK AND COMPANY EXCHANGE DEBENTURES,
INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR GIFT TAX LAWS OR ANY
STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN APPLICABLE TAX LAWS AND ANY
PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
EXCHANGE OFFER
There should be no U.S. federal income tax consequences to a holder who
exchanges Old Senior Preferred Stock for New Senior Preferred Stock pursuant
to the Exchange Offer and the New Senior Preferred Stock received should be
treated as a continuation of the Old Senior Preferred Stock in the hands of
such holder. Accordingly, any such holder should have the same adjusted tax
basis and holding period in the New Senior Preferred Stock as it had in the
Old Senior Preferred Stock immediately before the exchange.
Because the Company sold the Old Senior Preferred Stock together with
certain stock warrants as a unit, the two instruments will likely be treated
as an investment unit for U.S. federal income tax purposes. In such case, the
purchase price of a unit should be allocated between the Old Senior Preferred
Stock and the warrants based on their relative fair market values at the time
of purchase. The Company intends to allocate $966.74 and $33.26 of the
purchase price of a unit to the Old Senior Preferred Stock and the warrant,
respectively, and such allocation should establish the issue price and initial
tax basis in the Old Senior Preferred Stock. No assurance can be given,
however, that the IRS will not challenge the Company's allocation of the
purchase price and, if successful, such challenge could result in a different
issue price and initial tax basis for the Old Senior Preferred Stock.
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DISTRIBUTIONS ON NEW SENIOR PREFERRED STOCK
Distributions on the New Senior Preferred Stock, whether paid in cash, in
additional shares of Senior Preferred Stock or as constructive distributions
(as discussed below under "Redemption Premium"), will be taxable as ordinary
income to the extent that the amount of cash or the fair market value of any
Senior Preferred Stock distributed does not exceed the portion of the
Company's current and accumulated earnings and profits attributable to such
distribution (as determined for U.S. federal income tax purposes). To the
extent that the amount of distributions paid on the New Senior Preferred Stock
exceeds such earnings and profits, such distributions will be treated first as
a return of capital, reducing the holder's adjusted tax basis in the New
Senior Preferred Stock, with any excess taxable as gain from the sale or
exchange of a capital asset. Any such capital gain will be long-term capital
gain if the holder has held the New Senior Preferred Stock for more than one
year immediately prior to such distribution. Under recently adopted amendments
to the Code, capital gain recognized by an individual investor upon a
disposition of a capital asset that has been held for more than one year
immediately prior to such disposition will generally be subject to a maximum
income tax rate of 20% or, in the case of a capital asset that has been held
for one year or less, will be subject to tax at ordinary income tax rates.
Corporate holders will generally be taxed on capital gains (short-term and
long-term) at a rate of 35%. It is unclear whether the Company will have
sufficient earnings and profits to cause distributions on the New Senior
Preferred Stock to be taxable as dividends for U.S. federal income tax
purposes. For purposes of the remainder of this discussion, unless the context
indicates otherwise, the term "dividend" refers to a distribution taxed as
ordinary income as described above.
A holder's initial tax basis in any additional shares of New Senior
Preferred Stock distributed by the Company will be equal to their fair market
value on the date of distribution. A holder's holding period for such
additional shares will commence with their distribution and will not include
its holding period for the New Senior Preferred Stock with respect to which
the additional shares were distributed.
Subject to various limitations, including certain holding period
requirements, the "debt financed portfolio stock" rules and limitations based
on a holder's taxable income, dividends received by a corporate holder which
owns less than 20% of the Company's stock (by vote or value) generally will be
eligible for the 70% dividends-received deduction. In addition, the rules of
Section 1059 of the Code may apply, requiring certain corporate holders to
reduce their adjusted tax basis (but not below zero) in the New Senior
Preferred Stock by the amount of the dividends-received deduction resulting
from any "extraordinary dividend" on the New Senior Preferred Stock. Moreover,
such holders would immediately recognize capital gain to the extent such
adjusted tax basis would have been reduced below zero as a result of the above
described rule. "Extraordinary dividend" is broadly defined and may include a
redemption of New Senior Preferred Stock that is treated as a dividend,
without regard to the size of such redemption or the length of time a holder
has held the stock. Corporate holders should consult their tax advisors
regarding the availability of the dividends-received deduction and the
possible application of Section 1059 of the Code.
As part of President Clinton's Fiscal Year 1999 Budget Proposal, which was
submitted to Congress on February 2, 1998, the Administration proposed
adoption of a provision that would, except in limited circumstances, eliminate
the dividends-received deduction for certain preferred stock (such as the New
Senior Preferred Stock). The proposal would be effective for stock issued
after the date of enactment. There can be no assurance that any legislation,
including the Administration's proposal, enacted after the date hereof would
not apply to the New Senior Preferred Stock. Corporate holders of New Senior
Preferred Stock should consult their tax advisors regarding the possible
effects of the Administration's proposal.
REDEMPTION PREMIUM
If the redemption price of redeemable preferred stock (such as the New
Senior Preferred Stock) exceeds its issue price by more than a de minimis
amount, such excess may be treated as a constructive distribution of
additional stock on such preferred stock, over the term of the preferred
stock, using a constant yield method.
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Based on the purchase price allocation discussed in "Exchange Offer" above,
the Senior Preferred Stock will be deemed to have been issued with more than a
de minimis amount of redemption premium. The Company's determination as to
whether there is a constructive distribution is binding on all holders of the
Senior Preferred Stock, other than a holder that explicitly discloses that its
determination as to whether there is a constructive distribution differs from
that of the Company. Such disclosure must be made on a statement attached to
the holder's timely filed U.S. federal income tax return for the taxable year
that includes the date the holder acquired the Senior Preferred Stock. A
constructive distribution of additional Senior Preferred Stock will generally
be subject to the same rules as described above in "Distributions on Senior
Preferred Stock."
In addition, Senior Preferred Stock distributed in lieu of cash dividends on
the New Senior Preferred Stock may also be subject to the foregoing rules,
depending on the issue price of such additional Senior Preferred Stock.
Constructive distributions on the Senior Preferred Stock may arise due to
its optional redemption provisions only if, based on all of the facts and
circumstances as of the issuance date, an optional redemption was more likely
than not to occur. Even if redemption were more likely than not to occur,
however, constructive distribution treatment would not result if the
redemption premium were solely in the nature of a penalty for premature
redemption (i.e., a premium paid as a result of changes in economic or market
conditions over which neither the issuer nor the holder has control, such as
changes in prevailing dividend rates). Applicable Treasury regulations provide
a safe harbor pursuant to which constructive distribution treatment will not
result from an issuer call right if the issuer and the holder are unrelated,
there are not arrangements that effectively require the issuer to redeem the
stock and exercise of the option to redeem would not reduce the yield of the
stock. Although no assurances can be given, the Company believes that the
optional redemption provisions will not give rise to a constructive
distribution, based on one or more of the following positions: (i) that such
provisions would not be treated as more likely than not to be exercised under
these rules, (ii) that the redemption premium is in the nature of a penalty
for premature redemption or (iii) that the safe harbor would apply. Moreover,
a holder's right to require a redemption of the Senior Preferred Stock upon
the occurrence of a contingency (such as a change of control of the Company)
could under certain circumstances result in constructive distributions,
although the Company does not believe that such result should apply to the
Senior Preferred Stock.
REDEMPTION, SALE OR EXCHANGE OF THE NEW SENIOR PREFERRED STOCK
A holder generally will recognize taxable gain or loss upon the sale or
disposition (other than a redemption or an exchange of New Senior Preferred
Stock for Company Exchange Debentures, as discussed below) of New Senior
Preferred Stock equal to the difference between the amount of cash or the fair
market value of property received and the holder's adjusted tax basis in the
shares. Such capital gain will be long-term gain or loss if the holder's
holding period for the New Senior Preferred Stock exceeds one year immediately
prior to such disposition. Such capital gain or loss will be subject to the
capital gains rates discussed above under "Distributions on New Senior
Preferred Stock."
A redemption by the Company of the New Senior Preferred Stock for cash or an
exchange of the New Senior Preferred Stock for Company Exchange Debentures
should be treated as a dividend to the extent that the amount of cash or the
fair market value of the Company Exchange Debentures exchanged therefor does
not exceed the Company's current and accumulated earnings and profits (as
determined for U.S. federal income tax purposes) attributable thereto unless
such redemption or exchange (i) results in a "complete termination" of the
holder's stock interest in the Company under Section 302(b)(3) of the Code,
(ii) is "substantially disproportionate" with respect to the holder under
Section 302(b)(2) of the Code or (iii) is "not essentially equivalent to a
dividend" with respect to the holder under Section 302(b)(1) of the Code. In
determining whether any of these tests have been met, the holder must take
into account not only stock which such holder actually owns, but also stock
which such holder constructively owns under the attribution rules of Section
318 of the Code. If a holder is treated as having received a dividend upon a
redemption of New Senior Preferred Stock for
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cash or an exchange of New Senior Preferred Stock for Company Exchange
Debentures, a holder's tax basis in (x) such Company Exchange Debentures
should equal their fair market value on the date of exchange and (y) its New
Senior Preferred Stock so redeemed or exchanged should be transferred to any
remaining stockholdings of the holder in the Company. If the holder does not
retain any stock ownership in the Company, such holder may lose such tax basis
entirely. If any of the three tests described above are met, except as
described below, such redemption or exchange generally should be treated in
the same manner as a sale or exchange of such shares described in the
preceding paragraph.
If a redemption of New Senior Preferred Stock in exchange for Company
Exchange Debentures is treated as a sale or exchange, each exchanging holder
of the New Senior Preferred Stock should recognize capital gain or loss equal
to the difference between the "issue price" of the Company Exchange Debentures
(as defined below) and such holder's adjusted tax basis in the New Senior
Preferred Stock surrendered in exchange therefor, and a holder's tax basis in
the Company Exchange Debentures should equal their "issue price." Assuming the
Company Exchange Debentures are traded on an established market at any time
during the 60-day period ending 30 days after their issue date, the issue
price of the Company Exchange Debentures should be their fair market value on
the issue date. If the New Senior Preferred Stock, but not the Company
Exchange Debentures issued in exchange therefor, is traded on an established
market at any time during the 60-day period ending 30 days after the issue
date of the Company Exchange Debentures, the issue price of the Company
Exchange Debentures should be the fair market value of the New Senior
Preferred Stock exchanged therefor at the time of exchange. If neither the New
Senior Preferred Stock nor the Company Exchange Debentures are so traded, the
issue price of the Company Exchange Debentures should be their stated
liquidation amount or, in the event the Company Exchange Debentures do not
bear "adequate stated interest" within the meaning of Section 1274 of the
Code, their "imputed liquidation amount" (generally, the present value of all
payments due under the Company Exchange Debentures, discounted at the
appropriate "applicable federal rate").
THE COMPANY EXCHANGE DEBENTURES
INTEREST AND ORIGINAL ISSUE DISCOUNT ("OID")
If the terms of the Company Exchange Debentures permit the Company to issue
additional Company Exchange Debentures in lieu of paying cash interest (which
generally should be the case only if the Company Exchange Debentures are
issued prior to June 15, 2003), the Company Exchange Debentures will be deemed
to have been issued with OID for U.S. federal income tax purposes.
Consequently, holders will be required to include OID in ordinary income over
the period that they hold the Company Exchange Debentures in advance of the
receipt of cash attributable thereto under a constant yield method. If the
issuance of additional Company Exchange Debentures would not reduce the yield
to maturity on the Company Exchange Debentures (which generally should be the
case if the issue price of the Company Exchange Debentures is at least equal
to their stated principal amount) and the Company does not elect to issue
additional Company Exchange Debentures, the amount of OID includible in
ordinary income over the remaining term of the Company Exchange Debentures
will be equal to the excess of (i) the sum of the stated principal amount of
the Company Exchange Debentures plus all remaining cash payments of stated
interest over (ii) the issue price of the Company Exchange Debentures. The
amount of OID includible in a holder's income during a calendar year should
generally equal the amount of scheduled interest payments during such year.
If the issuance of additional Company Exchange Debentures would not reduce
the yield to maturity on the Company Exchange Debentures, and the Company
elects to issue additional Company Exchange Debentures, the issuance of
additional Company Exchange Debentures would not be treated as a payment of
interest and the Company Exchange Debentures would be deemed to be "reissued"
on each date that additional Company Exchange Debentures are issued solely for
purposes of computing the amount of OID includible in income during the then
remaining term of the Company Exchange Debentures. Under these rules, the
Company
127
<PAGE>
Exchange Debentures would be deemed to be reissued at their then adjusted
issue price (i.e., their original issue price plus accrued OID less previous
payments of interest in cash) and any additional Company Exchange Debentures
would be treated as part of the original Company Exchange Debentures to which
such additional Company Exchange Debentures relate. The amount of OID
includible in a holder's income over the remaining term of a Company Exchange
Debenture, determined under the constant yield method described above, would
be equal to (i) the stated principal amount due at maturity (including the
stated principal amount of any additional Company Exchange Debentures treated
as part of such Company Exchange Debenture) plus all remaining cash payments
of stated interest over (ii) the adjusted issue price of the Company Exchange
Debentures.
If the issuance of additional Company Exchange Debentures would reduce the
yield to maturity on the Company Exchange Debentures (which generally should
be the case if the issue price of the Company Exchange Debentures is less than
their stated principal amount) and the Company elects to issue additional
Company Exchange Debentures in lieu of paying cash interest, the amount of OID
includible in income in respect of a Company Exchange Debenture should
generally be equal to (i) the stated principal amount due at maturity
(including the stated principal amount of the additional Company Exchange
Debentures, assuming the Company issued Company Exchange Debentures in lieu of
paying cash interest on all interest payment dates prior to June 15, 2003)
plus all remaining cash payments of stated interest on such Company Exchange
Debenture over (ii) the issue price of the Company Exchange Debenture. If the
issuance of additional Company Exchange Debentures would reduce the yield to
maturity on the Company Exchange Debentures and the Company pays cash interest
prior to June 15, 2003 rather than issuing additional Company Exchange
Debentures in lieu thereof, a portion of such cash payment would be treated as
a partial prepayment of the Company Exchange Debentures, which could result in
the recognition of capital gain and generally would reduce the amount of OID
inclusions for subsequent periods.
In the event the Company Exchange Debentures are not issued with OID, which
may be the case if the terms thereof do not permit the Company to issue
additional Company Exchange Debentures in lieu of paying cash interest and the
Company Exchange Debentures' stated redemption price at maturity is less than
or equal to their issue price or does not exceed their issue price by more
than a de minimis amount, stated interest should be included in income by a
holder in accordance with its method of tax accounting.
BOND PREMIUM
If the issue price of a Company Exchange Debenture exceeds its stated
principal amount, the Company Exchange Debenture may be treated as having been
issued with amortizable bond premium, in which case a holder may be entitled
to amortize the bond premium over the life of the Company Exchange Debenture.
SALE, EXCHANGE OR REDEMPTION OF COMPANY EXCHANGE DEBENTURES
A holder generally will recognize taxable gain or loss upon the sale,
exchange or redemption of Company Exchange Debentures equal to the difference
between the amount of cash or the fair market value of property received
(except to the extent that such cash or property is attributable to accrued,
but previously untaxed, interest) and the holder's adjusted tax basis in the
Company Exchange Debentures. A holder which receives Company Exchange
Debentures in exchange for New Senior Preferred Stock generally should have an
adjusted tax basis in the Company Exchange Debentures equal to the "issue
price" of the Company Exchange Debentures, increased by any accrued OID
thereon included in the holder's income prior to such sale, exchange or
redemption, and reduced by (i) any cash payments of interest other than
qualified stated interest and (ii) the amount of any previously amortized bond
premium, as discussed above. Such gain or loss will be long-term capital gain
or loss if the holder's holding period for the Company Exchange Debentures
exceeds one year immediately prior to such sale, exchange or redemption and
will be subject to the capital gains rates discussed above under
"Distributions on New Senior Preferred Stock."
128
<PAGE>
APPLICATION OF AHYDO RULES
The applicable high yield discount obligation ("AHYDO") rules may affect the
Company's ability to deduct interest payments made on the Company Exchange
Debentures. Under those rules, the Company would not be entitled to deduct a
portion of the OID accruing on the Company Exchange Debentures and would be
allowed to deduct the remainder of the OID only when paid. The AHYDO rules
apply to debt instruments that have a term of more than five years, have a
yield to maturity that equals or exceeds five percentage points over the
"applicable federal rate" and that have "significant OID". Because the amount
of OID, if any, will be determined at the time that a Company Exchange
Debenture is issued, it is not possible to determine if the AHYDO rules will
apply. If the AHYDO rules applied to a Company Exchange Debenture, a corporate
holder may be treated as receiving dividend income (to the extent of the
Company's current and accumulated earnings and profits) solely for purposes of
the dividends received deduction, with respect to that portion of the OID for
which the Company is denied a deduction.
BACKUP WITHHOLDING
"Backup withholding" at a rate of 31% may apply to payments of dividends on
New Senior Preferred Stock, payments of principal and interest made on a
Company Exchange Debenture, and to payments of the proceeds of a sale or
exchange of New Senior Preferred Stock or Company Exchange Debentures (before
maturity) that are made to a non-corporate holder if such holder fails to
provide a correct taxpayer identification number or otherwise comply with
applicable requirements of the backup withholding rules. The backup
withholding tax is not an additional tax and may be credited against a
holder's U.S. federal income tax liability provided that correct information
is provided to the IRS.
129
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Senior Preferred Stock for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Senior Preferred Stock.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of New Senior Preferred
Stock received in exchange for Old Senior Preferred Stock where such Old
Senior Preferred Stock was acquired as a result of market-making activities or
other trading activities. For a period of 180 days after the Expiration Date,
the Company will make this Prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale. In addition,
until November 24, 1998 (90 days from the date of this Prospectus), all
dealers effecting transactions in the New Senior Preferred Stock may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Senior
Preferred Stock by broker-dealers. New Senior Preferred Stock received by
broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the New
Senior Preferred Stock or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchaser of any such New Senior Preferred Stock. Any broker-dealer that
resells New Senior Preferred Stock that was received by it for its own account
pursuant to the Exchange Offer and any broker-dealer that participates in a
distribution of such New Senior Preferred Stock may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Senior Preferred Stock and any commission or concession
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Senior Preferred Stock) other than commissions or
concessions of any broker-dealers and will indemnify the holders of the Senior
Preferred Stock (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the New Senior Preferred Stock,
Company Exchange Debentures and Holdings Exchange Debentures offered hereby
will be passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom
LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of January 31, 1998
and 1997, and for each of the years in the three-year period ended January 31,
1998, and the related financial statement schedule and the balance sheet of
Samsonite Holdings Inc. as of August 5, 1998 have been included or
incorporated by reference herein and in the registration statement of which
this Prospectus is a part, in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, included or incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
130
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SAMSONITE CORPORATION
<TABLE>
<CAPTION>
PAGE
NUMBER
------
AS OF AND FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997
<S> <C>
Unaudited Consolidated Balance Sheet as of April 30, 1998.............. F-2
Unaudited Consolidated Statements of Operations for the three months
ended April 30, 1998 and 1997......................................... F-3
Unaudited Consolidated Statement of Stockholders' Equity for the three
months ended
April 30, 1998........................................................ F-4
Unaudited Consolidated Statements of Cash Flows for the three months
ended
April 30, 1998 and 1997............................................... F-5
Unaudited Notes to Consolidated Financial Statements................... F-6
AS OF AND FOR THE YEARS ENDED JANUARY 31, 1998 AND 1997
Independent Auditors' Report........................................... F-14
Consolidated Balance Sheets as of January 31, 1998 and 1997............ F-15
Consolidated Statements of Operations for each of the years in the
three-year period
ended January 31, 1998................................................ F-16
Consolidated Statements of Stockholders' Equity for each of the years
in the three-year period
ended January 31, 1998................................................ F-17
Consolidated Statements of Cash Flows for each of the years in the
three-year period
ended January 31, 1998................................................ F-18
Notes to Consolidated Financial Statements............................. F-19
SAMSONITE HOLDINGS INC.
Independent Auditors' Report........................................... F-43
Balance Sheet as of August 5, 1998..................................... F-44
Note to Balance Sheet.................................................. F-45
</TABLE>
F-1
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
APRIL 30,
1998
----------
(IN
THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 6,911
Trade receivables, net of allowances for doubtful accounts of
$8,891........................................................... 91,839
Notes and other receivables....................................... 11,299
Inventories (Note 2).............................................. 186,347
Deferred income tax assets........................................ 33,437
Prepaid expenses and other current assets......................... 15,899
Assets held for sale.............................................. 8,471
---------
Total current assets............................................ 354,203
Investments in affiliates........................................... 2,204
Property, plant and equipment, net (Note 3)......................... 140,964
Intangible assets, less accumulated amortization of $207,756 (Note
4)................................................................. 115,506
Other assets and long-term receivables, net of allowance for doubt-
ful accounts of $706............................................... 4,881
---------
$ 617,758
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt (Note 5).......................................... $ 9,084
Current installments of long-term obligations (Note 5)............ 4,662
Accounts payable.................................................. 48,096
Accrued liabilities............................................... 76,168
---------
Total current liabilities....................................... 138,010
Long-term obligations, less current installments (Note 5)........... 203,629
Deferred income tax liabilities..................................... 13,252
Other noncurrent liabilities........................................ 59,164
---------
Total liabilities............................................... 414,055
---------
Minority interests in consolidated subsidiaries..................... 6,194
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 shares issued and outstanding)........................ 204
Additional paid-in capital........................................ 419,283
Accumulated deficit............................................... (206,098)
Foreign currency translation adjustment........................... (15,857)
Unearned compensation--restricted shares.......................... (23)
---------
Total Stockholders' equity...................................... 197,509
---------
$ 617,758
=========
Commitments and contingencies (Notes 1B and 1D)
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS
ENDED APRIL 30,
-----------------
1998 1997
-------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<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.
F-3
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
FOREIGN UNEARNED
ADDITIONAL CURRENCY COMPENSATION-
PREFERRED COMMON PAID-IN ACCUMULATED TRANSLATION RESTRICTED
STOCK STOCK CAPITAL DEFICIT ADJUSTMENT SHARES
--------- ------ ---------- ----------- ----------- -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<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.
F-4
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
----------------------------
1998 1997
-------------- --------------
(IN THOUSANDS)
<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
-------------- -------------
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.
F-5
<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 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 $350,000,000 of
senior subordinated notes, $175 million of senior redeemable exchangeable
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 Company 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. See Note 9--Subsequent Events.
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 "Series B Notes") and retired $52,269,000
principal amount of the Series B 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 previous senior 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.
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
F-6
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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-7
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
F. Per Share Data
The Company has adopted and retroactively applied the requirements of
Statement of Financial Accounting 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.
F-8
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
APRIL 30,
1998
--------------
(IN THOUSANDS)
<S> <C>
Raw Materials................................................. $ 53,909
Work in Process............................................... 9,624
Finished Goods................................................ 122,814
--------
$186,347
========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
APRIL 30,
1998
--------------
(IN THOUSANDS)
<S> <C>
Land.......................................................... $ 11,996
Buildings..................................................... 64,438
Machinery, equipment and other................................ 130,259
---------
206,693
Less accumulated amortization and depreciation................ (65,729)
---------
$ 140,964
=========
</TABLE>
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:
<TABLE>
<CAPTION>
APRIL 30,
1998
--------------
(IN THOUSANDS)
<S> <C>
Trademarks.................................................... $107,682
Licenses, Patents and Other................................... 7,824
--------
$115,506
========
</TABLE>
F-9
<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,
1998
--------------
(IN THOUSANDS)
<S> <C>
Senior Credit Facility(a)................................... $186,699
Other(b).................................................... 23,668
Capital lease obligations................................... 6,476
Series B Senior Subordinated Notes(c)....................... 532
--------
Total debt................................................ 217,375
Less short-term debt and current installments of long-term
obligations................................................ (13,746)
--------
$203,629
========
</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:
<TABLE>
<S> <C>
Revolving Credit Facility A:
Borrowings................................................. $135.5 million
Letters of Credit.......................................... $15.6 million
Revolving Credit Facility B.................................. $50.0 million
</TABLE>
Available borrowings were $48.9 million at April 30, 1998.
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
F-10
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 and 1997 includes $753,000 and $2,729,000,
respectively, 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.
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.
F-11
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
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>
- --------
(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.
F-12
<PAGE>
9. SUBSEQUENT EVENTS
On June 23, 1998, the Company completed the Tender Offer, repurchasing 10.5
million shares of the Company's common stock at a purchase price of $40.00 per
share. On June 24, 1998, the Company completed the financing of the
Recapitalization through the private placement of $350,000,000 of senior
subordinated notes, $175 million of senior redeemable exchangeable preferred
stock and a new senior credit facility.
On July 1, 1998, a complaint was filed in the Delaware Court of Chancery
against the Company and certain members of its Board of Directors. The
purported class action brought on behalf of holders of Common Stock challenges
the Company's offer to purchase shares of Common Stock for a purchase price of
$40.00 per share, which offer was upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated May 20, 1998, as supplemented by the
Supplement dated June 9, 1998, and in the related Letter of Transmittal (which
together constitute the "Offer"). The purported class action initially sought
an order temporarily restraining consummation of the Offer but that
application was subsequently withdrawn. The Company believes that the
complaint is without merit and intends to contest it vigorously. The
complaint, which seeks compensatory and/or rescissory damages as well as other
relief, alleges disclosure violations with respect to the Offer and that the
Offer was coercive, the product of unfair dealing and violated the directors'
duties.
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Samsonite Corporation:
We have audited the accompanying consolidated financial statements of
Samsonite Corporation and subsidiaries as listed in the accompanying index.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Samsonite
Corporation and subsidiaries as of January 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-
year period ended January 31, 1998, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
March 17, 1998, except as to
Note 19, which is as of April 24, 1998.
F-14
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 31,
-------------------
1998 1997
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 3,134 9,343
Trade receivables, net of allowances for doubtful ac-
counts of $8,766 and $7,431............................. 91,523 83,276
Notes and other receivables.............................. 10,129 9,045
Inventories (note 5)..................................... 172,665 135,071
Deferred income tax assets (note 11)..................... 31,623 36,365
Prepaid expenses and other current assets................ 13,873 13,012
Assets held for sale..................................... 11,471 9,002
--------- --------
Total current assets.................................... 334,418 295,114
Investments in affiliates................................. 2,425 2,989
Property, plant and equipment, net (note 6)............... 142,351 143,959
Intangible assets, less accumulated amortization of
$206,260 and $203,039
(notes 2 and 7).......................................... 116,908 127,655
Other assets and long-term receivables, net of allowances
for doubtful accounts of
$706 and $5,556 (note 12)................................ 13,947 22,941
--------- --------
$ 610,049 592,658
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt (note 8)................................. $ 5,640 2,095
Current installments of long-term obligations (note 9)... 6,977 22,862
Accounts payable......................................... 49,221 46,777
Accrued interest expense................................. 1,223 2,183
Accrued compensation and employee benefits............... 17,228 21,540
Other accrued expenses (note 14)......................... 66,917 94,262
--------- --------
Total current liabilities............................... 147,206 189,719
Long-term obligations, less current installments (notes 9
and 19).................................................. 172,246 267,755
Deferred income tax liabilities (note 11)................. 15,730 30,921
Other noncurrent liabilities (notes 12 and 14)............ 59,838 75,125
--------- --------
Total liabilities....................................... 395,020 563,520
--------- --------
Minority interests in consolidated subsidiaries........... 6,143 4,140
--------- --------
Stockholders' equity (notes 9, 10 and 18):
Preferred stock.......................................... -- --
Common stock............................................. 204 160
Additional paid-in capital............................... 418,462 266,752
Accumulated deficit...................................... (195,171) (235,870)
Foreign currency translation adjustment.................. (14,449) (5,337)
Unearned compensation--restricted shares................. (160) (707)
--------- --------
Total stockholders' equity.............................. 208,886 24,998
--------- --------
Commitments and contingencies (notes 9, 10, 12, 14 and 19)
$ 610,049 592,658
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Net sales.......................................... $736,875 741,138 675,209
Cost of goods sold................................. 424,349 449,333 414,691
-------- ------- -------
Gross profit...................................... 312,526 291,805 260,518
Selling, general and administrative expenses....... 234,257 233,761 203,701
Amortization of intangible assets.................. 7,101 31,837 63,824
Provision for restructuring operations (note 4).... 1,866 10,670 2,369
-------- ------- -------
Operating income (loss)........................... 69,302 15,537 (9,376)
Other income (expense):
Interest income................................... 2,574 1,419 4,709
Interest expense and amortization of debt issue
costs and premium................................ (19,918) (35,670) (39,974)
Other income--net (notes 14 and 15)............... 28,294 18,821 3,967
-------- ------- -------
Income (loss) from continuing operations before
income taxes, minority interest, and
extraordinary item.............................. 80,252 107 (40,674)
Income tax expense (note 11)....................... (23,088) (10,389) (9,095)
Minority interest in earnings of subsidiaries...... (287) (1,041) (1,385)
-------- ------- -------
Income (loss) from continuing operations before
extraordinary item.............................. 56,877 (11,323) (51,154)
Operations discontinued and sold (note 3):
Loss on discontinuance--net, after income tax
expense of $1,062................................ -- -- (2,251)
-------- ------- -------
Income (loss) before extraordinary item.......... 56,877 (11,323) (53,405)
Extraordinary item--loss on extinguishment of debt,
net of income tax benefit of $9,930 and $5,589
(note 9).......................................... (16,178) -- (8,042)
-------- ------- -------
Net income (loss)................................ $ 40,699 (11,323) (61,447)
======== ======= =======
Income (loss) per common share--basic:
Continuing operations before extraordinary
item........................................... $ 2.81 (.71) (3.24)
Operations discontinued and sold................ -- -- (.14)
Extraordinary item.............................. (.80) -- (.51)
-------- ------- -------
Net income (loss) per share..................... $ 2.01 (.71) (3.89)
======== ======= =======
Income (loss) per common share--assuming
dilution:
Continuing operations before extraordinary
item........................................... $ 2.70 (.71) (3.24)
Operations discontinued and sold................ -- -- (.14)
Extraordinary item.............................. (.77) -- (.51)
-------- ------- -------
Net income (loss) per share..................... $ 1.93 (.71) (3.89)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN UNEARNED NOTE
ADDITIONAL ACCUMU- CURRENCY COMPENSATION- RECEIVABLE
PREFERRED COMMON PAID-IN LATED TRANSLATION RESTRICTED FROM
STOCK(1) STOCK(2) CAPITAL DEFICIT ADJUSTMENT SHARES OFFICER
--------- -------- ---------- -------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1,
1995................... $-- 155 312,989 (163,100) (1,572) -- --
Net loss............... -- -- -- (61,447) -- -- --
Issuance of 425,532
shares to officer in
exchange for note
receivable (note 10).. -- 4 9,996 -- -- -- (10,000)
Spinoff of water
treatment business
(note 3).............. -- -- (61,143) -- -- -- --
Foreign currency
translation
adjustment............ -- -- -- -- (766) -- --
---- --- ------- -------- ------- ------ -------
Balance, January 31,
1996................... -- 159 261,842 (224,547) (2,338) -- (10,000)
Net loss............... -- -- -- (11,323) -- -- --
Issuance of 55,000
shares of common stock
to an officer for cash
(note 10)............. -- -- 1,004 -- -- -- --
Stock award of 60,000
shares of restricted
common stock to an
officer (note 10)..... -- 1 1,094 -- -- (1,095) --
Issuance of 513 shares
to directors for
services (note 10).... -- -- 19 -- -- -- --
Amortization of
restricted stock award
to compensation
expense (note 10)..... -- -- -- -- -- 388 --
Compensation expense
accrued for stock
bonus awards (note
10)................... -- -- 503 -- -- -- --
Exercise of employee
stock options and
related income tax
benefits (note 10).... -- -- 591 -- -- -- --
Reclassification of
accrued compensation
for stock options
exercised............. -- -- 1,699 -- -- -- --
Foreign currency
translation
adjustment............ -- -- -- -- (2,999) -- --
Payment of note
receivable (note 10).. -- -- -- -- -- -- 10,000
---- --- ------- -------- ------- ------ -------
Balance, January 31,
1997................... -- 160 266,752 (235,870) (5,337) (707) --
Net income............. -- -- -- 40,699 -- -- --
Issuance of 3,300,000
shares of common stock
in public offering,
net of offering costs
and underwriting
discount of $8,303
(note 18)............. -- 33 130,209 -- -- -- --
Issuance of 4,032
shares to directors
for services (note
10)................... -- -- 174 -- -- -- --
Issuance of 1,033,203
shares for exercise of
employee stock options
and related income tax
benefits, net of
889,450 shares
exchanged (notes 10
and 18)............... -- 11 20,617 -- -- -- --
Amortization of
restricted stock award
to compensation
expense (note 10)..... -- -- -- -- -- 547 --
Compensation expense
accrued for stock
bonus awards (note
10)................... -- -- 710 -- -- -- --
Foreign currency
translation
adjustment............ -- -- -- -- (9,112) -- --
---- --- ------- -------- ------- ------ -------
Balance, January 31,
1998................... $-- 204 418,462 (195,171) (14,449) (160) --
==== === ======= ======== ======= ====== =======
</TABLE>
- --------
(1) $.01 par value; 2,000,000 shares authorized; no shares issued and
outstanding at January 31, 1998 or 1997.
(2) $.01 par value; 60,000,000 shares authorized; 20,371,068 and 16,033,833
shares issued and outstanding at January 31, 1998 and 1997, respectively.
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------
1998 1997 1996
--------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ 40,699 (11,323) (61,447)
Adjustments to reconcile net income (loss) to
net cash provided by continuing operating
activities:
Nonoperating loss (gain) items:
Loss on extinguishment of debt............... 16,178 -- 8,042
Loss on discontinuance of operations......... -- -- 2,251
Loss on disposition of fixed assets, net..... 377 62 245
Gain on sale of other asset.................. -- -- (5,368)
Depreciation and amortization of property,
plant and equipment.......................... 21,493 22,052 20,277
Amortization of debt issue costs and
premium...................................... 888 1,932 803
Amortization of intangible assets............. 7,101 31,837 63,824
Amortization of stock awards and stock issued
for services................................. 1,431 910 --
Deferred income tax expense (benefit)......... (4,750) 1,365 2,809
Adjustment of liability for PBGC claims....... -- (11,100) --
Adjustment of allowances for contingencies
from previous operations..................... (5,299) -- --
Adjustment of liability for contingent
accruals..................................... (12,700) -- --
Net provision for doubtful accounts........... 4,341 2,815 2,627
Net provision for restructuring operations.... 1,866 10,670 2,369
Changes in operating assets and liabilities:
Trade and other receivables.................. (13,177) (17,850) 3,544
Inventories.................................. (35,686) (19,335) (6,404)
Other current assets......................... (440) 3,431 (620)
Accounts payable and accrued liabilities..... 1,234 9,027 (11,114)
Other adjustments--net........................ (5,345) 853 (2,170)
--------- ------- --------
Net cash provided by continuing operating
activities.................................. 18,211 25,346 19,668
--------- ------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Proceeds from sales of fixed assets and other
asset......................................... $ 1,625 2,323 15,086
Purchases of property, plant and equipment:
By Company and wholly-owned subsidiaries...... (30,189) (25,465) (19,668)
By less than 100% owned subsidiaries.......... (6,124) (5,628) (2,000)
Cash received from spinoff of operations....... -- -- 112,000
Net cash received from (used in) previous
operations.................................... (3,999) 10,446 10,483
Acquisition of foreign distributorships........ (2,547) -- --
Acquisition of Mexico subsidiary, net of cash
acquired of $1,469............................ -- -- 1,275
Other.......................................... 3,292 1,307 (280)
--------- ------- --------
Net cash provided by (used in) investing
activities.................................. (37,942) (17,017) 116,896
--------- ------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Net borrowings (payments) of senior credit
facility...................................... $ 53,628 (8,000) 58,000
Proceeds from issuance of senior notes......... -- -- 190,000
Issuance costs for senior notes and credit
facility...................................... (467) -- (13,472)
Retirement of senior notes..................... (137,199) -- (375,217)
Redemption premium on retirement of long-term
obligations................................... (17,556) -- (18,000)
Proceeds from long-term obligations--other..... 4,657 26,206 19,910
Payments of long-term obligations--other....... (25,980) (35,901) (15,201)
Proceeds from (payments of) short-term debt--
net........................................... 4,096 (7,231) (14,022)
Proceeds from public stock offering, net of
offering costs................................ 130,242 -- --
Proceeds from sale of common stock and
exercise of stock options..................... 7,012 1,327 --
Payment of note receivable from officer........ -- 10,000 --
Other, net..................................... 2,621 1,907 (1,384)
--------- ------- --------
Net cash provided by (used in) financing
activities.................................. 21,054 (11,692) (169,386)
--------- ------- --------
Effect of exchange rate changes on cash and
cash equivalents.............................. (7,532) (2,473) (1,813)
--------- ------- --------
Net decrease in cash and cash equivalents.... (6,209) (5,836) (34,635)
Cash and cash equivalents, beginning of year... 9,343 15,179 49,814
--------- ------- --------
Cash and cash equivalents, end of year......... $ 3,134 9,343 15,179
========= ======= ========
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest......... $ 20,451 33,194 46,755
========= ======= ========
Cash paid during the year for income taxes,
net........................................... $ 8,733 3,210 5,315
========= ======= ========
Noncash transactions:
During the years ended January 31, 1998, 1997,
and 1996, property and equipment was acquired
under capital lease financing transactions
aggregating $924, $1,281 and $2,307,
respectively. Other noncash transactions are
described in notes 3, 10, 14, and 15.
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998 AND 1997
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)General 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.
Previously, Astrum was a holding company with subsidiaries involved in
the water treatment business and apparel manufacturing business in addition
to the luggage business. As more fully explained in note 3, the Company
spun off the water treatment and discontinued the apparel manufacturing
business segments.
(b)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 (the "Effective Date"), 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
accompanying consolidated financial statements include the ongoing impact
of the fresh-start reporting, the most significant of which included the
recording of Reorganization Value in Excess of Identifiable Assets.
Reorganization Value in Excess of Identifiable Assets was amortized over a
three-year period which ended in June 1996.
(c)Principles of Consolidation
The consolidated financial statements include the financial statements of
Samsonite Corporation and its wholly-owned and majority-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated
in consolidation. The Company's foreign subsidiaries generally have
December 31 year ends.
Minority interests consist of other stockholders' ownership interests in
majority-owned subsidiaries of the Company.
(d)Use of Estimates
The preparation of consolidated 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 consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ significantly from those estimates.
F-19
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(e)Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(f)Inventories
The Company values inventories at the lower of cost, using the first-in,
first-out ("FIFO") method, or market.
(g)Investments in Affiliates
Investments in affiliates for which the Company owns 20% to 50% are
accounted for under the equity method.
At January 31, 1998, investments in affiliates primarily represent the
Company's investment in Chia Tai Samsonite (H.K.) Ltd., a 50% owned joint
venture formed to manufacture and distribute luggage in China.
(h)Property, Plant and Equipment
Property, plant and equipment acquired subsequent to the adoption of
fresh-start reporting are stated at cost. In connection with the adoption
of fresh-start reporting at June 30, 1993, the Company was required to
adjust property, plant and equipment to fair value. Assets under capital
leases are stated at the present value of the future minimum lease
payments. Improvements which extend the life of an asset are capitalized.
Maintenance and repair costs are expensed as incurred.
Assets held for sale are assets not used in the Company's luggage
manufacturing or distribution operations; the majority of such assets were
sold, or were under contract for sale, subsequent to January 31, 1998.
These assets are recorded at the lower of cost or net realizable value
(fair value less costs to sell).
Depreciation and amortization are provided on the straight-line method
over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings................................................... 20 to 65 years
Machinery, equipment and other.............................. 2 to 20 years
</TABLE>
(i)Intangible Assets
As a result of adopting fresh-start reporting in 1993, the Company
recorded Reorganization Value in Excess of Identifiable Assets which became
fully amortized in June of 1996. Tradenames, licenses, patents and other
intangibles were recorded at fair value based upon independent appraisals.
These assets are amortized on a straight-line basis over their estimated
useful lives which are primarily as follows:
<TABLE>
<S> <C>
Tradenames................................................... 40 years
Licenses, patents and other.................................. 1 to 23 years
</TABLE>
The Company accounts for these intangible assets at the lower of
amortized cost or fair value. On an ongoing basis, the Company reviews the
valuation and amortization of intangible assets, taking into consideration
any events or circumstances which may have diminished the recorded value.
F-20
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(j)Debt Issuance Costs
Costs incurred in connection with the issuance of new debt instruments
are deferred and included in other assets. Such costs are amortized over
the term of the related debt obligation.
(k)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. The
following table presents a reconciliation of the numerators and
denominators of basic earnings per share and earnings per share--assuming
dilution for the year ended January 31, 1998:
<TABLE>
<CAPTION>
PER SHARE
INCOME SHARES AMOUNT
----------- ---------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income from continuing operations before
extraordinary item available to common
stockholders........................... $56,877,000 20,235,802 $2.81
=====
Add dilutive effect of stock options and
awards................................. -- 850,783
----------- ----------
Earnings per share--assuming dilution:
Income from continuing operations before
extraordinary item available to common
stockholders plus assumed conversions.. $56,877,000 21,086,585 $2.70
=========== ========== =====
</TABLE>
Loss from continuing operations before extraordinary item per share and
net loss per share for the years ended January 31, 1997 and 1996 is
computed based on a weighted average number of shares of common stock
outstanding during the period of 15,971,157 and 15,806,675, respectively.
Basic earnings per share and earnings per share--assuming dilution are the
same for the years ended January 31, 1997 and 1996 because of the
antidilutive effect of stock options and awards when there is a loss from
continuing operations.
(l)Income Taxes
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes ("SFAS 109"). SFAS 109 requires recognition of deferred tax
assets and liabilities for operating loss and tax credit carryforwards and
the estimated future tax consequences attributable to temporary differences
between the financial statement carrying amount of existing assets and
liabilities and their respective tax bases. Measurement of deferred tax
assets and liabilities is based upon enacted tax rates expected to apply to
taxable income in the years in which carryforwards and temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
F-21
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax assets are reduced by a valuation allowance for the portion
of such assets for which it is more likely than not the amount will not be
realized. Deferred tax assets and liabilities are classified as current or
noncurrent based on the classification of the underlying asset or liability
giving rise to the temporary difference or the expected date of utilization
of carryforwards.
(m)Insurance
The Company maintains self-insurance programs for certain workers'
compensation risks up to $300,000 per individual claim. The Company
purchases excess workers' compensation coverage for individual claims in
excess of $300,000.
(n)Foreign Exchange Risk and Financial Instruments
The accounts of the Company's foreign subsidiaries and affiliates are
generally measured using the local currency as the functional currency. For
those operations, assets and liabilities are translated into U.S. dollars
at period-end exchange rates. Income and expense accounts are translated at
average monthly exchange rates. Net exchange gains or losses resulting from
such translation are excluded from results of operations and accumulated as
a separate component of stockholders' equity. Gains and losses from foreign
currency transactions are included in other income (expense). See note 15.
The Company enters into foreign exchange contracts in order to reduce its
economic exposure to fluctuations in currency exchange rates on certain
foreign operations and royalty agreements through the use of forward
delivery commitments. Generally, open forward delivery commitments are
marked to market at the end of each accounting period and corresponding
gains and losses are recognized in other income (expense). See note 15.
With respect to trade receivables, concentration of credit risk is
limited due to the diversity in the Company's customer base and geographic
areas covered by the Company's operations. In certain European countries,
the Company receives negotiable trade acceptances as payment for goods with
maturities from 60 to 90 days from the date of issuance. These instruments
are generally discounted to banks with recourse. At January 31, 1998,
approximately $13,586,000 of such instruments had been discounted and, by
the terms of their maturity dates, were uncollected by the holders. Any
probable bad debt losses for trade receivables or acceptances have been
reserved for in the allowance for doubtful accounts.
(o)Accounting for Long-lived Assets
The Company accounts for long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("SFAS 121"). SFAS 121 requires impairment losses
to be recorded on long-lived assets, and certain identifiable intangible
assets, used in operations when indicators of impairment are present and
the undiscounted future cash flows (without interest charges) estimated to
be generated by such assets are less than the assets' carrying amount.
Impairment is measured by the excess of the assets' carrying amount over
fair value. SFAS 121 also requires that long-lived assets and certain
identifiable intangibles that are expected to be disposed of be reported at
the lower of the carrying amount or fair value less costs to sell.
(p)Revenue Recognition
Revenues from wholesale product sales are recognized at the time of
shipment, and provisions are made for markdown allowances, returns and
discounts. Revenues from retail sales are recognized at the point-of-sale.
F-22
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 $19,925,000, $20,548,000, and $17,056,000 for
the years ended January 31, 1998, 1997, and 1996, respectively. Royalty
revenues in fiscal 1998 and 1997 include approximately $2,200,000 and
$3,900,000, respectively, from the sale of apparel trademarks in certain
foreign countries.
(2)PURCHASE OF SOUTH KOREA AND HONG KONG DISTRIBUTORSHIPS
During the year ended January 31, 1998, the Company formed a subsidiary,
Samsonite Korea Limited ("SKL"), which is owned 71% by the Company and 29% by
the Company's former distributor in South Korea. The Company contributed
$832,000 to SKL for its equity interest. SKL acquired the inventory, fixed
assets, and other assets of the distributorship and recorded approximately
$200,000 of goodwill. By agreement with its joint venture partner, the Company
will acquire an additional 9% interest in SKL on October 1, 1998.
During the year ended January 31, 1998, the Company formed a 100% owned
subsidiary, Samsonite Hong Kong Limited ("HKL"), which purchased the assets of
the Company's former Hong Kong distributor. The Company made investments or
advances to HKL of $1,715,000 for the purchase of inventory, fixed assets, and
other assets from the former Hong Kong distributor. Approximately $439,000 of
goodwill was recorded as a result of the purchase.
(3)OPERATIONS DISCONTINUED AND SOLD
During fiscal 1995, the Company's Board of Directors adopted a plan to (i)
separate the water treatment business from its other operations through a
spinoff in the form of a one-for-one stock dividend to the Company's holders
and (ii) to sell or otherwise discontinue its apparel manufacturing and pet
food businesses. During fiscal 1996, the Company distributed its stock in the
water treatment business to the Company's stockholders and charged the amount
of the net assets of the water treatment business of $61.1 million at the date
of distribution to additional paid-in capital. As part of the spinoff, the
water treatment business repaid $112 million of intercompany indebtedness.
Additionally, the Company closed its apparel manufacturing operations and sold
all related inventories and equipment to unrelated third parties. The pet food
segment was sold in fiscal 1995. The loss on discontinuance during fiscal 1996
includes an adjustment to reduce previously accrued losses on disposal of $2.6
million, net of income taxes of $1.1 million, and a provision for federal
income taxes on the distribution of the common stock of the water treatment
business to certain foreign stockholders of $3.8 million.
(4)PROVISION FOR RESTRUCTURING OPERATIONS
Fiscal 1998
The Company recorded a pretax restructuring provision in fiscal 1998 of
$3,589,000 and adjusted for excess fiscal 1997 restructuring accruals by
$1,723,000, resulting in a net expense for restructuring operations in fiscal
1998 of $1,866,000. The fiscal 1998 restructuring provision was provided
primarily for costs associated with the involuntary termination of 180
manufacturing positions in Mexico and twenty management positions in the U.S.
and is comprised of estimated cash expenditures estimated of $3,283,000 and
non-cash charges of $306,000. Through January 31, 1998, $1,945,000 of
severance costs had been charged against the accrual.
Fiscal 1997
The Company recorded a restructuring provision of $10,670,000 in fiscal 1997
as a result of a restructuring program to consolidate functions and operations
in North America, Europe, and the Far East, and to reduce or eliminate certain
other operations.
F-23
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The restructuring plan included further consolidation of hardside luggage
production to Samsonite's largest U.S. facility located in Denver, Colorado
from other locations in the Americas, as well as consolidation of many
administrative and control functions to Denver. The plan included the
elimination of as many as 450 positions worldwide, including approximately 150
manufacturing positions and approximately 300 managerial, office and clerical
positions. The restructuring provision consisted primarily of costs associated
with involuntary employee terminations and was comprised of cash expenses of
$9,670,000 and non-cash expenses of $1,000,000, both on a pretax basis.
Through January 31, 1998, approximately $8,183,000 had been charged against
the accrual for restructuring expenses, approximately $1,723,000 was
determined to be overaccrued and was credited to expense, and approximately
$764,000 remains accrued at January 31, 1998 for certain pension settlement
costs yet to be incurred.
Fiscal 1996
In the fourth quarter of fiscal 1996, management initiated a plan to
restructure the manufacturing and various administrative functions of its
American Tourister division. The restructuring plan included relocation of
manufacturing operations from Jacksonville, Florida to the Company's Denver,
Colorado manufacturing facility. Certain administrative functions were also
consolidated in Denver. A provision for restructuring and corresponding
liability of $2,369,000 was recorded in fiscal 1996 primarily for costs
associated with involuntary employee terminations and the disposal of assets.
The restructuring plan included the termination of 137 employees by August
1996. This restructuring was completed during fiscal 1997 with actual costs
incurred and the number of employees terminated approximating plan.
(5)INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies.............................. $ 47,814 38,532
Work in process......................................... 10,476 10,842
Finished goods.......................................... 114,375 85,697
-------- -------
$172,665 135,071
======== =======
(6)PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<CAPTION>
JANUARY 31,
-----------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................... $ 12,266 13,324
Buildings............................................... 60,524 62,561
Machinery, equipment and other.......................... 133,778 121,875
-------- -------
206,568 197,760
Less accumulated depreciation and amortization.......... (64,217) (53,801)
-------- -------
$142,351 143,959
======== =======
</TABLE>
F-24
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property, plant and equipment includes property and equipment under capital
leases as follows:
<TABLE>
<CAPTION>
JANUARY 31,
---------------
1998 1997
------- ------
(IN THOUSANDS)
<S> <C> <C>
Buildings................................................. $ 4,178 4,856
Machinery, equipment and other............................ 2,707 2,323
------- ------
6,885 7,179
Less accumulated amortization............................. (1,388) (1,090)
------- ------
$ 5,497 6,089
======= ======
</TABLE>
(7)INTANGIBLE ASSETS
The following is a summary of intangible assets, net of accumulated
amortization:
<TABLE>
<CAPTION>
JANUARY 31,
----------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Tradenames................................................ $108,556 115,838
Licenses, patents and other............................... 8,352 11,817
-------- -------
$116,908 127,655
======== =======
</TABLE>
(8)SHORT-TERM DEBT
As of January 31, 1998 and 1997, the Company had $5,640,000 and $2,095,000
of short-term debt outstanding under foreign lines of credit, respectively.
During the year ended January 31, 1998, the weighted average interest rate on
foreign short-term borrowings was 6.26% and the average interest rate at
January 31, 1998 was 7.50%. The European subsidiaries had unused available
borrowings on foreign lines of credit and other foreign borrowing arrangements
totaling approximately $47 million as of January 31, 1998, which are generally
restricted for working capital purposes.
Other foreign subsidiaries had approximately $8.6 million available under
bank credit lines at January 31, 1998.
(9)LONG-TERM OBLIGATIONS
Long-term obligations represent long-term debt and capital lease obligations
as follows:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Senior Credit Facility (a).............................. $102,533 50,000
Other obligations (b)................................... 19,587 45,526
Capital lease obligations (c)........................... 4,302 5,091
11 1/8% Series B Senior Subordinated Notes (d).......... 52,801 190,000
-------- -------
179,223 290,617
Less current installments............................... (6,977) (22,862)
-------- -------
$172,246 267,755
======== =======
</TABLE>
F-25
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(a) Senior Credit Facility
Effective June 12, 1997, the Company entered into an amended and restated
Senior Credit Facility agreement. The new agreement provides for a $200
million revolving credit facility ("Revolving Credit Facility A") due June
12, 2002 and a $50 million revolving credit facility ("Revolving Credit
Facility B") due June 11, 1998. The Revolving Credit Facility A is a
multicurrency facility which allows for loans of $140 million in U.S.
dollars and $60 million in various European currencies.
The following amounts were outstanding at January 31, 1998 under the Senior
Credit Facility:
<TABLE>
<S> <C>
Revolving Credit Facility A:
Borrowings................................................ $102.5 million
Letters of Credit......................................... $ 14.5 million
Revolving Credit Facility B................................ $ --
</TABLE>
Borrowings under the agreement accrue interest at rates adjusted
periodically depending on the Company's financial performance as measured
by certain financial ratios each quarter. At January 31, 1998, U.S. loans
outstanding under the Senior Credit Facility bear interest at approximately
6% and foreign currency loans outstanding bear interest at approximately
5%. Additionally, a facility fee of .125% to .350% of the total commitment
depending on financial performance, whether used or unused, is payable
quarterly. At January 31, 1998, the facility fee was .150%.
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 limit 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.
As a result of entering into the amended and restated Senior Credit
Facility, which has significantly different terms and conditions than the
previous facility, the Company charged to expense the balance of deferred
financing costs relating to the previous facility totaling $3,989,000 and
paid prepayment penalties of $279,000. These charges are recorded as part
of the extraordinary item from loss on extinguishment of debt, net of tax
effects, in the accompanying consolidated statement of operations for the
year ended January 31, 1998.
(b) Other Obligations
As of January 31, 1998, other obligations consist of various notes
payable to banks by foreign subsidiaries aggregating $16.0 million and a
$3.6 million secured financing arrangement with a European leasing
corporation. The obligations bear interest at varying rates and mature
through 2002.
F-26
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(c) Leases
Future minimum payments under noncancelable capital leases, which relate
primarily to property and equipment, and noncancelable operating leases,
which relate primarily to retail floor space rental, at January 31, 1998
were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Year ending January 31:
1999................................................. $ 1,473 11,811
2000................................................. 1,421 8,607
2001................................................. 721 6,723
2002................................................. 593 5,073
2003................................................. 479 2,437
Thereafter........................................... 986 1,782
------- ------
Total minimum lease payments........................ 5,673 36,433
======
Less amount representing interest..................... (1,371)
-------
Present value of net minimum capital lease payments.. 4,302
Less current installments of minimum capital lease
payments............................................. (1,055)
-------
Long-term obligations under capital leases, excluding
current installments................................. $ 3,247
=======
</TABLE>
Rental expense under cancelable and noncancelable operating leases
pertaining to continuing operations consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY
31,
--------------------
1998 1997 1996
------- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C>
Minimum rentals....................................... $10,421 10,723 8,650
Contingent rentals.................................... 1,358 714 523
------- ------ -----
$11,779 11,437 9,173
======= ====== =====
</TABLE>
Aggregate maturities of long-term obligations at January 31, 1998 were as
follows (in thousands):
<TABLE>
<S> <C>
Year ending January 31:
1999............................................................. $ 5,922
2000............................................................. 4,840
2001............................................................. 4,224
2002............................................................. 1,734
2003............................................................. 103,662
Thereafter....................................................... 54,539
--------
174,921
Obligations under capital leases................................ 4,302
--------
Total.......................................................... $179,223
========
</TABLE>
F-27
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(d)Series B Senior Subordinated Notes
Interest on the 11 1/8% Series B Senior Subordinated Notes ("Series B
Notes") is payable semiannually with principal due July 15, 2005. The
Series B Notes may be redeemed after July 15, 2000 with the payment of
certain redemption premiums; however, up to one-third of the outstanding
Series B Notes were allowed to be redeemed (at a premium) before July 15,
1998, from the proceeds of the first two public equity offerings the
Company may have completed after the issuance of the Series B Notes. As
described in note 18, the Company completed a public equity offering on
February 11, 1997 and used a portion of the offering proceeds to redeem
Series B Notes and repurchase Series B Notes in the market. Additional
Series B Notes were purchased using bank borrowings under the Senior Credit
Facility. A total of $137,199,000 principal amount of Series B Notes were
retired during the year ended January 31, 1998. Redemption premiums of
$17,277,000 paid in connection with the retirement of the notes and
deferred financing costs of $4,563,000 were charged to expense and
classified as part of the extraordinary item from loss on extinguishment of
debt, net of tax effects, in the accompanying consolidated statement of
operations for the year ended January 31, 1998. The terms of the Series B
Notes include financial covenants to maintain certain financial ratios and
covenants which restrict payment of any dividends, amounts of additional
debt issuances, asset sales, and amounts of investments in emerging market
subsidiaries. See note 19.
(10)EMPLOYEE STOCK OPTIONS AND AWARDS
At January 31, 1998, the Company has outstanding options under its 1995
Stock Option and Incentive Award Plan and under an employment agreement with
its chief executive officer. The Company applies Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations, in accounting for stock options and awards. Accordingly, no
compensation cost has been recognized for stock options granted at exercise
prices at or above fair market value at the date of grant. Additionally, no
performance based options were issued during the three years ended January 31,
1998.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation ("SFAS
123") which provides for an alternative method of recognizing compensation
expense for stock options based upon a fair value determination. The Company
has elected not to adopt the recognition and measurement provisions of SFAS
123. Had the Company determined compensation cost for the stock options based
on the fair value at the grant dates consistent with the provisions of SFAS
123, pro forma net income (loss) per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income (loss):
As reported...................................... $40,699 (11,323) (61,447)
======= ======= =======
Pro forma........................................ $38,343 (12,922) (61,781)
======= ======= =======
Net income (loss) per share--basic:
As reported...................................... $ 2.01 (0.71) (3.89)
======= ======= =======
Pro forma........................................ $ 1.89 (0.81) (3.91)
======= ======= =======
Net income (loss) per share--assuming dilution:
As reported...................................... $ 1.93 (0.71) (3.89)
======= ======= =======
Pro forma........................................ $ 1.82 (0.81) (3.91)
======= ======= =======
</TABLE>
F-28
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants in the three years ended January 31, 1998: no dividend yield for any
year; expected volatility of 29% for fiscal 1998 and 28% for fiscal 1997 and
1996; weighted-average risk-free interest rate of 5.5% for fiscal 1998 and
6.2% for fiscal 1997 and 1996; and weighted average expected lives of 4.3
years for fiscal 1998, 3.5 years for fiscal 1997, and 1.8 years for fiscal
1996. Options granted during the year ended January 31, 1996 were granted at
exercise prices which significantly exceeded the market value of the stock at
the grant date.
Pro forma net income (loss) reflects only options granted in the three years
ended January 31, 1998. Therefore, the full impact of calculating compensation
cost for stock options under SFAS 123 is not reflected in the pro forma net
income (loss) amounts presented because compensation cost is reflected over
option vesting periods (ranging from 2 to 5 years) and compensation cost for
options granted prior to February 1, 1995 is not considered.
Directors' Stock Plan
In fiscal 1996, the Company adopted the Samsonite Corporation 1996
Directors' Stock Plan (the "Plan") and reserved 200,000 shares of its common
stock for issuance under the Plan. Under the Plan, each non-employee director
may elect to receive common stock for directors' fees valued at fair market
value in lieu of cash. At January 31, 1998, 4,545 shares of common stock had
been issued under the Plan.
1995 Stock Option and Incentive Award Plan
The 1995 Stock Option and Incentive Award Plan (as Amended in 1996) ("the
1995 Plan") reserves 2,550,000 shares for the issuance of options as
determined by the compensation committee of the Board of Directors. The 1995
Plan provides for the issuance of a variety of awards, including tax qualified
incentive stock options, nonqualified stock options, stock appreciation
rights, restricted stock awards or other forms of awards consistent with the
purposes of the 1995 Plan. Incentive stock options must be issued at exercise
prices no less than the market value of the common stock at the date of the
grant. Nonqualified stock options may be granted at option prices at or below
the market value, but not at less than 50% of the market value of the common
stock at the date of the grant. Options granted under the 1995 Plan may vest
over a period of not more than ten years as determined by the compensation
committee. At January 31, 1998, all awards under the 1995 Plan were
nonqualified stock options issued at option prices equal to, or in excess of,
the market value at the date of grant.
Chief Executive Officer Employment Agreement
On May 15, 1996, the Company retained a new Chief Executive Officer, Richard
R. Nicolosi. Pursuant to his employment contract, the Company has granted Mr.
Nicolosi options to purchase 425,532 shares of common stock at an exercise
price of $18.25 per share (subject to customary antidilution adjustments).
Options to purchase 186,170 shares of common stock (the "Series A Options")
are time-vesting options and options to purchase 239,362 shares of common
stock (the "Series B Options") are subject to certain performance requirements
with respect to accelerating vesting. The options have a five-year term. Fifty
percent (50%) of the Series A Options vested on May 15, 1997 and the remaining
fifty percent (50%) will vest on May 15, 1998, so long as Mr. Nicolosi remains
continually employed by the Company through such date. All of the Series B
Options shall vest on April 15, 2001, so long as he remains continually
employed by the Company through April 15, 2001, subject to accelerated,
performance-based vesting as follows. The Series B Options will vest on May
15, 1998 if Mr. Nicolosi remains continually employed by the Company through
such date and the average market value of the common stock equals or exceeds
$30.00 per share in any period of 30 consecutive days prior to May 15, 1998.
Notwithstanding the foregoing, if a change of control event occurs prior to
May 15, 1998,
F-29
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(i) all of the Series A Options will automatically vest and (ii) all of the
Series B Options will vest if Mr. Nicolosi remains continually employed by the
Company through the date of such event and either the average market value of
the common stock in any period of 30 consecutive days prior to such event or
the market value of the common stock as of the date of such event, equals or
exceeds $30.00 per share. During the term of the Series B Options, the
Company's common stock has reached an average market value of $30.00 per share
for 30 consecutive days.
Also in connection with the performance by Mr. Nicolosi of services pursuant
to his employment, the Company issued to Mr. Nicolosi 60,000 shares of
restricted common stock (the "Restricted Shares"). So long as Mr. Nicolosi
remains continually employed with the Company, the shares will vest on May 15,
1998; provided that if a change of control event occurs and Mr. Nicolosi
remains continually employed by the Company through the date of such event,
then all Restricted Shares that have not vested will become vested as of the
date of such event. The Company is recognizing compensation expense for the
market value ($18.25 per share) of the shares at the date of grant over the
two-year vesting period.
Additionally, on June 6, 1996, the Company sold and issued to Mr. Nicolosi
55,000 shares of common stock at the market value of $18.25 per share, or an
aggregate purchase price of $1,003,750.
Former Chief Executive Officer
Pursuant to an employment agreement with the former Chief Executive Officer
(CEO) dated April 13, 1995, certain options previously granted were canceled
and options to purchase 653,668 shares of common stock (granted June 8, 1993
at market value) became fully vested and exercisable at $11.87 per share, as
adjusted by the terms of the option agreement for the spinoff of the water
treatment business. Under the employment agreement, the former CEO was also
granted options for 500,000 shares of common stock at $24.85 per share and
1,000,000 shares of common stock at $32.85 per share, as adjusted by the terms
of the option agreement for the spinoff of the water treatment business.
Options for 300,000 of such shares lapsed. The remaining options for 1,200,000
shares of common stock became fully exercisable upon the cessation of the
former CEO's employment as of May 15, 1996. On February 11, 1997, the former
CEO exercised all outstanding options for a total of 1,853,668 shares. The
exercise price was paid by the return of 889,450 shares of common stock owned
by the former CEO to the Company and cash of $6,622,139. See note 18.
Also under the employment agreement, the Company sold 425,532 shares of
common stock to the former CEO for a $10 million promissory note which was
presented in the accompanying consolidated financial statements as a reduction
of stockholders' equity until it was repaid in full on October 11, 1996. The
note bore interest at 8 1/8% per annum and the Company agreed to pay the
former CEO additional compensation equal to the interest due on the note.
Other Options and Stock Awards
In October 1996, a former officer exercised options to purchase 17,500
shares granted under an individual stock option agreement at an exercise price
of $11.14 per share.
Effective May 15, 1996, the Company entered into agreements with three
executive officers to provide stock bonuses to each of them of 38,889 shares
of common stock, payable if the executive remains continually employed by the
Company through the earlier of May 15, 1999 or one year after a change of
control event. The shares are also issuable in the event of certain types of
terminations. The Company is recognizing compensation expense equal to the
market value of the shares at May 15, 1996 ($18.25 per share) over the vesting
period.
F-30
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Option Summary
A summary of stock option transactions follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------------------------------------
1998 1997 1996
--------------------- -------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 4,579,072 $24.79 2,171,168 $24.51 671,168 $11.85
Granted................. 213,953 $40.16 2,754,142 $25.52 1,500,000 $30.18
Exercised:
By former Chief
Executive Officer..... (1,853,668) $23.73 -- -- -- --
By others.............. (68,985) $12.82 (28,870) $11.18 -- --
Forfeited............... (305,322) $32.27 (317,368) $30.47 -- --
---------- --------- ---------
Outstanding at end of
year................... 2,565,050 $26.27 4,579,072 $24.79 2,171,168 $24.51
========== ========= =========
Options exercisable at
end of year............ 897,192 $21.82 2,176,945 $22.67 671,168 $11.85
========== ========= =========
Weighted-average fair
value of options
granted during the
year................... $ 13.17 $ 7.59 $ 1.04
========== ========= =========
</TABLE>
The following table summarizes information about stock options outstanding at
January 31,1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ----------------------------
WEIGHTED-AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$10.875 to $20.75....... 1,324,419 4.6 years $16.34 633,202 $15.82
$28.50 to $47.875....... 1,240,631 8.4 years $36.79 263,990 $36.22
--------- -------
2,565,050 897,192
========= =======
</TABLE>
F-31
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11)INCOME TAXES
Income tax expense (benefit) attributable to income (loss) from continuing
operations consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Year ended January 31, 1998:
U.S. federal...................................... $ 9,068 4,246 13,314
Foreign........................................... 7,841 (1,108) 6,733
U.S. state and local.............................. 1,429 1,612 3,041
------- ------ ------
$18,338 4,750 23,088
======= ====== ======
Year ended January 31, 1997:
U.S. federal...................................... $ 923 1,408 2,331
Foreign........................................... 7,443 (249) 7,194
U.S. state and local.............................. 658 206 864
------- ------ ------
$ 9,024 1,365 10,389
======= ====== ======
Year ended January 31, 1996:
U.S. federal...................................... $ (426) 1,944 1,518
Foreign........................................... 5,699 257 5,956
U.S. state and local.............................. 1,013 608 1,621
------- ------ ------
$ 6,286 2,809 9,095
======= ====== ======
</TABLE>
Components of income (loss) from continuing operations before income taxes,
minority interest, and extraordinary item are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States...................................... $63,633 (10,408) (59,634)
Other nations...................................... 16,619 10,515 18,960
------- ------- -------
Total............................................ $80,252 107 (40,674)
======= ======= =======
</TABLE>
F-32
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense (benefit) attributable to income (loss) from continuing
operations differed from the amounts computed by applying the U.S. federal
income tax rate of 35% for fiscal 1998 and 34% for fiscal 1997 and 1996 as a
result of the following:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1998 1997 1996
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)........ $28,088 36 (13,829)
Increase (decrease) in taxes resulting from:
Adjustment of contingent tax accruals (see note
15)............................................ (4,445) -- --
Foreign tax credits, net of valuation
allowance...................................... (3,337) -- --
Reduction in valuation allowance................ (1,950) -- --
Tax rate differential on foreign earnings....... 3,923 3,320 3,609
Amortization of intangibles..................... -- 7,746 18,668
State income taxes, net of federal benefit...... 1,977 570 1,070
Other, net...................................... (1,168) (1,283) (423)
------- ------ -------
Income tax expense............................... $23,088 10,389 9,095
======= ====== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are presented below:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable valuation allowances............... $ 5,550 7,513
Inventory costs capitalized for tax purposes........... 931 1,194
Other accruals and reserves accrued for financial
reporting purposes.................................... 38,088 40,364
Postretirement benefits accrued for financial reporting
purposes.............................................. 6,338 6,636
Foreign tax credit carryforwards....................... 8,820 --
Net operating loss and minimum tax carryforwards....... 53,111 54,197
-------- -------
Total gross deferred tax assets....................... 112,838 109,904
Less:
Valuation allowance................................... (34,888) (33,961)
-------- -------
Deferred tax assets, net of valuation allowance...... 77,950 75,943
-------- -------
Deferred tax liabilities:
Plant, equipment and intangibles, due to differences as
a result of fresh start............................... 45,484 54,340
Plant and equipment, due to differences in depreciation
methods............................................... 10,037 9,738
Other accruals and reserves............................ 6,536 6,421
-------- -------
Total gross deferred tax liabilities.................. 62,057 70,499
-------- -------
Net deferred tax asset............................... $ 15,893 5,444
======== =======
</TABLE>
F-33
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the net current deferred tax asset and net noncurrent
deferred tax liability were as follows:
<TABLE>
<CAPTION>
JANUARY 31,
--------------
1998 1997
------- ------
(IN THOUSANDS)
<S> <C> <C>
Net current deferred tax asset:
U.S. federal................................................ $27,341 28,361
Foreign..................................................... 2,222 2,115
U.S. state and local........................................ 2,060 5,889
------- ------
31,623 36,365
------- ------
Net noncurrent deferred tax liability:
U.S. federal................................................ 1,045 10,172
Foreign..................................................... 13,886 16,958
U.S. state and local........................................ 799 3,791
------- ------
15,730 30,921
------- ------
Net deferred tax asset..................................... $15,893 5,444
======= ======
</TABLE>
The valuation allowance for deferred tax assets was increased from
$33,961,000 at January 31, 1997 to $34,888,000 at January 31, 1998 primarily
to allow for potential unused foreign tax credit carryforwards, net of
decreases to the valuation allowance for certain fully reserved loss
carryforwards utilized in certain foreign jurisdictions during the current
year. Management of the Company believes that it is more likely than not that
the results of future operations will generate sufficient taxable income to
realize the net deferred tax asset of $15,893,000 at January 31, 1998. If the
Company should recognize a tax benefit for pre-reorganization net operating
losses, for which a valuation allowance had been established, it would be
applied to reduce intangible assets until exhausted and then to increase
additional paid-in capital.
At January 31, 1998, the Company has net operating loss carryforwards of
approximately $135 million for federal income tax purposes, expiring at
various dates through 2012. As a result of the reorganization, the Company had
a change in ownership as defined by Section 382 of the Internal Revenue Code.
Consequently, utilization of the net operating loss carryforwards is subject
to an annual limitation of $17,200,000 per year, as adjusted for unused yearly
limitations.
Deferred income taxes have been provided on undistributed earnings of
foreign subsidiaries to the extent that management plans to remit these
earnings in the future. Undistributed earnings of foreign subsidiaries and
affiliates that are permanently invested, and for which no deferred taxes have
been provided, amounted to approximately $81,660,000 and $73,000,000 as of
January 31, 1998 and 1997, respectively.
F-34
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(12)PENSION AND OTHER EMPLOYEE BENEFITS
Certain subsidiaries of the Company have pension plans which provide
retirement benefits for eligible employees, generally measured by length of
service, compensation and other factors.
Net pension cost of continuing operations included the following components:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------
1998 1997 1996
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................... $ 2,332 2,576 2,466
Interest cost................................... 6,460 6,435 6,521
Actual return (income) loss on plan assets...... (27,741) (14,472) (21,990)
Net amortization and deferral................... 18,492 6,711 14,792
-------- -------- -------
Net pension expense (income).................. $ (457) 1,250 1,789
======== ======== =======
</TABLE>
The funded status of the plans at January 31, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
PLANS WITH
PLANS WITH ACCUMULATED
ASSETS EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS
------------------ --------------
1998 1997 1998 1997
-------- -------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Projected benefit obligation for
service rendered to date.............. $160,428 59,617 31,289 30,464
Plan assets at fair value.............. 178,640 89,017 28,712 24,501
-------- -------- ------ ------
Plan assets in excess (deficiency) of
projected benefit obligation.......... 18,212 29,400 (2,577) (5,963)
Unrecognized prior service cost........ (270) (80) 1,203 1,357
Unrecognized net gain.................. (35,569) (21,341) (7,442) (4,355)
-------- -------- ------ ------
Prepaid (accrued) pension cost
included in other assets
(liabilities)........................ $(17,627) 7,979 (8,816) (8,961)
======== ======== ====== ======
Accumulated benefit obligation:
Vested................................ $153,209 45,420 30,000 28,864
======== ======== ====== ======
Nonvested............................. $ 987 1,063 1,035 1,160
======== ======== ====== ======
</TABLE>
Net periodic pension cost during the years ended January 31, 1998, 1997 and
1996 assumed an expected long-term rate of return on plan assets of 7.5% to
8.5% for domestic plans and 7.5% to 15% for foreign plans. The valuations of
the projected benefit obligation assumed weighted-average discount rates of
7.0% to 7.25% for domestic plans and 7.5% to 13% for foreign plans at January
31, 1998, and 7.0% to 7.25% for domestic plans and 7.5% to 13% for foreign
plans at January 31, 1997. The rate of increase in future compensation levels
ranged from 3.50% to 5% for domestic plans and 5.5% to 10% for foreign plans
at January 31, 1998 and 1997. As a result of the employee terminations
associated with restructurings described in note 4, a plan curtailment
occurred resulting in the acceleration of the amortization of prior service
cost and unrecognized net gains. The effect of the curtailment was a reduction
in fiscal 1998 pension expense of $1.1 million.
Plan assets are primarily invested in cash equivalents, equity securities
and fixed income instruments. The plans do not have significant liabilities
other than benefit obligations. The Company's funding policy is to contribute
amounts equal to the minimum funding requirements of ERISA. During fiscal
1998, the McCrory and Schenley Plans (see note 14--Contingent Pension
Liabilities) were merged with a Company pension plan.
F-35
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company sponsors defined contribution plans, qualified under Sections
401(a) and 401(k) of the Internal Revenue Code, which are offered to certain
groups of employees of substantially all U.S. operations. Expense related to
continuing operations for these plans was $792,000, $1,237,000, and $1,052,000
for the years ended January 31, 1998, 1997, and 1996, respectively.
The Company provides postretirement health care benefits primarily for
certain groups of employees of substantially all U.S. operations. Qualifying
employees become eligible for these benefits upon reaching normal or early
retirement age, and if they have accumulated the specified number of years of
service. The Company recognizes the cost of providing postretirement health
care benefits over the employee's service period.
Postretirement benefit costs were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during period........ $ 465 486 699
Interest cost on projected benefit obligation...... 715 684 907
Other.............................................. (386) (314) (169)
------- ------ -------
Total postretirement benefit costs............... $ 794 856 1,437
======= ====== =======
</TABLE>
The health care cost trend rates used to measure the expected cost in each
of the years in the three-year period ended January 31, 1998 were between 9.5%
and 15%, graded down to an ultimate trend rate of between 5.5% and 6.0% to be
achieved over the next 10 years. The effect of a one-percentage-point increase
in the health care cost trend rate for future periods would increase the
annual postretirement benefit cost by $166,000. The accumulated postretirement
benefit obligation would increase by $1,410,000.
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.25% at January 31, 1998 and
1997.
The funded status of the postretirement plans were as follows:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair value................................ $ -- --
Accumulated postretirement benefit obligation............ (10,620) (10,468)
Unrecognized cumulative net gain......................... (6,196) (6,092)
-------- -------
Postretirement benefit liability included in other
liabilities............................................ $(16,816) (16,560)
======== =======
</TABLE>
(13)DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Cash Equivalents, Trade Receivables, Accounts Payable, Short-term
Debt, and Accrued Expenses
The carrying amount approximates fair value because of the short maturity or
duration of these instruments.
F-36
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Series B Senior Subordinated Notes
There is no established public trading market for the Company's Series B
Senior Subordinated Notes. The Company estimates that the fair value of the
Series B Senior Subordinated Notes at January 31, 1998 approximates
$60,193,000 based on recent interdealer transactions which were priced at
approximately 114.
Senior Credit Facility and Other Long-term Obligations
The carrying value approximates the fair value of these instruments, which
primarily have floating interest rates that are fixed for periods not
exceeding six months.
Foreign Currency Forward Delivery Contracts
The fair value of foreign currency forward delivery contracts (see note 1n)
is estimated by reference to market quotations received from banks. At January
31, 1998 and 1997, the contract value of foreign currency forward delivery
agreements outstanding was approximately $26,357,000 and $50,644,000,
respectively. The settlement value of these instruments was approximately
$24,963,000 and $50,025,000, respectively.
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
(14)LITIGATION, COMMITMENTS AND CONTINGENCIES
Litigation
On March 13, 1998, a complaint was filed in Colorado State District Court,
County of Denver against the Company, certain current and former directors of
the Company, Apollo Investment Fund, L.P., and Apollo Advisors, L.P. The
purported class action brought on behalf of an alleged class of purchasers of
Samsonite common stock during the period from September 10, 1996 to December
1, 1997 alleges, among other things, that certain statements and earnings
forecasts made in the last 18 months were misleading and/or misrepresented
material facts and that the Company is also liable for certain allegedly
misleading statements contained in various analysts' reports. The Company
believes that the complaint is without merit and intends to contest it
vigorously. The class action seeks, among other things, compensatory and
rescissory damages, as well as pre-judgment and post-judgment interest, and
attorneys fees, expert witness fees and other costs.
In addition, the Company is a party to various other legal proceedings and
claims in the ordinary course of business. The Company does not believe that
the outcome of any pending matters will have a material adverse affect on its
consolidated financial position, results of operations or liquidity.
Obligations to Settlement Trust
In connection with the Restructuring in 1993, a settlement trust (the
"Trust") was established for the benefit of the holders of certain classes of
pre-bankruptcy claims to resolve certain claims between the Company and other
parties affiliated with the previous owner of the Company. The creation of the
Trust enabled the Company to emerge from bankruptcy without first resolving
these claims. The terms of the Trust require the Company to make loans to the
Trust of up to $37 million, if necessary, to provide funds for Trust
operations, to pay resolved
F-37
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
claims, and to distribute to the Trust beneficiaries any remaining balance
after settling all liabilities. In prior fiscal years, the Company made loans
to the Trust aggregating $4,850,000, and provided an allowance for the full
amount of the loans. During the current fiscal year, the Trust repaid the
loans together with accrued interest of $1,400,000. As a result, the Company
recorded the collection of the loans as other income (see note 15) and
recorded the interest income. The Company believes it is very unlikely to be
required to make any additional loans to the Trust, which by its terms must
settle with its beneficiaries and dissolve by June 8, 1998.
Contingent Pension Liabilities
In connection with the Restructuring in 1993, a liability of $37.7 million
for claims of the Pension Benefit Guaranty Corporation ("PBGC") related to
pension liabilities for unpaid contributions and insurance premiums of certain
pension plans (the "Plans") which were sponsored by certain companies which
were, along with the Company, part of a "controlled group" of companies as
defined by the Employee Retirement Income Security Act of 1974. The amount
accrued was based on a PBGC calculated termination liability. As a result of
agreements executed in fiscal 1997 giving the Company the right to assume
sponsorship of the Plans in the event of certain defaults by the primary plan
sponsors, the liability was adjusted to $26.6 million based on the pension
benefit obligation of the Plans discounted at 7.25%, reduced by the market
value of the Plans' assets. The corresponding reduction in the liability of
$11.1 million was recorded in other nonoperating income in fiscal 1997 (see
note 15).
As a result of the failure of the Plan sponsors' to meet their obligations
to the Plans in fiscal 1998, the Company assumed sponsorship of the Plans and
merged them with an existing Company pension plan on October 14, 1997. The
accrued liability for this matter was reclassified and is included in the
determination of the Company's pension benefit liability at January 31, 1998.
Contingent Liability with Respect to the Old Notes
The reorganization plan provides for payment in full of 100% of the allowed
claim of the holders of certain old notes ("Old Notes") of E-II Holdings, Inc.
(predecessor to Astrum), including approximately $16.4 million of interest on
overdue installments of interest accruing prior to the commencement of
Astrum's bankruptcy case. Various parties have challenged the allowability of
the claim on the basis that interest on overdue installments of interest is
not permitted under applicable non-bankruptcy law. The Company provided for
this contingent liability in its consolidated financial statements when it
emerged from bankruptcy in the amount of $16.4 million.
During fiscal 1997, $4.0 million of such claims were settled for $0.2
million, resulting in the recording of $3.8 million of other nonoperating
income from the favorable settlement of this claim. The holders of the claim
were Apollo Investment Fund, L.P. ("Apollo") and an affiliate of Apollo. At
January 31, 1997, Apollo and its affiliates owned 45.75% of the Company's
issued and outstanding common stock. During fiscal 1998, the Company recorded
other income of $2,060,000 from the favorable settlement of $2,139,000 of such
claims. Also, see note 15.
As a result of a change in New York law in fiscal 1998, which adversely
affected the Company's ability to favorably settle the remaining claims, the
Company has entered into a non-binding agreement-in-principle to settle the
remaining amount of these claims for approximately $9.4 million. At January
31, 1998, other accrued expenses include $10.3 million provided for these
remaining claims. The Company expects final settlement to occur in fiscal
1999.
Union Agreements
Union membership in the Company's European manufacturing plants varies from
country to country and is not officially known; however, it is probable that
most of the workers are affiliated with a union. Most European
F-38
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
union contracts have a one-year term. In the United States, 770 production
employees are unionized under a contract which next expires on April 9, 1999.
(15)OTHER INCOME (EXPENSE)--NET
Other income (expense)--net from continuing operations consisted of the
following:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1998 1997 1996
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Net gains from foreign currency forward delivery
contracts....................................... $ 6,463 $ 2,829 (494)
Rental income.................................... 1,633 1,987 1,735
Equity in loss of unconsolidated affiliate....... (547) (33) --
Foreign currency transaction losses, net......... (1,834) (211) (1,660)
Favorable settlement of claims (note 14)......... 2,060 3,802 --
Adjustment of allowances relating to previous
operations (a).................................. 5,299 529 --
Adjustment of contingent tax accruals (b)........ 12,700 -- --
Collection of loan to settlement trust (note
14)............................................. 4,850 -- --
Adjustment of liability for PBGC claims (note
14)............................................. -- 11,100 --
Loss on disposition of fixed assets, net......... (377) (62) (245)
Gain on sale of television station............... -- -- 5,368
Other, net....................................... (1,953) (1,120) (737)
------- ------- ------
$28,294 $18,821 3,967
======= ======= ======
</TABLE>
- --------
(a) During fiscal 1998, the Company recorded other income resulting from the
adjustment of accruals and allowances of $5,299,000 for potential
environmental liability on real estate and factored receivables related to
previous operations. The adjustments were made upon the termination of the
claim period for the environmental matter and upon collection of the
factored receivables.
(b) During fiscal 1998, certain contingencies related to tax matters arising
prior to and accrued in conjunction with the Restructuring referred to in
Note 1(b) have been resolved. As a result, the Company reduced the related
accruals by $12,700,000. The resolution of such matters did not result in
any cash payment or additional liability for taxes.
F-39
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(16)QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1997 1997 1997 1998
--------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales..................... $169,562 179,545 211,104 176,664
======== ======= ======= =======
Gross profit.................. $ 70,269 78,228 89,859 74,170
======== ======= ======= =======
Income from continuing
operations before
extraordinary item........... $ 8,499 20,291 23,519 4,568
======== ======= ======= =======
Net income.................... $ 1,866 17,301 16,955 4,577
======== ======= ======= =======
Income per share--basic:
Continuing operations before
extraordinary item.......... $ .43 1.00 1.15 .22
======== ======= ======= =======
Net income................... $ .09 .85 .83 .22
======== ======= ======= =======
Income per share--assuming
dilution:
Continuing operations before
extraordinary item.......... $ .41 .96 1.11 .22
======== ======= ======= =======
Net income................... $ .09 .82 .80 .22
======== ======= ======= =======
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1996 1996 1996 1997
--------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales..................... $169,867 179,440 203,817 188,014
======== ======= ======= =======
Gross profit.................. $ 68,665 68,692 80,404 74,044
======== ======= ======= =======
Income (loss) from continuing
operations before
extraordinary item........... $(10,802) (6,183) 3,372 2,290
======== ======= ======= =======
Net income (loss)............. $(10,802) (6,183) 3,372 2,290
======== ======= ======= =======
Income (loss) per share--
basic:
Continuing operations before
extraordinary item.......... $ (0.68) (0.39) 0.21 0.14
======== ======= ======= =======
Net income (loss)............ $ (0.68) (0.39) 0.21 0.14
======== ======= ======= =======
Income (loss) per share--
assuming dilution:
Continuing operations before
extraordinary item.......... $ (0.68) (0.39) 0.20 0.13
======== ======= ======= =======
Net income (loss)............ $ (0.68) (0.39) 0.20 0.13
======== ======= ======= =======
</TABLE>
F-40
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(17)INDUSTRY AND GEOGRAPHICAL AREA INFORMATION
The Company operates primarily in one industry consisting of the
manufacture, marketing, and distribution of luggage, including softside and
hardside suitcases, garment bags, casual bags, business cases and other travel
bags. The Company's operations in non-luggage products and licensing of non-
luggage products are not significant.
Certain geographical data was as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------
1998 1997 1996
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales:
United States................................... $426,191 428,450 378,723
Europe.......................................... 284,641 285,841 276,219
Other........................................... 52,275 43,551 27,881
Eliminations.................................... (26,232) (16,704) (7,614)
-------- ------- -------
$736,875 741,138 675,209
======== ======= =======
Operating income (loss):
United States................................... $ 31,215 20,023 22,323
Europe.......................................... 36,722 28,492 27,569
Other........................................... 4,106 (1,640) (1,265)
-------- ------- -------
72,043 46,875 48,627
Unallocated costs--net.......................... (2,741) (31,338) (58,003)
-------- ------- -------
Operating income (loss) (a).................... $ 69,302 15,537 (9,376)
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
----------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Identifiable assets:
United States.............................................. $371,965 342,148
Europe..................................................... 162,286 169,696
Other...................................................... 59,327 39,035
Corporate.................................................. 16,471 41,779
-------- -------
Total..................................................... $610,049 592,658
======== =======
</TABLE>
- --------
(a) The Company enters into foreign exchange contracts in order to reduce its
exposure to fluctuations in currency exchange rates (primarily the Belgian
franc) on certain foreign operations and royalty agreements through the
use of forward delivery commitments. For the years ended January 31, 1998,
1997 and 1996, the Company had net gains (losses) from such transactions
of $6,463,000, $2,829,000 and $(494,000), respectively, which are included
in nonoperating income (see note 15).
Net sales and operating income in the United States includes export sales
and the resulting operating income for products produced within the United
States.
Operating income (loss) represents net sales less operating expenses. In
computing operating income (loss) none of the following items have been added
or deducted: interest income, interest expense, other-- net, income taxes,
minority interest, operations discontinued and sold and extraordinary items.
General corporate expenses and amortization of reorganization value in excess
of identifiable assets are included in unallocated costs-net.
F-41
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Identifiable assets by geographic area are those assets that are used in the
Company's operations in each geographic area. Corporate assets consist of
inactive corporations which hold cash, fixed assets, other receivables,
investments and reorganization value in excess of identifiable assets.
For its foreign subsidiaries, the Company translates net assets at exchange
rates prevailing at the period ending date. Income and expenses are translated
at the average exchange rate during the period.
Net assets of the foreign subsidiaries were $135,347,000 and $124,047,000 at
January 31, 1998 and 1997, respectively. Included as a reduction to
stockholders' equity is the cumulative foreign currency translation adjustment
amounting to $14,449,000 and $5,337,000 at January 31, 1998 and 1997,
respectively.
(18)PUBLIC STOCK OFFERING
On February 11, 1997, the Company completed the sale of 3,300,000 shares of
its common stock in a public offering and received net cash proceeds therefrom
of approximately $130,200,000. In addition, the former CEO (see note 10)
exercised options for 1,853,668 common shares and sold these shares in the
public offering. The Company received approximately $6,600,000 in cash from
the exercise of these options.
(19)SUBSEQUENT EVENT--REPURCHASE OF SUBSTANTIALLY ALL OF THE 11 1/8% SERIES B
SUBORDINATED NOTES.
Subsequent to year end, the Company announced an offer to purchase and
consent solicitation of the holders of the 11 1/8% Series B Subordinated Notes
(the "Series B Notes"). The amount payable by the Company to purchase all of
the Series B Notes and obtain consents of the holders thereof, as determined
pursuant to the offer and consent solicitation, was 115.35% of the principal
amount plus accrued interest. The amount payable consisted of 112.35% of the
principal amount representing the purchase price of the Series B Notes
tendered and 3% of the principal amount for the consent to certain amendments
to the subordinated note indenture.
The offer expired on April 23, 1998 with the Company repurchasing
$52,269,000 principal amount of the Series B Notes on April 24, 1998 for an
aggregate purchase price of $60,290,000. The Company also paid accrued
interest of $1,599,000. The Company will record an extraordinary loss of
approximately $6,300,000 in the first quarter of fiscal 1999 representing the
purchase premium of $8,021,000, the write-off of the deferred financing costs
of $1,527,000, and other expenses of the transaction, net of tax benefit.
F-42
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Samsonite Holdings Inc.
We have audited the accompanying balance sheet of Samsonite Holdings Inc. as
of August 5, 1998. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Samsonite Holdings Inc. as of
August 5, 1998 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 6, 1998
F-43
<PAGE>
SAMSONITE HOLDINGS INC.
(A WHOLLY OWNED SUBSIDIARY OF SAMSONITE CORPORATION)
BALANCE SHEET
AS OF AUGUST 5, 1998
<TABLE>
<S> <C>
Current asset - cash...................................................... $100
====
Stockholder's equity:
Common stock ($.01 par value; 1,000 shares authorized;
10 shares issued and outstanding)....................................... $ --
Additional paid-in capital............................................... 100
----
Total stockholder's equity.............................................. $100
====
</TABLE>
See accompanying note to balance sheet.
F-44
<PAGE>
SAMSONITE HOLDINGS INC.
(A WHOLLY OWNED SUBSIDIARY OF SAMSONITE CORPORATION)
NOTE TO BALANCE SHEET
AUGUST 5, 1998
(1) GENERAL
Samsonite Holdings Inc. ("Holdings") was incorporated on August 3, 1998
under Delaware law and is a wholly owned subsidiary of Samsonite Corporation
("Samsonite"). Holdings has no operations.
Holdings was formed in the event that Samsonite elects to exchange its
outstanding senior preferred stock for debt securities of Holdings. If such
election were made, it is currently contemplated that Holdings would become a
holding company of Samsonite through a merger transaction pursuant to Section
251(g) of the Delaware General Corporation Law. Subsequent to the merger, the
sole material asset of Holdings would be the capital stock of Samsonite and
Holdings would have no material liabilities other than in respect of the debt
securities issued by Holdings in exchange for the outstanding senior preferred
stock of Samsonite.
F-45
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, HOLDINGS OR THE INITIAL PURCHASER. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES NOR DOES IT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED
HEREBY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements............................................... iii
Available Information.................................................... iii
Incorporation of Certain Documents by Reference.......................... iii
Prospectus Summary....................................................... 1
Risk Factors............................................................. 19
The Recapitalization..................................................... 27
Concurrent Offering...................................................... 28
Use of Proceeds.......................................................... 28
Capitalization........................................................... 29
Selected Historical and Pro Forma Consolidated Financial Information..... 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 38
The Exchange Offer....................................................... 56
Business................................................................. 63
Management............................................................... 74
Security Ownership of Certain Beneficial Owners and Management........... 77
Description of Senior Preferred Stock and Exchange Debentures............ 79
Book-Entry; Delivery and Form............................................ 115
Description of New Credit Facility....................................... 119
Description of Capital Stock............................................. 120
Certain U.S. Federal Income Tax
Considerations.......................................................... 124
Plan of Distribution..................................................... 130
Legal Matters............................................................ 130
Experts.................................................................. 130
Index to Consolidated Financial Statements............................... F-1
</TABLE>
UNTIL NOVEMBER 24, 1998 (90 DAYS FOLLOWING THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW SENIOR PREFERRED STOCK WHETHER OR
NOT PARTICIPATING IN THE EXCHANGE OFFER MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SAMSONITE CORPORATION
SHARES OF 13 7/8% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
13 7/8% JUNIOR SUBORDINATED DEBENTURES DUE 2010
SAMSONITE HOLDINGS INC.
13 7/8% SENIOR DEBENTURES DUE 2010
----------------------
PROSPECTUS
----------------------
AUGUST 26, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS
Samsonite Corporation's (the "Company") Amended and Restated
Certificate of Incorporation provides that each person who is or was or
had agreed to become a director or officer of the Company, or each such
person who is or was serving or who had agreed to serve at the request
of the Board of Directors of the Company as an employee or agent of the
Company or as director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
(including the heirs, executors, administrators or estate of such
person), shall be indemnified by the Company, in accordance with the
By-Laws of the Company, to the full extent permitted from time to time
by the General Corporation Law of the State of Delaware (the "DGCL"),
as the same exists or may hereafter be amended or any other applicable
laws as presently or hereafter in effect. The Company's Amended and
Restated Certificate of Incorporation also specifically authorizes the
Company to enter into one or more agreements with any person which
provide for indemnification greater or different than that provided by
the Company's Amended and Restated Certificate of Incorporation.
The Company's By-Laws provide that each person who was or is made a
party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he or she or
a person of whom he or she is the legal representative is or was a
director, officer or employee of the Company or is or was serving at
the request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise including service with respect to employee benefit plans,
whether the basis of such Proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the Company to the fullest extent
authorized by the DGCL as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights
than said law permitted the Company to provide prior to such
amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA, excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that
except as provided in the next paragraph with respect to Proceedings
seeking to enforce rights to indemnification, the Company shall
indemnify any such person seeking indemnification in connection with a
Proceeding (or part thereof) initiated by such person only if such
Proceeding (or part thereof) was authorized by the Board of Directors
of the Company.
Pursuant to the Company's By-Laws, if a claim described in the
preceding paragraph is not paid in full by the Company within thirty
days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim and, if successful in whole or
in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. The Company's By-Laws provide that it shall be
a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any Proceeding in advance of
its final disposition where the required undertaking, if any is
required, has been tendered to the Company) that the claimant has not
met the standards of conduct which make it permissible under the DGCL
for the Company to indemnify the claimant for the amount claimed, but
the burden of proving such defense will be on the Company. Neither the
failure of the Company (including its Board of Directors, independent
legal counsel or stockholders) to have made a determination prior to
the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the DGCL, nor an actual determination
by the Company (including its Board of Directors, independent legal
counsel or stockholders) that the claimant has not met such applicable
standard of conduct, shall
II-1
<PAGE>
be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct. The Company's By-Laws
provide that following any "change in control" of the Company of the
type required to be reported under Item 1 of Form 8-K promulgated under
the Securities Exchange Act of 1934, as amended, any determination as to
entitlement to indemnification shall be made by independent legal
counsel selected by the claimant, which independent legal counsel shall
be retained by the Board of Directors on behalf of the Company.
The Company's By-Laws provide that the right to indemnification and
the payment of expenses incurred in defending a Proceeding in advance of
its final disposition conferred in the Company's By-Laws shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Company's Amended and
Restated Certificate of Incorporation, the Company's By-Laws, agreement,
vote of stockholders or disinterested directors or otherwise. The
Company's By-Laws permit the Company to maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent
of the Company or another corporation, partnership, joint venture, trust
or other enterprise against any expense, liability or loss, whether or
not the Company would have the power to indemnify such person against
such expense, liability or loss under the DGCL. In addition, the
Company's By-Laws authorize the Company, to the extent authorized from
time to time by the Company's Board of Directors, to grant rights to
indemnification, and rights to be paid by the Company the expenses
incurred in defending any Proceeding in advance of its final
disposition, to any agent of the Company to the fullest extent of the
provisions of the Company's By-Laws with respect to the indemnification
and advancement of expenses of directors, officers and employees of the
Company.
The Company's By-Laws provide that the right to indemnification
conferred therein shall be a contract right and shall include the right
to be paid by the Company the expenses incurred in defending any such
Proceeding in advance of its final disposition; provided, however, that
if the DGCL requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition
of a Proceeding, shall be made only upon delivery to the Company of an
undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it is ultimately determined that such director or
officer is not entitled to be indemnified under the Company's By-Laws or
otherwise.
If the Company elects to have Samsonite Holdings Inc. ("Holdings")
issue the 13 7/8% Senior Debentures due 2010 of Holdings registered
hereby, it is currently contemplated that Holdings would become a
holding company of the Company through a merger transaction pursuant to
Section 251(g) of the Delaware General Corporation Law and, accordingly,
the Certificate of Incorporation and By-Laws of Holdings immediately
following the effective time of the merger would contain provisions
identical to the Certificate of Incorporation and By-Laws of the Company
immediately prior to the effective time of the merger.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with certain
of the Company's directors and officers. The indemnification agreements
require, among other things, the Company to indemnify the directors and
officers to the fullest extent permitted by law, and to advance to such
directors and officers all related expenses, subject to reimbursement if
it is subsequently determined that indemnification is not permitted. The
Company will also indemnify and advance all expenses incurred by such
directors and officers seeking to enforce their rights under the
indemnification agreements, and cover directors and officers under the
Company's directors' and officers' liability insurance. Although such
indemnification agreements will offer substantially the same scope of
coverage afforded by provisions in the Company's Amended and Restated
Certificate of Incorporation and the Company's By-Laws, they provide
greater assurance to directors and officers that indemnification will be
available because, as a contract, it cannot be modified unilaterally in
the future by the Board of Directors of the Company or by the
stockholders to eliminate the rights provided therein. Indemnification
for officers of the Company is or will be provided for in their
respective employment agreements.
II-2
<PAGE>
ITEM 21. EXHIBITS.
The following is a list of Exhibits, which were previously filed, are filed
herewith or incorporated herein by reference:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1 Distribution Agreement, dated as of July 14, 1995, between the Company
and Culligan Water Technologies, Inc.(1)
2.2 Tax Sharing Agreement, dated as of July 14, 1995, between the Company
and Culligan Water Technologies, Inc.(1)
2.3 Company's Second Amended Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code, dated February 17, 1993 (the "Plan").(2)
2.4 Modification of the Plan, dated May 21, 1993.(3)
2.5 Notice to holders of Notes regarding the Stock Elections described in
the Plan.(3)
2.6 Order of the United States Bankruptcy Court for the Southern District
of New York, dated May 25, 1993, confirming the Plan and authorizing
and directing certain actions in connection therewith.(3)
3.1 Amended and Restated Certificate of Incorporation of the Company.(4)
3.2 Certificate of Ownership and Merger dated July 14, 1995.(1)
3.3 By-Laws of the Company.(4)
3.4 Certificate of Incorporation of Samsonite Holdings Inc.*
3.5 By-Laws of Samsonite Holdings Inc.*
4.1 Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and other Special Rights of 13 7/8% Senior
Redeemable Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions thereof.*
4.2 Certificate of Correction to the Certificate of Designation of the
Powers, Preferences and Relative, Participating, Optional and other
Special Rights of 13 7/8% Senior Redeemable Exchangeable Preferred
Stock and Qualifications, Limitations and Restrictions thereof.*
4.3 Indenture, in respect of the 13 7/8% Junior Subordinated Debentures
due 2010 of the Company, dated as of June 24, 1998, between the
Company and United States Trust Company of New York.*
4.4 Form of Indenture, in respect of the 13 7/8% Senior Debentures due
2010 of Holdings, to be dated as of the Exchange Date, between
Samsonite Holdings Inc. and United States Trust Company of New York.*
4.5 Registration Rights Agreement, in respect of the 13 7/8% Senior
Redeemable Exchangeable Preferred Stock, dated as of June 24, 1998,
between the Company and CIBC Oppenheimer Corp.*
4.6 Indenture, in respect of the 10 3/4% Senior Subordinated Notes due
2008, dated as of June 24, 1998, between the Company and United States
Trust Company of New York.*
4.7 Registration Rights Agreement, in respect of the 10 3/4% Senior
Subordinated Notes due 2008, dated as of June 24, 1998, by and among
the Company, CIBC Oppenheimer Corp., BancAmerica Robertson Stephens,
BancBoston Securities Inc. and Goldman, Sachs & Co.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
10.1 Second Amended and Restated Multicurrency Revolving Credit and Term
Loan Agreement, dated as of June 24, 1998, between the Company,
Samsonite Europe N.V. and Bank of America National Trust and Savings
Association, BankBoston N.A. and various other lending institutions,
Bank of America National Trust and Savings Association, as
Administrative Agent, BankBoston, N.A., as Syndication Agent, Canadian
Imperial Bank of Commerce, as Documentation Agent and BancAmerica
Robertson Stephens and BancBoston Securities Inc., as Arrangers.*
10.2 Rights Agreement, dated as of May 12, 1998, between the Company and
BankBoston, N.A. as Rights Agent, including the form of Certificate of
Designation, Preferences and Rights setting forth the terms of the
Series B Junior Participating Preferred Stock, par value $0.01 per
share, as Exhibit A, the form of Rights Certificate as Exhibit B and
the Summary of Rights to Purchase Series B Junior Participating
Preferred Stock as Exhibit C.(14)
10.3 Stock Option Agreement, dated as of May 15, 1996, between the Company
and Richard R. Nicolosi.(8)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.4 Form of Indemnification Agreement entered into or to be entered into
by the Company with each of R. Theodore Ammon, Leon D. Black, Robert
H. Falk, Thomas J. Leonard, Marc J. Rowan, Stephen J. Solarz, Gregory
Wm. Hunt, Carl C. Ichan, Mark H. Rachesky and Robert L. Rosen.(3)
10.5 Employment Agreement, dated as of February 1, 1998, between the
Company and Thomas R. Sandler.(13)
10.6 Consulting Agreement, dated as of February 1, 1998, between Samsonite
Europe N.V. and Luc Van Nevel.(13)
10.7 Executive Management Agreement, dated February 1, 1998, between the
Company and Luc Van Nevel.(13)
10.8 Employment Agreement, dated as of February 1, 1998, between Samsonite
GmbH and Karlheinz Tretter.(13)
10.9 Overall Agreement, dated as of February 1, 1998, between the Company
and Karlheinz Tretter.(13)
10.10 Samsonite Corporation 1995 Stock Option and Incentive Award Plan (as
amended in 1996).(10)
10.11 Samsonite Corporation 1995 Stock Option and Incentive Award Plan,
Second Amendment.(9)
10.12 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Thomas J. Leonard.(4)
10.13 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Thomas R. Sandler.(4)
10.14 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Luc Van Nevel.(4)
10.15 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Karlheinz Tretter.(4)
10.16 Registration Rights Agreement, dated as of May 15, 1996, between the
Company and Richard R. Nicolosi.(5)
10.17 Stock Sale Agreement, dated as of May 16, 1996, between the Company
and Richard R. Nicolosi.(5)
10.18 Agreement, made as of June 11, 1998, between the Company and Luc Van
Nevel.*
10.19 Agreement, made as of June 11, 1998, between the Company and Thomas R.
Sandler.*
10.20 Form of Stock Option Agreement for Awards under the 1995 Stock Option
and Incentive Award Plan (as amended in 1996).(8)
10.21 Samsonite Corporation 1996 Directors' Stock Plan.(10)
10.22 Final Settlement Agreement, made as of June 20, 1996, among the
Company, the Pension Benefit Guaranty Corporation and others named
therein (including exhibits thereto), with respect to the Schenley
Pension Plan.(6)
10.23 Final Settlement Agreement, made as of June 20, 1996, among the
Company, the Pension Benefit Guaranty Corporation and others named
therein (including exhibits thereto), with respect to the McCrory
Pension Plan.(6)
10.24 Purchase Agreement, dated as of June 13, 1996, between the Company and
Artemis America Partnership and Apollo Investment Fund, L.P.(6)
10.25 Employment Agreement, effective as of August 1, 1996, between the
Company and John P. Murtagh.(7)
10.26 Amended and Restated Employment Agreement, dated as of October 1,
1997, between the Company and John P. Murtagh.(11)
10.27 Employment Agreement, effective as of September 16, 1996, between the
Company and Robert P. Baird, Jr.(7)
10.28 Employment Agreement, effective as of August 4, 1996, between the
Company and James E. Barch.(7)
10.29 Employment Agreement, effective as of September 10, 1996, between the
Company and Gary D. Ervick.(7)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.30 Amended and Restated Option Agreement, dated as of October 1, 1997,
between the Company and John P. Murtagh.(11)
10.31 Stock Option Agreement, dated as of September 16, 1996, between the
Company and Robert P. Baird, Jr.(7)
10.32 Stock Option Agreement, dated as of August 5, 1996, between the
Company and James E. Barch.(7)
10.33 Stock Option Agreement, dated as of August 21, 1996, between the
Company and Gary D. Ervick.(7)
10.34 Stock Option Agreement, dated as of October 29, 1996, between the
Company and Thomas R. Sandler.(12)
10.35 Stock Option Agreement, dated as of October 29, 1996, between the
Company and Karlheinz Tretter.(12)
10.36 Stock Option Agreement, dated as of January 16, 1997, between the
Company and Gary D. Ervick.(12)
10.37 Employment Agreement, effective as of February 1, 1998, between the
Company and Richard H. Wiley.(13)
10.38 Employment Agreement, effective as of February 1, 1998, between the
Company and Carlo Zezza.(13)
10.39 Trademark Purchase and Assignment Agreement, dated as of October 31,
1997, between the Company's subsidiary, McGregor L.L.C. and McGregor
International Licensing N.V.(11)
10.40 Trademark Option Agreement, dated as of October 31, 1997, between the
Company's subsidiary, McGregor L.L.C. and McGregor International
Licensing N.V.(11)
12.1 Statements re: Computation of Ratios.*
21.1 Subsidiaries of the Company.(12)
23.1 Consent of KPMG Peat Marwick LLP in respect of the Company.
23.2 Consent of KPMG Peat Marwick LLP in respect of Holdings.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).*
25.1 Form T-1 Statement of Eligibility of Trustee with respect to the
Indenture for the 13 7/8% Junior Subordinated Debentures due 2010 of
the Company.
25.2 Form T-1 Statement of Eligibility of Trustee with respect to the Form
of Indenture for the 13 7/8% Senior Debentures due 2010 of Holdings.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.*
</TABLE>
- --------
* Filed previously.
(1) Incorporated by reference from the Registration Statement on Form S-4
(Registration No. 33-95642).
(2) Incorporated by reference from the Application for Qualification of
Indenture on Form T-3 (File No. 22-24448).
(3) Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 33-71224).
(4) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1996 (File No. 0-23214).
(5) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended April 30, 1996 (File No. 0-23214).
(6) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended July 31, 1996 (File No. 0-23214).
(7) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended October 31, 1996 (File No. 0-23214).
(8) Incorporated by reference from the Registration Statement on Form S-8
filed June 7, 1996 (File No. 333-05467).
II-5
<PAGE>
(9) Incorporated by reference from the Registration Statement on Form S-8
filed January 30, 1997 (File No. 333-20775).
(10) Incorporated by reference from the Proxy Statement filed May 24, 1996.
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended October 31, 1997 (File No. 0-23214).
(12) 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).
(13) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1998 (File No. 0-23214).
(14) Incorporated by reference from the Company's Report on Form 8-K filed May
13, 1998 (File No. 0-23214).
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
II-6
<PAGE>
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Denver, State of Colorado on the 24th day of August, 1998.
SAMSONITE CORPORATION
/s/ D. Michael Clayton
By: _________________________________
Name: D. Michael Clayton
Title: General Counsel and Vice
President - Legal
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON ITS BEHALF BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Chairman of the
* Board August 24, 1998
---------------------------
Richard R. Nicolosi
President and Chief
* Executive Officer August 24, 1998
--------------------------- and Director
Luc Van Nevel (principal
executive officer)
* Director August 24, 1998
---------------------------
R. Theodore Ammon
* Director August 24, 1998
---------------------------
Bernard Attal
* Director August 24, 1998
---------------------------
Leon D. Black
* Director August 24, 1998
---------------------------
Robert H. Falk
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Director August 24, 1998
---------------------------
Mark H. Rachesky
* Director August 24, 1998
---------------------------
Robert L. Rosen
* Director August 24, 1998
---------------------------
Marc J. Rowan
* Director August 24, 1998
---------------------------
Stephen J. Solarz
* Chief Financial August 24, 1998
--------------------------- Officer (principal
Richard H. Wiley financial and
accounting officer)
*By: /s/ D. Michael Clayton Attorney-in-Fact August 24, 1998
---------------------------
D. Michael Clayton
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Denver, State of Colorado on the 24th day of August, 1998.
SAMSONITE HOLDINGS INC.
/s/ Thomas R. Sandler
By: __________________________________
Name: Thomas R. Sandler
Title: Senior Vice President and
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON ITS BEHALF BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* President and August 24, 1998
--------------------------- Director
Luc Van Nevel (principal
executive officer)
/s/ Thomas R. Sandler Senior Vice August 24, 1998
--------------------------- President and
Thomas R. Sandler Secretary
* Chief Financial August 24, 1998
--------------------------- Officer and
Richard H. Wiley Treasurer
(principal
financial and
accounting
officer)
*By: /s/ Thomas R. Sandler Attorney-in-Fact August 24, 1998
---------------------------
Thomas R. Sandler
</TABLE>
II-10
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1 Distribution Agreement, dated as of July 14, 1995, between the Company
and Culligan Water Technologies, Inc.(1)
2.2 Tax Sharing Agreement, dated as of July 14, 1995, between the Company
and Culligan Water Technologies, Inc.(1)
2.3 Company's Second Amended Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code, dated February 17, 1993 (the "Plan").(2)
2.4 Modification of the Plan, dated May 21, 1993.(3)
2.5 Notice to holders of Notes regarding the Stock Elections described in
the Plan.(3)
2.6 Order of the United States Bankruptcy Court for the Southern District
of New York, dated May 25, 1993, confirming the Plan and authorizing
and directing certain actions in connection therewith.(3)
3.1 Amended and Restated Certificate of Incorporation of the Company.(4)
3.2 Certificate of Ownership and Merger dated July 14, 1995.(1)
3.3 By-Laws of the Company.(4)
3.4 Certificate of Incorporation of Samsonite Holdings Inc.*
3.5 By-Laws of Samsonite Holdings Inc.*
4.1 Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and other Special Rights of 13 7/8% Senior
Redeemable Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions thereof.*
4.2 Certificate of Correction to the Certificate of Designation of the
Powers, Preferences and Relative, Participating, Optional and other
Special Rights of 13 7/8% Senior Redeemable Exchangeable Preferred
Stock and Qualifications, Limitations and Restrictions thereof.*
4.3 Indenture, in respect of the 13 7/8% Junior Subordinated Debentures
due 2010 of the Company, dated as of June 24, 1998, between the
Company and United States Trust Company of New York.*
4.4 Form of Indenture, in respect of the 13 7/8% Senior Debentures due
2010 of Holdings, to be dated as of the Exchange Date, between
Samsonite Holdings Inc. and United States Trust Company of New York.*
4.5 Registration Rights Agreement, in respect of the 13 7/8% Senior
Redeemable Exchangeable Preferred Stock, dated as of June 24, 1998,
between the Company and CIBC Oppenheimer Corp.*
4.6 Indenture, in respect of the 10 3/4% Senior Subordinated Notes due
2008, dated as of June 24, 1998, between the Company and United States
Trust Company of New York.*
4.7 Registration Rights Agreement, in respect of the 10 3/4% Senior
Subordinated Notes due 2008, dated as of June 24, 1998, by and among
the Company, CIBC Oppenheimer Corp., BancAmerica Robertson Stephens,
BancBoston Securities Inc. and Goldman, Sachs & Co.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
10.1 Second Amended and Restated Multicurrency Revolving Credit and Term
Loan Agreement, dated as of June 24, 1998, between the Company,
Samsonite Europe N.V. and Bank of America National Trust and Savings
Association, BankBoston N.A. and various other lending institutions,
Bank of America National Trust and Savings Association, as
Administrative Agent, BankBoston, N.A., as Syndication Agent, Canadian
Imperial Bank of Commerce, as Documentation Agent and BancAmerica
Robertson Stephens and BancBoston Securities Inc., as Arrangers.*
10.2 Rights Agreement, dated as of May 12, 1998, between the Company and
BankBoston, N.A. as Rights Agent, including the form of Certificate of
Designation, Preferences and Rights setting forth the terms of the
Series B Junior Participating Preferred Stock, par value $0.01 per
share, as Exhibit A, the form of Rights Certificate as Exhibit B and
the Summary of Rights to Purchase Series B Junior Participating
Preferred Stock as Exhibit C.(14)
10.3 Stock Option Agreement, dated as of May 15, 1996, between the Company
and Richard R. Nicolosi.(8)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.4 Form of Indemnification Agreement entered into or to be entered into
by the Company with each of R. Theodore Ammon, Leon D. Black, Robert
H. Falk, Thomas J. Leonard, Marc J. Rowan, Stephen J. Solarz, Gregory
Wm. Hunt, Carl C. Ichan, Mark H. Rachesky and Robert L. Rosen.(3)
10.5 Employment Agreement, dated as of February 1, 1998, between the
Company and Thomas R. Sandler.(13)
10.6 Consulting Agreement, dated as of February 1, 1998, between Samsonite
Europe N.V. and Luc Van Nevel.(13)
10.7 Executive Management Agreement, dated February 1, 1998, between the
Company and Luc Van Nevel.(13)
10.8 Employment Agreement, dated as of February 1, 1998, between Samsonite
GmbH and Karlheinz Tretter.(13)
10.9 Overall Agreement, dated as of February 1, 1998, between the Company
and Karlheinz Tretter.(13)
10.10 Samsonite Corporation 1995 Stock Option and Incentive Award Plan (as
amended in 1996).(10)
10.11 Samsonite Corporation 1995 Stock Option and Incentive Award Plan,
Second Amendment.(9)
10.12 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Thomas J. Leonard.(4)
10.13 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Thomas R. Sandler.(4)
10.14 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Luc Van Nevel.(4)
10.15 Stock Option Agreement, dated as of February 20, 1996, between the
Company and Karlheinz Tretter.(4)
10.16 Registration Rights Agreement, dated as of May 15, 1996, between the
Company and Richard R. Nicolosi.(5)
10.17 Stock Sale Agreement, dated as of May 16, 1996, between the Company
and Richard R. Nicolosi.(5)
10.18 Agreement, made as of June 11, 1998, between the Company and Luc Van
Nevel.*
10.19 Agreement, made as of June 11, 1998, between the Company and Thomas R.
Sandler.*
10.20 Form of Stock Option Agreement for Awards under the 1995 Stock Option
and Incentive Award Plan (as amended in 1996).(8)
10.21 Samsonite Corporation 1996 Directors' Stock Plan.(10)
10.22 Final Settlement Agreement, made as of June 20, 1996, among the
Company, the Pension Benefit Guaranty Corporation and others named
therein (including exhibits thereto), with respect to the Schenley
Pension Plan.(6)
10.23 Final Settlement Agreement, made as of June 20, 1996, among the
Company, the Pension Benefit Guaranty Corporation and others named
therein (including exhibits thereto), with respect to the McCrory
Pension Plan.(6)
10.24 Purchase Agreement, dated as of June 13, 1996, between the Company and
Artemis America Partnership and Apollo Investment Fund, L.P.(6)
10.25 Employment Agreement, effective as of August 1, 1996, between the
Company and John P. Murtagh.(7)
10.26 Amended and Restated Employment Agreement, dated as of October 1,
1997, between the Company and John P. Murtagh.(11)
10.27 Employment Agreement, effective as of September 16, 1996, between the
Company and Robert P. Baird, Jr.(7)
10.28 Employment Agreement, effective as of August 4, 1996, between the
Company and James E. Barch.(7)
10.29 Employment Agreement, effective as of September 10, 1996, between the
Company and Gary D. Ervick.(7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.30 Amended and Restated Option Agreement, dated as of October 1, 1997,
between the Company and John P. Murtagh.(11)
10.31 Stock Option Agreement, dated as of September 16, 1996, between the
Company and Robert P. Baird, Jr.(7)
10.32 Stock Option Agreement, dated as of August 5, 1996, between the
Company and James E. Barch.(7)
10.33 Stock Option Agreement, dated as of August 21, 1996, between the
Company and Gary D. Ervick.(7)
10.34 Stock Option Agreement, dated as of October 29, 1996, between the
Company and Thomas R. Sandler.(12)
10.35 Stock Option Agreement, dated as of October 29, 1996, between the
Company and Karlheinz Tretter.(12)
10.36 Stock Option Agreement, dated as of January 16, 1997, between the
Company and Gary D. Ervick.(12)
10.37 Employment Agreement, effective as of February 1, 1998, between the
Company and Richard H. Wiley.(13)
10.38 Employment Agreement, effective as of February 1, 1998, between the
Company and Carlo Zezza.(13)
10.39 Trademark Purchase and Assignment Agreement, dated as of October 31,
1997, between the Company's subsidiary, McGregor L.L.C. and McGregor
International Licensing N.V.(11)
10.40 Trademark Option Agreement, dated as of October 31, 1997, between the
Company's subsidiary, McGregor L.L.C. and McGregor International
Licensing N.V.(11)*
12.1 Statements re: Computation of Ratios.*
21.1 Subsidiaries of the Company.(12)
23.1 Consent of KPMG Peat Marwick LLP in respect of the Company.
23.2 Consent of KPMG Peat Marwick LLP in respect of Holdings.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).*
25.1 Form T-1 Statement of Eligibility of Trustee with respect to the
Indenture for the 13 7/8% Junior Subordinated Debentures due 2010 of
the Company.
25.2 Form T-1 Statement of Eligibility of Trustee with respect to the Form
of Indenture for the 13 7/8% Senior Debentures due 2010 of Holdings.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.*
</TABLE>
- --------
*Previously filed.
(1) Incorporated by reference from the Registration Statement on Form S-4
(Registration No. 33-95642).
(2) Incorporated by reference from the Application for Qualification of
Indenture on Form T-3 (File No. 22-24448).
(3) Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 33-71224).
(4) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1996 (File No. 0-23214).
(5) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended April 30, 1996 (File No. 0-23214).
(6) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended July 31, 1996 (File No. 0-23214).
(7) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended October 31, 1996 (File No. 0-23214).
(8) Incorporated by reference from the Registration Statement on Form S-8
filed June 7, 1996 (File No. 333-05467).
<PAGE>
(9) Incorporated by reference from the Registration Statement on Form S-8
filed January 30, 1997 (File No. 333-20775).
(10) Incorporated by reference from the Proxy Statement filed May 24, 1996.
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended October 31, 1997 (File No. 0-23214).
(12) 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).
(13) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1998 (File No. 0-23214).
(14) Incorporated by reference from the Company's Report on Form 8-K filed May
13, 1998 (File No. 0-23214).
<PAGE>
Exhibit 23.1
CONSENT OF KPMG PEAT MARWICK LLP
THE BOARD OF DIRECTORS
SAMSONITE CORPORATION:
We consent to the use of our report dated March 17, 1998, except as to Note 19,
which is as of April 24, 1998, relating to the consolidated balance sheets of
Samsonite Corporation and subsidiaries as of January 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended January 31, 1998,
included in the registration statement and incorporated by reference herein, and
the related financial statement schedule incorporated by reference herein, and
to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Samsonite Holdings Inc.
We consent to the use of our report dated August 6, 1998 included herein and
to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
__________________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal executive offices)
__________________________
Samsonite Corporation
(Exact name of OBLIGOR 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 80239
Denver Colorado (Zip code)
(Address of principal executive offices)
__________________________
13 7/8% Company Exchange Debentures due 2010
(Title of the indenture securities)
<PAGE>
- 2 -
GENERAL
1. GENERAL INFORMATION
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
-----------------------------
If the obligor is an affiliate of the trustee, describe each such affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Samsonite Corporation currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15
of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
----------------
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form
T-1 filed on September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. LIST OF EXHIBITS
----------------
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
====
As of August 5, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 5th day
of August 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: __________________________
James E. Logan
Vice President
JEL/kk
<PAGE>
Exhibit T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
By: _________________________
Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1998
--------------
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and Due from Banks $ 303,692
Short-Term Investments 325,044
Securities, Available for Sale 650,954
Loans 1,717,101
Less: Allowance for Credit Losses 16,546
----------
Net Loans 1,700,555
Premises and Equipment 58,868
Other Assets 120,865
----------
TOTAL ASSETS $3,159,978
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 602,769
Interest Bearing 1,955,571
----------
Total Deposits 2,558,340
Short-Term Credit Facilities 293,185
Accounts Payable and Accrued Liabilities 136,396
----------
TOTAL LIABILITIES $2,987,921
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 105,214
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,307
----------
TOTAL STOCKHOLDER'S EQUITY 172,057
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,159,978
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
May 6, 1998
