<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _____________
Commission File Number: 0-23214
-------
SAMSONITE CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3511556
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 East 45th Avenue, Denver, CO 80239
---------------------------------- -----
(Address of principal executive offices) (Zip Code)
(303) 373-2000
--------------
(Registrant's telephone number, including area code)
_______________
(Former name, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
X Yes _____ No
-----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
X Yes _____ No
-----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 10,513,612 shares of
common stock, par value $.01 per share, as of September 10, 1999.
<PAGE>
FORM 10-Q
---------
CONTENTS
--------
PART I - FINANCIAL INFORMATION Page Number
--------------------- -----------
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets as of July 31, 1999
and January 31, 1999............................................. 1
Unaudited Consolidated Statements of Operations for the three
months ended July 31, 1999 and 1998.............................. 3
Unaudited Consolidated Statements of Operations for the six
months ended July 31, 1999 and 1998.............................. 4
Unaudited Consolidated Statement of Stockholders' Equity
(Deficit) for the six months ended July 31, 1999................. 5
Unaudited Consolidated Statements of Cash Flows for the six
months ended July 31, 1999 and 1998.............................. 6
Unaudited Notes to Consolidated Financial Statements............. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 26
PART II - OTHER INFORMATION
-----------------
Item 1: Legal Proceedings..................................... 28
Item 2: Changes in Securities................................. 28
Item 3: Defaults upon Senior Securities....................... 28
Item 4: Submission of Matters to a Vote of Security Holders... 28
Item 5: Other Information..................................... 28
Item 6: Exhibits and Reports on Form 8-K...................... 29
Signature........................................................ 30
Index to Exhibits................................................ 31
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
as of July 31, 1999 and January 31, 1999
(In thousands)
<TABLE>
<CAPTION>
July 31, January 31,
Assets 1999 1999
---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................... $ 27,678 41,932
Trade receivables, net of allowances for doubtful accounts
of $8,207 and $7,065.................................................. 80,347 78,329
Notes and other receivables............................................. 9,024 11,614
Inventories (Note 2).................................................... 167,306 187,567
Deferred income tax assets.............................................. 2,559 2,491
Prepaid expenses and other current assets............................... 15,686 14,564
---------- ------------
Total current assets.................................................. 302,600 336,497
Investments in affiliates................................................. 319 518
Property, plant and equipment, net (Note 3)............................... 142,689 149,641
Intangible assets, less accumulated amortization of $49,277 and
$46,786 (Note 4)........................................................ 111,402 114,248
Other assets and long-term receivables, net of allowances 18,087 20,531
for doubtful accounts of $521........................................... ---------- ------------
$ 575,097 621,435
========== ============
(Continued)
</TABLE>
See accompanying notes to consolidated financial statements
1
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
as of July 31, 1999 and January 31, 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
July 31, January 31,
Liabilities and Stockholders' Equity (Deficit) 1999 1999
----------- -----------
<S> <C> <C>
Current liabilities:
Short-term debt (Note 5)................................................... $ 11,813 8,409
Current installments of long-term obligations (Note 5)..................... 5,777 6,923
Accounts payable........................................................... 46,681 48,375
Accrued liabilities........................................................ 74,712 98,541
----------- -----------
Total current liabilities 138,983 162,248
Long-term obligations, less current installments (Note 5).................... 465,135 496,173
Deferred income tax liabilities.............................................. 14,367 17,046
Other noncurrent liabilities................................................. 50,933 53,919
----------- -----------
Total liabilities........................................................ 669,418 729,386
----------- -----------
Minority interests in consolidated subsidiaries.............................. 9,387 9,166
Senior redeemable preferred stock, aggregate liquidation preference of
$203,446 and $190,034; 199,902 and 186,723 shares issued and outstanding... 192,254 178,329
Stockholders' equity (deficit) (Note 7):
Preferred stock ($.01 par value; 2,000,000 shares authorized):
Series Z preferred stock, convertible; authorized 2,000 shares; issued
and outstanding 1,000 shares (Note 1C).................................. 24,410 --
Common stock ($.01 par value; 60,000,000 shares authorized;
21,013,612 and 21,000,039 shares issued; 10,513,612 and
10,500,039 shares outstanding)........................................... 210 210
Additional paid-in capital................................................. 436,895 436,351
Accumulated other comprehensive income..................................... (19,674) (12,426)
Accumulated deficit........................................................ (317,803) (299,581)
----------- -----------
124,038 124,554
Treasury stock, at cost (10,500,000 shares)................................ (420,000) (420,000)
----------- -----------
Total stockholders' equity (deficit)..................................... (295,962) (295,446)
----------- -----------
Commitments and contingencies (Notes 1C, 5, 7 and 9)
$ 575,097 621,435
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
for the three months ended July 31, 1999 and 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended July 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales (Note 1G)................................................... $195,388 163,662
Cost of goods sold.................................................... 114,305 99,534
-------- -------
Gross profit........................................................ 81,083 64,128
Selling, general and administrative expenses.......................... 65,018 70,828
Provision for restructuring operations................................ -- 5,606
Amortization of intangible assets..................................... 1,389 1,512
-------- -------
Operating income (loss)............................................. 14,676 (13,818)
Other income (expense):
Interest income..................................................... 412 755
Interest expense and amortization of debt issue costs
and premium....................................................... (13,264) (7,532)
Other income - net (Note 6)......................................... 874 1,798
-------- -------
Income (loss) before income taxes, minority interest,
and extraordinary item............................................ 2,698 (18,797)
Income tax expense.................................................... (2,740) (8,136)
Minority interest in earnings of subsidiaries......................... (321) (165)
-------- -------
Loss before extraordinary item....................................... (363) (27,098)
Extraordinary item - loss on extinguishment of debt,
net of income tax benefit of $144 (Note 5).......................... -- (235)
-------- -------
Net loss............................................................ (363) (27,333)
Senior redeemable preferred stock dividends and accretion
of senior redeemable preferred stock discount....................... (7,077) (2,579)
-------- -------
Net loss to common stockholders..................................... $ (7,440) (29,912)
======== =======
Income (loss) per common share - basic and diluted:
Loss before extraordinary item.................................... $ (0.71) (1.81)
Extraordinary loss................................................ -- (0.01)
-------- -------
Net loss per share.............................................. $ (0.71) (1.82)
======== =======
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
for the six months ended July 31, 1999 and 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended July 31,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales (Note 1G)................................................... $371,264 320,338
Cost of goods sold.................................................... 215,522 196,805
-------- -------
Gross profit........................................................ 155,742 123,533
Selling, general and administrative expenses.......................... 128,272 130,448
Provision for restructuring operations................................ -- 8,214
Amortization of intangible assets..................................... 2,780 3,038
-------- -------
Operating income (loss)............................................. 24,690 (18,167)
Other income (expense):
Interest income..................................................... 998 1,547
Interest expense and amortization of debt issue costs
and premium....................................................... (26,849) (12,341)
Other income - net (Note 6)......................................... 3,090 2,796
-------- -------
Income (loss) before income taxes, minority interest,
and extraordinary item............................................ 1,929 (26,165)
Income tax expense.................................................... (5,794) (5,213)
Minority interest in earnings of subsidiaries......................... (432) (420)
-------- -------
Loss before extraordinary item...................................... (4,297) (31,798)
Extraordinary item - loss on extinguishment of debt,
net of income tax benefit of $3,959 (Note 5)........................ -- (6,460)
-------- -------
Net loss............................................................ (4,297) (38,258)
Senior redeemable preferred stock dividends and accretion
of senior redeemable preferred stock discount....................... (13,925) (2,579)
-------- -------
Net loss to common stockholders..................................... $(18,222) (40,837)
======== =======
Income (loss) per common share - basic and diluted:
Loss before extraordinary item.................................... $ (1.73) (1.87)
Extraordinary loss................................................ -- (0.35)
-------- -------
Net loss per share.............................................. $ (1.73) (2.22)
======== =======
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statement of Stockholders' Equity (Deficit)
for the six months ended July 31, 1999
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Preferred Common Paid-In Comprehensive Accumulated Comprehensive Treasury
Stock Stock Capital Loss Deficit Loss Stock
--------- ------ ---------- ------------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1,
1999 $ -- 210 436,351 (12,426) (299,581) (420,000)
Issuance of shares to
directors for services -- -- 68 -- -- --
Compensation expense
accrued for stock
bonus awards -- -- 138 -- -- --
Issuance of preferred
stock (Note 1C) 24,410 -- -- -- -- --
Exercise of employee
stock options and
issuance of stock
award shares -- -- 338 -- -- --
Net loss -- -- -- -- (4,297) (4,297) --
Foreign currency
translation adjustment -- -- -- (7,248) -- (7,248) --
------------
Comprehensive loss -- -- -- -- -- (11,545)
============
Senior redeemable
preferred stock
dividends and accretion
of senior redeemable
preferred stock discount -- -- -- -- (13,925) --
--------- ------ ---------- ------------- ----------- --------
Balance, July 31, 1999 $ 24,410 210 436,895 (19,674) (317,803) (420,000)
========= ====== ========== ============= =========== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
for the six months ended July 31, 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended July 31,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss).................................................... $ (4,297) (38,258)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Loss on extinguishment of debt..................................... -- 6,460
Depreciation and amortization of property,
plant and equipment.............................................. 10,833 10,579
Amortization of intangible assets.................................. 2,780 3,038
Amortization of debt issue costs and premium....................... 1,082 183
Provision for doubtful accounts.................................... 1,929 682
Amortization of stock awards and stock issued for services......... 207 750
Compensation expense for adjustment of stock options............... 331 3,722
Provision for restructuring operations............................. -- 5,606
Changes in operating assets and liabilities:
Trade and other receivables...................................... (2,899) 19,716
Inventories...................................................... 20,261 (20,869)
Prepaid expenses and other current assets........................ (1,643) (3,199)
Accounts payable and accrued liabilities......................... (26,410) (11,702)
Other adjustments - net............................................ 768 633
-------- -------
Net cash provided by (used in) operating activities.................. 2,942 (22,659)
-------- -------
(Continued)
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
for the six months ended July 31, 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended July 31,
---------------------------
1999 1998
------- -------
<S> <C> <C>
Cash flows provided by (used in) investing activities:
Purchases of property, plant and equipment........................ $(11,009) (12,946)
Proceeds from sale of assets held for sale and property and
equipment........................................................ 459 14,744
Excess of purchase price over net assets acquired of South
American distributorships........................................ -- (2,574)
Other, net........................................................ (1,393) (1,905)
-------- --------
Net cash used in investing activities............................ (11,943) (2,681)
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of preferred stock......................... 25,410 --
Proceeds from exercise of employee stock options.................. 6 7,114
Proceeds from issuance of senior subordinated notes............... -- 350,000
Proceeds from issuance of senior redeemable preferred stock....... -- 175,000
Issuance costs of senior subordinated notes, senior preferred
stock, and senior credit facility................................ -- (20,712)
Purchase of treasury stock........................................ -- (420,000)
Retirement of subordinated notes, including redemption premium.... -- (60,781)
Net borrowings (payments) of short-term obligations............... 3,404 3,439
Net borrowings (payments) on long-term obligations................ (25,186) 4,592
Other, net........................................................ 70 3,463
-------- --------
Net cash provided by financing activities........................ 3,704 42,115
-------- --------
Effect of exchange rate changes on cash and cash equivalents........ (8,957) 1,048
-------- --------
Net increase (decrease) in cash and cash equivalents............. (14,254) 17,823
Cash and cash equivalents, beginning of period...................... 41,932 3,134
-------- --------
Cash and cash equivalents, end of period............................ $ 27,678 20,957
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest.......................... $ 26,085 8,446
======== ========
Cash paid during the period for income taxes...................... $ 6,874 2,208
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
7
<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. 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
"Reorganization").
The Reorganization 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.
C. Proposed Rights Offering and Sale of Preferred Stock
----------------------------------------------------
The Company has announced that it plans to commence a $75 million rights
offering to its stockholders. Under the rights offering, the Company
plans to distribute, on a pro rata basis to all of its common
stockholders of record as of a date to be determined, transferable
rights to purchase additional shares of common stock at or about $6.00
per share. On April 7, 1999, the Company entered into an agreement with
Apollo Investment Fund, L.P. ("Apollo"), together with its affiliates,
Samsonite's largest stockholder, pursuant to which Apollo agreed to make
a "bridge" investment equal to the aggregate subscription price of the
rights distributable to Apollo and its affiliates in the rights offering
and to "backstop" the rights offering by purchasing additional shares
not subscribed for by other stockholders, subject to a maximum total
investment by Apollo of $37.5 million. Apollo subsequently agreed to
increase its backstop obligation by $12.5 million to $50.0 million. In
consideration of Apollo's agreement to make the bridge investment and to
back-stop the rights offering, the Company agreed to pay Apollo a fee of
$1.0 million. Additionally, Artemis America Partnership has agreed to
make up to a $25.0 million investment in the Company by purchasing from
Apollo, at Apollo's cost, one-half of the shares that Apollo purchased
pursuant to its bridge investment and one-half of any shares that Apollo
is obligated to purchase pursuant to the backstop.
In April, Apollo made its bridge investment of $25.4 million by
purchasing 1,000 shares of Series Z Convertible Preferred Stock ("Series
Z Preferred Stock") which is initially convertible into the Company's
common stock at a rate of $6.00 per common share for a total of
4,235,000 shares. The Series Z Preferred Stock has a nominal
liquidation preference and is entitled to receive dividends equal to the
dividends payable on the shares of common stock into which it is
convertible. Part of the proceeds from Apollo's
8
<PAGE>
bridge investment were used to pay the cash premium for an insurance
policy covering various lawsuits filed between March 13, 1998 and March
9, 1999 against the Company and related parties, and to pay certain
costs incurred to defend these lawsuits (see Note 9). The $1.0 million
fee payable to Apollo was recorded as a reduction of the stated value of
the Series Z Preferred Stock.
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 July 31, 1999 and results of operations for the
three and six month periods ended July 31, 1999 and 1998. These
unaudited 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, 1999.
E. Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ significantly
from those estimates.
F. Per Share Data
--------------
The Company computes earnings (loss) per share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128"). 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, convertible preferred stock 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 six months ended July 31, 1999 and 1998 and
the three months ended July 31, 1999 and 1998 is computed based on a
weighted average number of shares of common stock outstanding during the
period of 10,508,957, 18,407,919, 10,512,211 and 16,402,301,
respectively. Basic earnings per share and earnings per share - assuming
dilution are the same for the six and three month periods ended July 31,
1999 and 1998 because of the antidilutive effect of stock options and
awards when there is a net loss to common stockholders.
G. Royalty Revenues
----------------
The Company licenses its brand names to certain unrelated third parties
as well as certain of its foreign subsidiaries and joint ventures. Net
sales include royalties earned of $7,979,000 and $7,349,000 for the six
months ended July 31, 1999 and 1998, respectively, and $3,433,000 and
$3,572,000 for the three months ended July 31, 1999 and 1998,
respectively.
H. Reclassifications
-----------------
Certain reclassifications were made to the consolidated financial
statements for prior periods to conform to the July 31, 1999
presentation.
9
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (continued)
2. Inventories
Inventories consisted of the following :
<TABLE>
<CAPTION>
July 31, January 31,
1999 1999
-------------- ----------------
(In thousands)
<S> <C> <C>
Raw Materials............................................ $ 35,296 47,014
Work in Process.......................................... 6,936 8,059
Finished Goods........................................... 125,074 132,494
-------- -------
$167,306 187,567
======== =======
3. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
July 31, January 31,
1999 1999
-------------- ----------------
Land..................................................... $ 11,806 12,555
Buildings................................................ 67,048 71,517
Machinery, equipment and other........................... 142,328 141,306
-------- -------
221,182 225,378
Less accumulated amortization and depreciation.......... (78,493) (75,737)
-------- -------
$142,689 149,641
======== =======
</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 and consisted of the
following:
<TABLE>
<CAPTION>
Three months ended Six months ended
July 31, July 31,
--------------------------- ------------------------------
1999 1998 1999 1998
--------------------------- ------------------------------
(In thousands)
<S> <C> <C> <C> <C>
"Fresh Start" Depreciation in Cost of Goods Sold........ $ 201 137 404 723
"Fresh Start" Depreciation in Selling, General and
Administrative Expenses.............................. 44 31 88 161
----- ---- ---- ----
Total "Fresh Start" Depreciation................... $ 245 168 492 884
===== ==== ==== ====
</TABLE>
Property and equipment revalued in connection with the adoption of SOP 90-7
are being depreciated over their respective estimated useful lives, ranging
primarily from two to six years.
4. Intangible Assets
Intangible assets, net of accumulated amortization, consisted of the
following:
<TABLE>
<CAPTION>
July 31, January 31,
1999 1999
-------------- ----------------
(In thousands)
<S> <C> <C>
Trademarks...................................... $ 103,310 105,059
Licenses, Patents and Other..................... 8,092 9,189
-------- -------
$ 111,402 114,248
======== =======
</TABLE>
10
<PAGE>
SAMONSONITE 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:
<TABLE>
<CAPTION>
Three months ended Six months ended
July 31, July 31,
----------------------- --------------------
1999 1998 1999 1998
--------- -------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
"Fresh Start" Amortization of Trademarks, Licenses,
Patents and Other................................... $ 1,260 1,431 2,519 2,863
Other....................................................... 129 81 261 175
--------- -------- ------- -------
$ 1,389 1,512 2,780 3,038
========= ======== ======= =======
</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>
July 31, January 31,
1999 1999
----------------------- ------------------
(In thousands)
<S> <C> <C>
Senior Credit Facility (a)............................. $ 105,480 135,074
Senior Subordinated Notes (b).......................... 350,000 350,000
Other obligations (c).................................. 21,825 20,097
Capital lease obligations.............................. 4,888 5,802
Series B Senior Subordinated Notes (d)................. 532 532
--------- -------
Total debt...................................... 482,725 511,505
Less short-term debt and current installments of
long-term obligations............................ (17,590) (15,332)
-------- -------
Long-term obligations less current installments........ $ 465,135 496,173
======== =======
</TABLE>
(a) The Senior Credit Facility provides for a $100 million revolving
credit facility (the "Revolving Credit Facility"), a $60 million term
loan facility (the "U.S. Term Loan Facility") borrowed by the Company,
and a term loan facility in the amount of Belgian francs
1,853,750,000, (equivalent to $50 million on the closing date of the
facility) (the "European Term Loan Facility"), borrowed by Samsonite
Europe N.V. The Company has the option in certain circumstances to add
lenders to the Senior Credit Facility in order to increase the
Revolving Credit Facility by up to an additional $50 million.
Obligations under the U.S. Term Loan Facility and the Revolving Credit
Facility are secured by inventory, accounts receivable, personal
property, intellectual property and other intangibles of the Company,
100% of the capital stock of the Company's major domestic
subsidiaries, 66% of the stock of Samsonite Europe N.V. and other
major non-domestic subsidiaries and a mortgage on the Company's real
estate in Denver, Colorado.
The Senior Credit Facility contains financial covenants that require
the Company to maintain certain debt to earnings and interest coverage
ratios and places limitations on capital expenditures. The Senior
Credit Facility also contains covenants that, among other things,
limit the ability of the Company (subject to exceptions) to incur
additional liens, incur additional indebtedness, make certain kinds of
investments,
11
<PAGE>
SAMONSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (continued)
prepay or purchase subordinate indebtedness and preferred stock, make
distributions and dividend payments to its stockholders, engage in
affiliate transactions, make certain asset dispositions, make
acquisitions and participate in certain mergers.
During the six months ended July 31, 1998, deferred financing costs
related to a refinancing of the Senior Credit Facility of $380,000
were charged to expense and classified as an extraordinary item, net
of tax effects, in the accompanying statements of operations.
(b) The Senior Subordinated Notes (the "Notes") bear interest at 10 3/4%
and mature on June 15, 2008. The Notes are redeemable at the option of
the Company at various redemption prices specified in the indenture
under which the Notes were issued. The indenture contains certain
covenants that, among other things, restrict the ability of the
Company and its restricted subsidiaries (as defined in the indenture)
to incur additional indebtedness, pay dividends and make certain other
distributions, issue capital stock of restricted subsidiaries, make
certain investments, repurchase stock, create liens, enter into
transactions with affiliates, create dividend or other payment
restrictions affecting restricted subsidiaries, merge or consolidate,
and transfer or sell assets. The covenants are subject to a number of
important exceptions.
(c) Other obligations consist of various notes payable (including short-
term notes) to banks by foreign subsidiaries aggregating $17.9 million
and $3.9 million of secured financing arrangements with foreign banks.
(d) The Series B Senior Subordinated Notes (the "Series B Notes") bear
interest at 11 1/8% and have a maturity date of July 15, 2005. During
the six months ended July 31, 1998, the Company completed a tender
offer for 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 six months ended
July 31, 1998.
6. Other Income (Expense) - Net
Other income (expense) - net consisted of the following:
<TABLE>
<CAPTION>
Three months ended Six months ended
July 31, July 31,
----------------------- --------------------
1999 1998 1999 1998
--------- -------- -------- -------
(In thousands)
<S> <C> <C> <C> <C>
Net realized gain from foreign currency forward
delivery contracts...................................... $ 834 749 1,238 1,425
Unrealized gain from foreign currency forward
delivery contracts...................................... 604 (562) 4,528 191
Equity in loss of unconsolidated affiliate.................. (160) (638) (197) (873)
Gain (loss) on disposition of assets held for sale
and fixed assets, net................................... 62 3,632 (32) 4,369
Other, net.................................................. (466) (1,383) (2,447) (2,316)
--------- -------- -------- -------
$ 874 1,798 3,090 2,796
========= ======== ======== =======
</TABLE>
12
<PAGE>
SAMONSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (continued)
7. Employee Stock Options
The Company has authorized 2,550,000 shares for the granting of options
under its 1995 Stock Option and Award Plan and 750,000 shares for the
granting of options under its FY 1999 Stock Option and Incentive Award
Plan. See Note 11 to the consolidated financial statements included in the
January 31, 1999 Form 10-K for a description of these plans. In addition,
the Company has outstanding options and stock bonus awards to current and
past executives in connection with employment agreements.
At July 31, 1999, the Company had outstanding options for a total of
1,814,688 shares at exercise prices ranging from $2.50 to $16.00 per share.
Options for 1,015,830 shares were exercisable at July 31, 1999 at a
weighted average exercise price of $6.51 per share. Options for 2,358
shares under the 1995 Stock Option and Award Plan were exercised at an
average exercise price of $2.50 per share during the six months ended July
31, 1999.
In May 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 (the "Bonus Shares"), 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. Bonus Shares vested and were issued to one executive
subsequent to his termination of employment on February 1, 1998 and the
remaining compensation expense related to his shares was recognized during
the six months ended July 31, 1998. The Company has recognized compensation
expense equal to the fair market value at the date of the grant ($18.25 per
share) over the vesting period for the two remaining executives. In
connection with the completion of the recapitalization in fiscal 1999, the
Share Bonus Agreements for the two remaining executives were amended to
permit the tender of Bonus Shares to the Company. As a result, during
fiscal 1999 the Company purchased 20,026 of the Bonus Shares from each of
the two executive officers, representing the same percentage of shares
accepted in the recapitalization from other stockholders. The remaining
outstanding Bonus Shares vested and were issued in May 1999.
8. Segment Information
Effective for the year ended January 31, 1999, the Company adopted SFAS No.
131, Disclosure About Segments of an Enterprise and Related Information,
which changes the way the Company reports information about its operating
segments. Certain information for July 31, 1998 has been reclassified from
the prior year's presentation in order to conform to the July 31, 1999
presentation.
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 primarily along geographic
lines dividing responsibility for the Company's operations as follows: The
Americas, which include the United States comprised of wholesale and retail
operations, Canada, Latin America, and South America; Europe; Asia, which
includes India, China, Singapore, South Korea, Taiwan and Hong Kong; and
Other which primarily includes licensing revenues from non-luggage brand
names owned by the Company, royalties from the Japanese luggage licensee
and corporate overhead.
The Company evaluates the performance of its segments based on operating
income of the respective business units. Intersegment sales prices are
market based.
13
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (continued)
Segment information for the six-month and three-month periods ended July 31,
1999 and 1998 is as follows:
Six months ended July 31,
<TABLE>
<CAPTION>
U.S. U.S. Other Other
---- ---- ----- -----
1999 Europe Wholesale Retail Americas Asia Operations Eliminations Totals
- ---- -------- --------- ------ -------- ------ ---------- ------------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from external customers........... $157,766 103,452 63,382 23,506 15,383 7,775 -- 371,264
Intersegment revenues...................... $ 1,525 30,359 -- 892 4,322 -- (37,098) --
Operating income (loss) (a)................ $ 22,007 (226) 2,669 836 2,073 (4,958) 2,289 24,690
Total assets............................... $175,184 160,523 35,191 46,907 29,269 225,265 (97,242) 575,097
1998
- ----
Revenues from external customers........... $144,577 76,991 59,958 21,552 10,119 7,141 -- 320,338
Intersegment revenues...................... $ 1,046 10,693 -- 3,364 4,097 -- (19,200) --
Operating income (loss) (a)................ $ 16,232 (27,570) 4,442 (8) 157 (13,163) 1,743 (18,167)
Total assets............................... $175,864 156,735 29,785 49,747 21,907 766,705 (569,890) 630,853
</TABLE>
Three months ended July 31,
<TABLE>
<CAPTION>
U.S. U.S. Other Other
---- ---- ----- -----
1999 Europe Wholesale Retail Americas Asia Operations Eliminations Totals
- ---- -------- --------- ------ -------- ------ ---------- ------------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from external customers........... $ 78,563 56,303 35,161 13,520 8,350 3,491 -- 195,388
Intersegment revenues...................... $ 856 13,191 -- 197 2,130 -- (16,374) --
Operating income (loss) (a)................ $ 10,807 585 2,394 967 1,303 (2,568) 1,188 14,676
Total assets............................... $175,184 160,523 35,191 46,907 29,269 225,265 (97,242) 575,097
1998
- ----
Revenues from external customers........... $ 72,628 37,019 34,176 11,123 5,230 3,486 -- 163,662
Intersegment revenues...................... $ 430 (1,832) -- 1,535 3,347 -- (3,480) --
Operating income (loss) (a)................ $ 10,806 (18,126) 3,745 (75) 198 (11,999) 1,633 (13,818)
Total assets............................... $175,864 156,735 29,785 49,747 21,907 766,705 (569,890) 630,853
</TABLE>
(a) 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 income - net,
income taxes, minority interest and extraordinary items. General corporate
expenses and amortization of intangibles are included in other operations.
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 six months ended July 31, 1999 and
1998, the Company had net gains from such transactions of $5,766,000 and
$1,616,000, respectively, which are included in nonoperating income. For the
three months ended July 31, 1999 and 1998, the Company had net gains from
such transactions of $1,438,000 and $187,000, respectively.
9. Litigation, Commitments and Contingencies
The Company and certain related parties have been the subject of various
purported shareholder class action lawsuits and a purported derivative
action filed between March 13, 1998 and March 9, 1999 in various courts,
including Colorado State District Court, City and County of Denver; United
States District Court for the District of Colorado; and the Delaware Court
of Chancery (together, the ''Shareholder Litigation''). In April 1999, the
Company entered into an insurance agreement with a major insurance carrier
whereby the carrier assumed responsibility for the defense and ultimate
resolution of the Shareholder Litigation and any other actions asserted at
any time that involve essentially the same or similar allegations, facts or
circumstances as those in the Shareholder Litigation. In connection with the
insurance agreement, the Company entered into certain agreements and
releases and agreed to make a cash premium payment, net of potential future
reimbursements, to the insurer ranging from an estimated minimum payment of
$7.0 million to a maximum payment of $17.5 million depending on the ultimate
cost to defend and resolve the pending litigation. The Company is
responsible for paying all legal defense costs prior to the effective date
of the insurance agreement. However, the Company expects that substantially
all costs incurred subsequent to the effective date to defend and resolve
the Shareholder Litigation will
14
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (continued)
be covered by the insurance agreement. The Company believes that its
consolidated statements of operations for the fiscal year ended January 31,
1999 reflect the accrual of substantially all costs incurred and expected to
be incurred in connection with these lawsuits.
In addition, the Company is a party to various other legal proceedings and
claims in the ordinary course of business. The Company believes that the
outcome of these other pending matters will not have a material adverse
effect on its consolidated financial position, results of operations or
liquidity.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- ---------------------
Three Months Ended July 31, 1999 ("fiscal 2000" or "current year") Compared to
Three Months Ended July 31, 1998 ("fiscal 1999" or "prior year")
General. The Company analyzes its net sales and operations by the following
categories: (i) "European operations" which include eastern and western European
country sales, manufacturing and distribution operations whose reporting
currency is the Belgian franc; (ii) "the Americas operations" which include
wholesale and retail sales, manufacturing and distribution operations in the
United States, and "Other Americas" which includes operations in Canada and
Latin America; (iii) "Asian operations" which include the sales, manufacturing
and distribution operations in India, China, Singapore, South Korea, Hong Kong
and Taiwan; and (iv) "corporate operations" which includes licensing operations
and corporate headquarters.
Results of European operations were translated from Belgian francs to U.S.
dollars in fiscal 2000 and fiscal 1999 at average rates of approximately 38.41
and 37.15 francs to the U.S. dollar, respectively. This decrease in the value of
the Belgian franc of approximately 3.4% resulted in decreases in reported sales,
cost of sales and other expenses in fiscal 2000 compared to fiscal 1999. The
most significant effects from the difference in exchange rates from last year to
this year are noted in the following analysis and are 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 2000, the Company had net gains from such instruments of $1.4 million
($0.8 million of which was realized); during fiscal 1999, the Company had net
gains on such instruments of $0.2 million ($0.7 million of which was realized).
The Company estimates the reduction in reported operating income because of the
translation from the strengthening of the U.S. dollar versus the Belgian franc
from the same quarter in the prior year to be approximately $0.4 million and
$0.5 million for the three months ended July 31, 1999 and 1998, respectively.
Net Sales. Consolidated net sales increased from $163.7 million in fiscal 1999
to $195.4 million in fiscal 2000, an increase of $31.7 million, or 19.4%.
Fiscal 2000 sales were negatively impacted by the decline in the value of the
Belgian franc compared to the U.S. dollar. Without the effect of the exchange
rate difference, fiscal 2000 sales would have increased by $34.4 million, or
approximately 21.0%.
Sales from European operations increased from $72.6 million in fiscal 1999 to
$78.6 million in fiscal 2000, an increase of $6.0 million. Expressed in the
local European reporting currency (Belgian francs), fiscal 2000 sales increased
by 11.8%, or the U.S. constant dollar equivalent of $8.7 million, compared to
fiscal 1999. Sales of softside product improved by approximately 26% from the
prior year while hardside product sales increased by approximately 2%. The
significant increase in softside sales is due in part to the success of the
redesigned Spark, Accent and Promo Base Hits lines. Sales of the new Trunk &
Co. products and softside business cases were also sharply higher.
Sales from the Americas operations increased from $82.3 million in fiscal 1999
to $105.0 million in fiscal 2000, an increase of $22.7 million, or 27.5%. U.S.
Wholesale sales for the second quarter increased by $19.3 million, or 52% from
the prior year, U.S. Retail division sales increased by $1.0 million, and sales
in the Other Americas operations increased by $2.4 million from the prior year.
A computer conversion problem in July 1998 caused a disruption in distribution
in the U.S. operations which significantly depressed sales during the second
quarter of the prior year. The Company believes U.S. Wholesale sales have
improved due to increased consumer acceptance of more competitive
16
<PAGE>
products and better marketing strategies resulting in better sell-through and
fewer returns compared to the prior year. U.S. Retail sales continued to
improve, increasing from $34.2 million in the prior year to $35.2 million in the
current year, an increase of 2.9%. However, comparable store sales decreased
3.9% from the same quarter in the prior year. The increase in Other Americas
sales is due to increases in Canada's sales as well as a full quarter of sales
from Argentina and Uruguay, which were acquired in the second quarter of fiscal
1999.
Second quarter sales from Asian operations were $3.1 million higher than the
prior year sales, a 59.7% increase, as a result of increased sales in all Asian
operations. The most significant increase occurred in Korea with a $1.4 million
increase over the prior year's sales. The improvement in Asian sales is
primarily due to some economic recovery in the region and increased market share
in Korea.
Revenues from licensing operations declined slightly from the prior year to $3.4
million in fiscal 2000. Samsonite and American Tourister label licensing
revenues decreased $0.1 million from the prior year, and Global Licensing
revenues were approximately equal to the prior year.
Gross profit. Consolidated gross profit for fiscal 2000 increased from fiscal
1999 by $17.0 million. Consolidated gross margin increased by 2.3 margin
points, from 39.2% in fiscal 1999 to 41.5% in fiscal 2000.
Gross margins from European operations increased 1.0 percentage points from the
prior year to 41.7% in fiscal 2000. The increase in European gross profit
margins is due primarily to selective price increases effective in the European
markets beginning in fiscal 2000 and an improvement in margins on softside
products due to lower product costs.
Gross margins for the Americas increased by 4.6 percentage points, from 34.8% in
fiscal 1999 to 39.4% in fiscal 2000. U.S. Wholesale gross profit margins
increased from 19.3% in the prior year to 32.3% in the current year due
primarily to improved sales volume, lower sales returns and allowances, the
reduction of unfavorable production variances and lower manufacturing overhead
costs.
U.S. Retail gross profit margins for the quarter declined slightly to 52.5% in
fiscal 2000 from 53.0% in fiscal 1999 due primarily to a higher sales mix of
discontinued and obsolete product at lower gross profit margins. Part of the
Company's strategy to reduce excess inventories in the U.S. is to sell such
products through its retail stores.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
decreased by $5.8 million from fiscal 1999 to fiscal 2000. As a percent of
sales, SG&A was 33.3% in fiscal 2000 and 43.3% in fiscal 1999.
SG&A for the Americas, including Corporate, decreased by $9.3 million. Within
the Americas, SG&A for U.S. Retail increased by $1.7 million primarily due to
increased sales volumes. SG&A for Corporate and U.S. Wholesale decreased $11.2
million due primarily to non-recurring expenses incurred in fiscal 1999 totaling
$9.1 million associated with the Recapitalization (see Note 2 to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1999) and lower dealer
advertising costs and warranty expense in the current year. SG&A for Other
Americas operations increased by $0.2 million. European SG&A increased by a net
$3.2 million, which included a $0.7 million decline due to the exchange rate
effect. The increase in Europe's SG&A is due primarily to an increase in
advertising costs compared to the prior year, a higher provision for doubtful
accounts receivable and higher professional fees incurred. SG&A for Asia was
$0.3 million higher than the prior year.
Provision for restructuring operations. The provision for restructuring
operations of $5.6 million in the second quarter of the prior year results
primarily from the restructuring of the U.S. Wholesale business. The
restructuring provision was primarily related to termination and severance costs
for the elimination of approximately 227 positions and costs related to the
disposal of molding and other equipment representing excess capacity. There was
no restructuring provision recorded in fiscal 2000.
17
<PAGE>
Amortization of intangible assets. Amortization of intangible assets decreased
from $1.5 million in fiscal 1999 to $1.4 million in fiscal 2000 due primarily to
lower amortization expense relating to certain McGregor licenses which became
fully amortized during fiscal 1999.
Operating income (loss). Operating income (loss) improved from an operating loss
of $13.8 million in fiscal 1999 to operating income in fiscal 2000 of $14.7
million, an increase of $28.5 million. The increase is a result of the increased
sales volume and resulting increase in gross profit of $17.0 million, reductions
in SG&A of $5.8 million and the restructuring expense of $5.6 million and the
decline in amortization of intangibles of $0.1 million.
Interest income. Interest income of $0.4 million was lower than the prior year
by $0.3 million due primarily to interest income received on the temporary
investment of funds from proceeds of the Recapitalization financing until the
tender offer was completed during the prior year.
Interest expense and amortization of debt issue costs. Interest expense and
amortization of debt issue costs increased from $7.5 million in fiscal 1999 to
$13.3 million in fiscal 2000. The increase is due primarily to increased
interest expense and issuance cost amortization as a result of the
Recapitalization which occurred during the second quarter of the prior year.
Other income - net. See Note 6 to the consolidated financial statements
included elsewhere herein for a comparative analysis of other income - net.
Other income - net decreased by $0.9 million from $1.8 million in fiscal 1999 to
$0.9 million in fiscal 2000. The decrease is due to a $3.6 million gain on the
sale of an asset held for sale recognized in the second quarter of fiscal 1999,
partially offset by an increase in hedge gains from forward foreign currency
contracts of $1.3 million and a decrease in other expenses of $0.9 million.
Equity in loss of unconsolidated affiliate also decreased by $0.5 million as a
result of a decrease in the losses of Chia Tai Samsonite (H.K.) Ltd., a 50%
owned joint venture formed to manufacture and distribute luggage in China, which
was restructured in fiscal 1999.
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 because of the translation from the strengthening of the U.S.
dollar versus the Belgian franc from the same quarter in the prior year to be
approximately $0.4 million and $0.5 million for the three months ended July 31,
1999 and 1998, respectively. Other income for the second quarter of fiscal 2000
includes income from forward exchange contracts of $1.4 million, $0.8 million of
which was realized. In the second quarter of fiscal 1999, such transactions
resulted in income of $0.2 million, $0.7 million which was realized. The income
recorded for the three months ended July 31, 1999 results primarily from forward
exchange contracts entered to reduce economic exposure to fluctuations in
currency exchange rates for the Belgian franc. The ultimate realization of
unrealized income from such contracts is subject to fluctuations in the exchange
rate of the U.S. dollar against the Belgian franc until the contracts are
closed.
Income tax expense. Income tax expense decreased from $8.1 million in fiscal
1999 to $2.7 million in fiscal 2000. The decrease is due primarily to the
provision for deferred taxes in the prior year on a $30 million dividend
received from Samsonite Europe N.V. Deferred taxes had not been previously
provided on these European earnings. Offsetting the effect of the dividend in
the prior year is higher pretax earnings in the current year. The relationship
between the expected income tax benefit computed by applying the U.S. statutory
rate to the pretax loss and actual income tax expense recognized results
primarily because of (i) foreign income tax expense provided on foreign
earnings, (ii) valuation allowances provided on deferred tax assets, and (iii)
state and local income taxes. A deferred tax benefit has not been provided for
U.S. operating losses.
Extraordinary loss. The extraordinary loss for the three months ended July 31,
1998 resulted from $0.4 million in deferred financing costs related to the
refinanced senior credit facility which were charged to expense, net of tax
effects, in connection with the completion of the Recapitalization.
18
<PAGE>
Net loss. The Company had a net loss in fiscal 2000 of $0.4 million compared to
a net loss in fiscal 1999 of $27.3 million. The decrease in the net loss from
the prior year of $26.9 million is caused by the effect of the increases in
operating income and a decrease in income tax expense and extraordinary loss,
offset by the decrease in interest and other income and the increase in interest
expense during fiscal 2000.
Senior redeemable preferred stock dividends and accretion of preferred stock
discount. This item represents the accrual of cumulative dividends on the Senior
Redeemable Preferred Stock issued in connection with the Recapitalization and
the accretion of the discount over the twelve-year term of the Senior Redeemable
Preferred Stock. The increase over prior year is due to the timing of the
Recapitalization which occurred in June 1998.
Net loss to common stockholders. This amount represents net loss after dividends
payable and the accretion of discount on the Senior Redeemable Preferred Stock
and is the amount used to calculate net loss per common share.
Six Months Ended July 31, 1999 ("fiscal 2000" or "current year") Compared to Six
Months Ended July 31, 1998 ("fiscal 1999" or "prior year").
General. Results of European operations were translated from Belgian francs to
U.S. dollars in fiscal 2000 and fiscal 1999 at average rates of approximately
37.24 and 37.38 francs to the U.S. dollar, respectively. This increase in the
value of the Belgian franc of approximately 0.3% resulted in nominal increases
in reported sales, cost of sales and other expenses in fiscal 2000 compared to
fiscal 1999. The most significant effects from the difference in exchange rates
from last year to this year are noted in the following analysis and are 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 2000, the Company had net gains from such instruments of $5.8
million, $1.3 million of which was realized; during fiscal 1999, the Company had
net gains on such instruments of $1.6 million, $1.4 million of which was
realized. The Company estimates the reduction in operating income from the
strengthening of the U.S. dollar versus the Belgian franc from the same period
in the prior year to be approximately $1.3 million for the six months ended July
31, 1998. The effect of the exchange rate difference on operating income in
fiscal 2000 is not significant.
Net Sales. Consolidated net sales increased from $320.3 million in fiscal 1999
to $371.3 million in fiscal 2000, an increase of $51.0 million or 15.9%. Fiscal
2000 sales were favorably impacted by the increase in the value of the Belgian
franc compared to the U.S. dollar. Without the effect of the exchange rate
difference, fiscal 2000 sales would have increased by $50.4 million or
approximately 15.7%.
Sales from European operations increased from $144.6 million in fiscal 1999 to
$157.8 million in fiscal 2000, an increase of $13.2 million. Expressed in the
local European reporting currency (Belgian francs), fiscal 2000 sales increased
by 8.7%, or the U.S. constant dollar equivalent of $12.6 million, compared to
fiscal 1999. Sales of softside product improved by approximately 20% from prior
year while hardside product sales decreased slightly. The significant increase
in softside sales is due in part to the success of the Spark, Accent and Promo
Base Hits lines. Sales of the new Trunk & Co. products and softside business
cases were also higher. The decrease in hardside sales is attributable mainly to
the decline in Epsilon and Oyster I series sales.
Sales from the Americas operations increased from $158.5 million in fiscal 1999
to $190.4 million in fiscal 2000, an increase of $31.9 million, or 20.1%. U.S.
Wholesale sales for the current year increased by $26.5 million from the prior
year, Retail sales increased by $3.4 million, and sales in the Other Americas
operations increased by $2.0 million from the prior year. A computer conversion
problem in July 1998 caused a disruption in distribution in the U.S. operations
which significantly depressed sales during the six months ended July 31, 1999.
The Company believes U.S. Wholesale sales have improved due to increased
consumer acceptance of more competitive products and better marketing strategies
resulting in better sell-through and fewer returns compared to the prior year.
U.S. Retail sales continued to improve, increasing from $60.0 million in the
prior year to $63.4 million in fiscal 2000, an increase of 5.7%. Comparable
store sales decreased 2.2% from the same period in the prior year.
19
<PAGE>
Sales from Asian operations were $5.3 million, or 52.0%, higher than the prior
year sales, as a result of increased sales in all Asian operations. The most
significant increase occurred in Korea with a $2.6 million increase over the
prior year's sales. The improvement in Asian sales is primarily due to some
economic recovery in the region and increased market share in Korea.
Revenues from licensing operations increased $0.6 million over the prior year to
$7.7 million in fiscal 2000. Samsonite and American Tourister label licensing
revenues increased $0.5 million, and Global Licensing revenues increased $0.1
million compared to the prior year.
Gross profit. Consolidated gross profit for fiscal 2000 increased from fiscal
1999 by $32.2 million. Consolidated gross margin increased by 3.3 margin
points, from 38.6% in fiscal 1999 to 41.9% in fiscal 2000.
Gross margins from European operations increased 1.4 percentage points from the
prior year to 40.9% in fiscal 2000. The increase in gross profit margins is due
primarily to selective price increases effective in the European markets
beginning in fiscal 2000 and improvement in margins on softside products.
Gross margins for the Americas increased by 5.5 percentage points, from 34.9% in
fiscal 1999 to 40.4% in fiscal 2000. U.S. Wholesale gross profit margins
increased from 22.6% in the prior year to 35.0% in the current year due
primarily to improved sales volume, lower sales returns and allowances, the
elimination of unfavorable production variances and lower manufacturing overhead
costs.
U.S. Retail gross profit margins for the period declined slightly to 51.8% in
fiscal 2000 due primarily to a higher sales mix of discontinued and obsolete
product at lower gross profit margins. Part of the Company's strategy to reduce
excess inventories in the U.S. is to sell such products through its retail
stores.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
decreased by $2.2 million from fiscal 1999 to fiscal 2000. As a percent of
sales, SG&A was 34.6% in fiscal 2000 and 40.7% in fiscal 1999.
SG&A for the Americas, including Corporate, decreased $6.7 million. Within the
Americas, SG&A for U.S. Retail increased by $2.9 million primarily due to an
increase in the number of stores. SG&A for Corporate and U.S. Wholesale combined
decreased $10.2 million due primarily to expenses incurred in fiscal 1999
totaling $9.1 million associated with the Recapitalization, lower dealer
advertising costs and lower warranty and sales costs. SG&A for Other Americas
increased by $0.6 million. SG&A for Europe increased $4.2 million. The increase
in Europe's SG&A is due primarily to an increase in advertising costs compared
to the prior year, a higher provision for doubtful accounts receivable and
higher professional fees incurred. SG&A for Asia was $0.3 million higher than
the prior year.
Provision for restructuring operations. The provision for restructuring
operations in fiscal 1999 of $8.2 million results primarily from the
restructuring of the U.S. Wholesale operations and the restructuring of the
Torhout, Belgium manufacturing operations. The U.S. Wholesale restructuring
provision of $5.6 million is primarily related to termination and severance
costs for the elimination of approximately 227 positions and costs related to
the disposal of molding and other equipment representing excess capacity. The
Torhout, Belgium restructuring provision of $2.6 million is primarily related to
termination and severance costs for the elimination of approximately 111
positions. There was no restructuring provision recorded during fiscal 2000.
Amortization of intangible assets. Amortization of intangible assets decreased
from $3.0 million in fiscal 1999 to $2.8 million in fiscal 2000 due primarily to
lower amortization expense relating to certain McGregor licenses which became
fully amortized during fiscal 1999.
Operating income (loss). Operating income (loss) improved from an operating loss
of $18.2 million in fiscal 1999 to operating income in fiscal 2000 of $24.7
million, an increase of $42.9 million. The increase is a result of the
increased sales volume and resulting increase in gross profit of $32.2 million,
the reduction in SG&A of $2.2 million and the restructuring provision of $8.2
million and the decline in amortization of intangibles of $0.3 million.
20
<PAGE>
Interest income. Interest income of $1.0 million was lower than the prior year
by $0.5 million due primarily to interest income received from temporary
investment of funds from proceeds of the Recapitalization financing until the
tender offer was completed and interest received on a refund of state income
taxes during the prior year.
Interest expense and amortization of debt issue costs. Interest expense and
amortization of debt issue costs increased from $12.3 million in fiscal 1999 to
$26.8 million in fiscal 2000. The increase is due primarily to increased
interest expense and issuance cost amortization as a result of the
Recapitalization which occurred during the second quarter of fiscal 1999.
Other income - net. See Note 6 to the consolidated financial statements
included elsewhere herein for a comparative analysis of other income - net.
Other income - net increased by $0.3 million from $2.8 million in fiscal 1999 to
$3.1 million in fiscal 2000. The increase is due primarily to an increase in
hedge gains of $4.2 million, and a decrease in equity in loss of unconsolidated
affiliates of $0.7 million as a result of a decrease in the losses of Chia Tai
Samsonite (H.K.) Ltd., a 50% owned joint-venture formed to manufacture and
distribute luggage in China, which was restructured in fiscal 1999. These
increases were partially offset by gains on sales of assets held for sale
recognized in the prior year of $3.6 million, decreases in gain on sale of fixed
assets of $0.7 million, and an increase in other miscellaneous expenses of $0.3
million.
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 period in the prior year to be approximately $1.3 million
for the six months ended July 31, 1998. There was substantially no effect on
operating income in fiscal 2000 due to exchange rate changes. Other income for
fiscal 2000 includes income from forward exchange contracts of $5.8 million,
$4.5 million of which was unrealized. In fiscal 1999, such transactions
resulted in income of $1.6 million, $0.2 million of which was unrealized. The
income recorded for the six months ended July 31, 1999 results primarily from
forward exchange contracts entered to reduce economic exposure to fluctuations
in currency exchange rates for the Belgian franc. The ultimate realization of
this amount is subject to fluctuations in the exchange rate of the U.S. dollar
against the Belgian franc when the contracts are closed.
Income tax expense. Income tax expense increased from $5.2 million in fiscal
1999 to $5.8 million in fiscal 2000. The increase in current year taxes is due
to pretax earnings in fiscal 2000 compared to a loss in fiscal 1999 offset by
the tax effect in the U.S. of a $30 million dividend received from Samsonite
Europe N.V. in the prior year. Prior year taxes also included $0.8 million in
state tax refunds received in fiscal 1999 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 the pretax loss and actual income tax
expense recognized results primarily because of (i) foreign income tax expense
provided on foreign earnings, (ii) valuation allowances provided on deferred tax
assets, and (iii) state and local income taxes. A deferred tax benefit has not
been provided for U.S. operating losses.
Extraordinary loss. The extraordinary loss for the six months ended July 31,
1998 resulted from the completion of a tender offer for the Company's 11 1/8%
Series B Subordinated Notes (the "Notes"). The Company retired $52.3 million
principal amount of the Notes and paid redemption premiums and other expenses of
the tender offer totaling approximately $8.5 million. These costs along with
$1.5 million of deferred financing costs were charged to expense and classified
as an extraordinary item, net of tax effects, for the six months ended July 31,
1998. Also during the prior year, the Company completed the Recapitalization. In
connection with the Recapitalization, deferred financing costs related to the
refinanced senior credit facility of $0.4 million were charged to expense and
classified as an extraordinary item, net of tax effects.
Net loss. The Company had a net loss in fiscal 2000 of $4.3 million compared to
a net loss in fiscal 1999 of $38.3 million. The decrease in the net loss from
the prior year of $34.0 million is caused by the effect of the increases in
operating and other income and a decrease in extraordinary loss, offset by the
decrease in interest income and the increase in interest expense and income
taxes during fiscal 2000.
21
<PAGE>
Senior redeemable preferred stock dividends and accretion of preferred stock
discount. This item represents the accrual of cumulative dividends on the Senior
Redeemable Preferred Stock issued in connection with the Recapitalization and
the accretion of the discount over the twelve-year term of the Senior Redeemable
Preferred Stock. The increase over the prior year is due to the timing of the
Recapitalization which occurred in June 1998.
Net loss to common stockholders. This amount represents net loss after
dividends payable and the accretion of discount on the Senior Redeemable
Preferred Stock and is the amount used to calculate net loss per common share.
Liquidity and Capital Resources
- -------------------------------
For the six months ended July 31, 1999, cash provided by operations as reflected
on the Consolidated Statements of Cash Flows included elsewhere herein was $2.9
million, primarily as a result of the net loss as adjusted for non-cash items
and decreases in inventories, net of the increases in trade and other
receivables, prepaid expenses and other current assets and decreases in accounts
payable and accrued liabilities since January 31, 1999. At July 31, 1999, the
Company had working capital of $163.6 million compared to $174.2 million at
January 31, 1999, a decrease of $10.6 million. Current assets decreased by $33.9
million, primarily due to decreases in inventories of $20.3 million, cash of
$14.3 million and trade and other receivables of $0.5 million, net of increases
in prepaid expenses and other current assets of $1.2 million.
The Company has applied excess cash balances to reduce long-term obligations. As
a result, long-term obligations decreased from $496.2 million at January 31,
1999 to $465.1 million at July 31, 1999, a decrease of $31.1 million. At July
31, 1999, the Company had utilized through outstanding letters of credit, $7.1
million of availability under the $100 million revolving credit portion of its
Senior Credit Facility. There was no balance outstanding on the revolving credit
portion of the facility. Additional borrowings under the Senior Credit Facility
could be limited by the Company's ability to meet and maintain the financial
ratios required under the Senior Credit Facility after giving effect to any
additional borrowings.
The Company's cash flow from operations together with amounts available under
its credit facilities were sufficient to fund second quarter fiscal 2000
operations, scheduled payments of principal and interest on indebtedness, income
taxes and capital expenditures. Management of the Company believes that cash
flow from operations, amounts available under its credit facilities, including
emerging market credit facilities, and proceeds from equity financing will be
adequate to fund operating requirements and expansion plans during the next 12
months.
The Company's principal foreign operations are located in Western Europe, the
economies of which are not considered to be highly inflationary. The Company
enters into foreign exchange contracts in order to hedge its exposure on certain
foreign operations through the use of forward delivery commitments. During the
past several years, the Company's most effective hedge against foreign currency
changes has been the foreign currency denominated debt balances maintained in
respect to its foreign operations. The Company's foreign operations in Asia
consist primarily of distributorships organized as joint venture subsidiaries.
Economies and local currencies throughout much of Asia entered a tumultuous
period beginning in fiscal 1998 as a result of political turmoil and general
economic problems with principal industries. The Company believes the situation
has stabilized to some degree and has experienced some improvement towards the
end of fiscal 1999 and in the first half of fiscal 2000 in the operations of the
Company's Asian subsidiaries. Geographic concentrations of credit risk with
respect to trade receivables are not considered significant as a result of the
diverse geographic areas covered by the Company's operations.
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, 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
22
<PAGE>
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. EBITDA, as calculated by the Company, also excludes
extraordinary items, discontinued operations, and minority interest in earnings
of subsidiaries. The Company's EBITDA for six months ended July 31, 1999 and
1998 and the three months ended July 31, 1999 and 1998 was $41.4 million, $(1.5)
million, $22.2 million and $(5.3) million, respectively. However, these amounts
include various items of income (expense), including restructuring provisions,
expenses of the Recapitalization, gain (loss) on disposition of fixed assets,
net, and other items, net, which together aggregate $(1.6) million and $15.2
million for the six months ended July 31, 1999 and 1998, respectively which
management believes should be added to (deducted from) the calculation of
EBITDA. These items were less than $0.1 million and $13.1 million in the three
months ended July 31, 1999 and 1998, respectively. As adjusted for the aggregate
of these items of other income (expense), EBITDA was $39.8 million and $13.7
million for the six months ended July 31, 1999, and 1998 and $22.2 million and
$7.8 million for the three months ended July 31, 1999 and 1998.
Effect of Year 2000 Issue on Company Operations
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in normal business activities. Following is a report on the status of the
Company's actions being taken to address the Year 2000 Issue.
United States Operations. In the United States, the Company has installed in
fiscal years 1998 and 1999 new financial manufacturing and distribution software
developed by J.D. Edwards in response to general needs of the business as well
as the Year 2000 Issue. This software system comprises the majority of the
information technology used in the U.S. operations. Based on documents provided
by the developer of the software, the Company believes the software is Year 2000
compliant. The Company has incurred costs to purchase and implement this
software through July 31, 1999 of approximately $11.0 million. Additionally, the
Company has upgraded the information system software used in its retail
operations in order to make it Year 2000 compliant. Based on documents provided
by the developer of the software, the Company believes the software is Year 2000
compliant. The aforementioned cost estimates do not include significant costs of
existing internal staff who have devoted significant resources to resolving Year
2000 issues.
In order to identify and remediate Year 2000 issues associated with other
information systems used by the Company, non-information technology systems, and
third party organizations, the Company contracted with a third party consultant
in November 1998 to coordinate the Company's Year 2000 project efforts (the "Y2K
Project"). The Y2K Project's scope includes an inventory of non-information
technology automated systems with potential Year 2000 issues, evaluation of
suspect systems, and development of a project plan schedule and budget for
remediation or replacement of non-compliant systems. The Y2K Project includes
identifying any Year 2000 risks associated with key business partners, product
purchasers, materials suppliers, public utility providers, and other
organizations with which the Company has a material relationship. Non-
information technology systems being evaluated include systems using embedded
chip technology (i.e. telecommunications, heating and air conditioning,
manufacturing process control). The Y2K Project includes five phases as follows:
. Phase 1--System level inventory and business risk assessment.
. Phase 2--Detailed inventory and evaluation to identify non-compliant
systems.
. Phase 3--Remediation of non-compliant systems.
. Phase 4--Acceptance testing of remediated systems in a production
environment.
. Phase 5--Implementation of remediated systems in a production environment.
23
<PAGE>
As of July 31, 1999, Phases 1 and 2 were complete. Phases 3 through 5 are
projected to be completed at various dates through October 31, 1999 and
remediation of identified non-compliant systems has been initiated throughout
Phases 1 and 2. As of July 31, 1999, the Company has not identified or become
aware of any Year 2000 problem specific to its major customers, vendors or
suppliers, municipalities, public utilities or other service providers which
could have a material effect on Company operations. The Company has incurred
consulting expenses for the Y2K Project management through July 31, 1999 of
approximately $900,000 and expects total costs of the consulting project will be
approximately $1.3 million. The Company has not completed a detailed estimate of
costs to remediate Year 2000 problems identified as a result of the Y2K Project;
however, based on preliminary evaluations, the Company does not expect such
costs to be substantial. Notwithstanding the foregoing, the Company cannot
assure you that it has identified all Year 2000 issues or that all Year 2000
issues identified will be corrected on the schedule or within the estimated cost
levels indicated above.
Within the U.S. operations, the Company's reasonable worst case scenarios
include the potential impact of the Company's inability to receive product from
finished goods suppliers to meet operational needs in January 2000 and the
inability of the Company or its finished goods suppliers to obtain raw materials
for softside or hardside production in January 2000 to meet production
requirements. The Company's contingency plans to address these scenarios
include:
. Increasing inventory levels of finished goods in December 1999 to meet
projected January 2000 shipment requirements.
. Increasing inventory levels of raw materials in December 1999 to meet
anticipated manufacturing needs in January 2000.
. Identifying alternative sources for providers of raw materials and
transportation of both raw materials and finished goods.
European Operations. The Company's European subsidiary ("Samsonite Europe")
generally uses information technology systems which have been developed
internally over many years. The Company began evaluating and remediating such
systems for Year 2000 problems in calendar year 1997 and believes that all
necessary modifications have been completed as of July 31, 1999. Similarly, the
Company believes that it has identified all Year 2000 issues pertaining to
information technology equipment acquired from third parties and that most of
the required corrective actions have been completed as of July 31, 1999. The
Company estimates that final remediation will be completed by November 30, 1999.
In January 1998, Samsonite Europe formed a Year 2000 compliance task force to
survey and remediate non-information technology systems using embedded chip
technology and to survey customers and suppliers for Year 2000 compliance.
Samsonite Europe believes that it has identified critical non-compliance issues
with respect to non-information technology systems and has made the necessary
equipment upgrades or replacements as of July 31, 1999. Problems and solutions
have been identified and remediation may take until September 30, 1999. A survey
of customers and suppliers has been or will be completed by the same dates.
Notwithstanding the foregoing, we cannot assure you that we have identified all
Year 2000 issues or that they will be corrected on the schedule indicated above.
Through July 31, 1999, Samsonite Europe has incurred incremental costs related
to the Year 2000 issue of approximately $100,000 and estimates that the total
costs will not exceed $200,000. Such cost estimates do not include significant
costs of existing internal staff who have devoted significant resources to
resolving Year 2000 issues.
Efforts have been made by Samsonite Europe to identify the most reasonably
likely worst case Year 2000 scenarios and actions have been scheduled in order
to safeguard business continuity in the event any of these scenarios actually
occurs. These scenarios include:
. Critical external service providers such as electricity or phone service
providers fail to provide their services during the period beginning
January 1, 2000.
24
<PAGE>
. Critical external suppliers fail to supply raw materials, subassemblies or
finished goods during the period beginning January 1, 2000.
Samsonite Europe's contingency plans to handle these reasonably likely worst
case Year 2000 scenarios include:
. Increases to the raw material, subassembly and finished goods inventory
levels at December 31, 1999.
. Development of an action plan to substitute automated production flows with
manual ones within the manufacturing plants.
. Organization of alternative action plans with critical carriers and
finished goods dispatchers throughout Europe, working with manual or basic
mechanical transport systems not linked to embedded systems.
. Providing alternative order entry processes.
. Implementing human resource actions to provide necessary staffing during
the period beginning January 1, 2000.
Other International Operations. The Company's other operations throughout the
world outside of Europe and the U.S. are generally using recently purchased and
installed information software which the Company currently believes is Year 2000
compliant. The same third party consultants who evaluated Year 2000 issues in
the U.S. are also surveying major systems in Canada and Latin America to
identify areas requiring remediation. The Company expects this evaluation to be
completed by September 30, 1999.
The aforementioned cost data related to costs incurred to acquire and install
software and to identify and remediate other Year 2000 issues does not include
substantial internal costs which have been incurred. Such internal costs are
principally payroll costs for information systems personnel and are not tracked
separately as they relate to Year 2000 issues.
No Assurance. No assurance can be given that the Company can identify or has
identified all Year 2000 issues which may have a material adverse effect on
Company operations in the U.S., Europe or elsewhere or that it can correct
identified issues before a Year 2000 problem occurs. Additionally, no assurances
can be given that the Company's customers, vendors or suppliers, municipalities,
public utilities or other third party organizations will not experience Year
2000 issues which may have a material adverse impact on the Company's
operations.
Conversion to the Euro
On January 1, 1999, eleven countries in Europe adopted a common currency, the
"Euro" and exchange rates between the currencies of the eleven countries were
fixed against the new Euro. The former currencies of those eleven countries will
remain legal tender as denominations of the Euro until January 1, 2002 and goods
and services may be paid for using either the Euro or the former currency until
that time. Approximately 75% of Samsonite Europe sales are within these eleven
countries. The Euro conversion has a significant impact on the Company's
operations in terms of pricing policies, currency risk and exchange, information
systems, and financial reporting. Samsonite Europe has been addressing Euro
implementation issues since fiscal 1998 and has formed two different project
teams to address Euro issues: one to address competitive and marketing issues
and another to address administrative, financial and computer systems issues.
The Company believes the adoption of the Euro will have a positive effect on
Samsonite Europe's operations. Having a common currency among many of the
countries that Samsonite Europe sells into will reduce the administrative burden
of multiple currencies as well as reduce the costs of hedging and exchanging
currencies and resulting exchange gains and losses. Additionally, if the Euro
becomes accepted in the international money markets, Samsonite Europe may also
reduce its currency risk against the U.S. dollar for purchases of goods in the
Far East by using the Euro to pay for such purchases rather than the U.S.
dollar, which is currently the primary currency used in international trade. At
present, there is some pressure on the Euro and Samsonite Europe will not seek
to use the Euro in international trade unless the Euro strengthens against the
U.S. dollar.
25
<PAGE>
Samsonite Europe has adjusted its wholesale pricing to reduce product pricing
differences between countries which have existed historically; however, price
variations between countries will continue to exist at the retail level due to
differences in transportation costs, value added tax rates, and dealer margins
in the various European countries. Because of Samsonite Europe's strong
competitive position throughout the countries participating in the Euro
conversion and significant economic barriers to entry, the Company does not
believe that potential increased competition and price transparency as a result
of the Euro will have an adverse effect on the Company's sales or results of
operations.
Samsonite Europe currently intends to continue using the Belgian franc as its
functional currency for financial reporting purposes until its fiscal year
beginning January 1, 2001. As of December 31, 1998, Samsonite Europe's
information systems have been modified such that order entry, customer
invoicing, and payment processing can be accomplished in the former currency or
the Euro, while converting financial reporting to the functional currency (the
Belgian franc). Additional extensive system modifications are necessary to
convert the functional currency to the Euro. The target completion date for such
modifications, which are being accomplished using existing internal staffing, is
December 31, 1999. Most system modifications to date have also been accomplished
using internal staffing with minimal incremental costs incurred to date. The
Company estimates that it has incurred incremental costs through July 31, 1999
of approximately $50,000 to implement the Euro conversion and estimates that it
will spend a total of approximately $100,000 to fully implement its Euro
conversion. All costs related to the Euro conversion have been charged to
expense.
Effect of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), which
was originally effective for fiscal quarters beginning after June 15, 1999. The
Financial Accounting Standards Board has delayed the effective date for FAS 133
to fiscal quarters beginning after June 15, 2000. FAS No. 133 requires companies
to record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies under the standard for hedge accounting. The Company does
not anticipate a material impact on its financial condition or results of
operations as a result of implementing this standard.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
The Company's primary market risks include changes in foreign currency exchange
rates and interest rates. Market risk is the potential loss arising from
adverse changes in market rates and prices, such as foreign currency exchange
and interest rates. The Company's strategies to address market risks and the
types of financial instruments entered into to hedge market risks have not
changed from those described in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1999.
At July 31, 1999, the Company and its European subsidiary had forward foreign
exchange contracts outstanding having a total contract amount of approximately
$40.1 million compared to approximately $74.0 million at January 31, 1999.
For the three and six month periods ended July 31, 1999, the Company had
recorded unrealized gains from forward foreign exchange contracts to hedge
translated earnings of foreign subsidiaries (primarily the translated earnings
of European operations which report earnings in Belgian francs) and intercompany
royalty payments of $0.6 million and $4.5 million, respectively. The ultimate
realization of such amount is subject to fluctuations in the exchange rate of
the U.S. dollar against the Belgian franc.
26
<PAGE>
If there were a ten percent adverse change in foreign currency exchange rates
relative to all outstanding forward exchange contracts, the loss in earnings
from the amount included in results of operations for the six month period ended
July 31, 1999 would be approximately $4.1 million, before the effect of income
taxes. Any hypothetical loss in earnings would be offset by changes in the
underlying value of translated earnings or royalty income, to the extent such
earnings or income is equal to the amount hedged, or for product purchases by
exchange gains.
The amount of fixed rate long-term debt outstanding has not changed materially
from the amount outstanding at January 31, 1999 and continues to be comprised
primarily of the Company's outstanding publicly traded senior subordinated notes
having a face amount of $350.0 million. At January 31, 1999, the quoted market
price of these notes was $80 per $100 of principal; at July 31, 1999, the quoted
market price of these notes was $85.50 per $100 of principal.
27
<PAGE>
SAMSONITE CORPORATION
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings
-----------------
The Company and certain related parties have been the subject of various
purported shareholder class action lawsuits and a purported derivative action
filed between March 13, 1998 and March 9, 1999 in various courts, including
Colorado State District Court, City and County of Denver; United States District
Court for the District of Colorado; and the Delaware Court of Chancery
(together, the "Shareholder Litigation"). In April 1999, the Company entered
into an insurance agreement with a major insurance carrier whereby the carrier
assumed responsibility for the defense and ultimate resolution of the
Shareholder Litigation and any other actions asserted at any time that involve
essentially the same or similar allegations, facts or circumstances as those in
the Shareholder Litigation. In connection with the insurance agreement, the
Company entered into certain agreements and releases and agreed to make a cash
premium payment, net of potential future reimbursements, to the insurer ranging
from an estimated minimum payment of $7.0 million to a maximum payment of $17.5
million depending on the ultimate cost to defend and resolve the pending
litigation. The Company is responsible for paying all legal defense costs prior
to the effective date of the insurance agreement. However, the Company expects
that substantially all costs incurred subsequent to the effective date to defend
and resolve the Shareholder Litigation will be covered by the insurance
agreement. The Company believes that its consolidated statements of operations
for the fiscal year ended January 31, 1999 reflect the accrual of substantially
all costs incurred and expected to be incurred in connection with these
lawsuits.
In addition, the Company is a party to various other legal proceedings and
claims in the ordinary course of business. The Company believes that the
outcome of these other pending matters will not have a material adverse effect
on its consolidated financial position, results of operations or liquidity.
Refer to Note 15 to the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1999
which describes other commitments and contingencies.
Item 2 - Changes in Securities
---------------------
None.
Item 3 - Defaults Upon Senior Securities
-------------------------------
None.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Company's regular annual meeting of shareholders held on June 30, 1999,
the Company's stockholders elected directors and approved one proposal.
Robert L. Rosen, Marc J. Rowan and Stephen J. Solarz were elected as directors.
Voting on the directors was as follows: Robert L. Rosen - 8,965,926 for, 66,372
against; Marc J. Rowan - 8,962,877 for, 69,421 against; Stephen J. Solarz -
8,688,630 for, 343,668 against.
A proposal to approve and ratify the appointments of KPMG LLP as independent
auditors of the Company and its subsidiaries for fiscal 2000 was approved
(8,997,181 for, 20,794, against, 14,323 abstentions).
Item 5 - Other Information
-----------------
None.
28
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) See Exhibit Index.
(b) Reports on Form 8-K.
Report dated July 29, 1999.
Item 5. Other Events
29
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAMSONITE CORPORATION
(Registrant)
By /s/ Richard H. Wiley
-------------------------------------------
Name: Richard H. Wiley
Title: Chief Financial Officer, Treasurer
and Secretary
Date: September 14, 1999
------------------
30
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company./1/
3.2 Certificate of Ownership and Merger dated July 14, 1995./2/
3.3 By-Laws of the Company./1/
4.1 Indenture, dated as of June 24, 1998, between the Company and United
States Trust Company of New York./3/
4.2 Certificate of Designation of the Powers, Preferences and Relative,
Participating, Option and other Special Rights of 13 7/8% Senior
Redeemable Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions thereof./4/
4.3 Certificate of Correction to the Certificate of Designation of the
Powers, Preferences and Relative, Participating, Option and other
Special Rights of 13 7/8% Senior Redeemable Exchangeable Preferred
Stock and Qualifications, Limitations and Restrictions thereof./4/
4.4 Indenture, in respect of the 13f% 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/
4.5 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/
4.6 Description of the Company's common stock, par value $.01 per share,
and the associated preferred stock purchase rights./5/
4.7 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./5/
4.8 First Amendment, dated as of April 7, 1999, to Rights Agreement,
dated as of May 12, 1998, between Samsonite and BankBoston, N.A., as
Rights Agent./6/
4.9 Second Amendment to the Rights Agreement, dated as of July 13, 1999,
between Samsonite and BankBoston, N.A., as Rights Agent.
10.1 Third Amendment to Second Amended and Restated Multicurrency
Revolving Credit and Term Loan Agreement, dated as of March 19,
1999, between the Company, Samsonite Europe N.V. and Bank of
American National Trust and Savings Association, BankBoston, N.A.
and various other lending institutions./6/
10.2 Investment Agreement between Samsonite Corporation and Apollo
Investment Fund, L.P., dated as of April 7, 1999./6/
10.3 Certificate of the Designations, Powers, Preferences and Rights of
Series Z Convertible Preferred Stock of Samsonite Corporation./6/
10.4 Registration Rights Agreement, dated as of April 7, 1999, between
Samsonite and Apollo Investment Fund, L.P./6/
31
<PAGE>
10.5 Letter Agreement dated July 13, 1999 between Apollo Investment Fund,
L.P. and Artemis America Partnership.
10.6 Stockholders Agreement dated as of July 13, 1999 by and among
Samsonite Corporation, Apollo Investment Fund, L.P. and Artemis
America Partnership.
Exhibit Description
- ------- -----------
27 Financial Data Schedule.
_____________
/1/ Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1997 (File No. 0-23214).
/2/ Incorporated by reference from the Registration Statement on Form S-4
(Registration No. 33-95642).
/3/ Incorporated by reference from the Registration Statement on form S-4
(Registration No. 333-61521).
/4/ Incorporated by reference from the Registration Statement on form S-4
(Registration No. 333-61519).
/5/ Incorporated by reference from the Company's Registration Statement on Form
8-A filed June 14, 1994 under the Exchange Act and the Company's
Registration Statement on Form 8-A filed May 13, 1998 under the Exchange
Act (File No. 0-23214).
/6/ Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1999.
32
<PAGE>
Exhibit 4.9
SECOND AMENDMENT OF
THE RIGHTS AGREEMENT
This SECOND AMENDMENT OF THE RIGHTS AGREEMENT (the "Agreement") is entered into
as of July 13, 1999, by and between Samsonite Corporation, a Delaware
corporation (the "Company") and BankBoston, N.A., a national banking association
(the "Rights Agent").
BACKGROUND
WHEREAS, the Company and the Rights Agent are parties to the Rights Agreement,
dated as of May 12, 1998, as amended on April 7, 1999 (the "Original
Agreement");
WHEREAS, pursuant to Section 26 of the Original Agreement, the parties hereto
have agreed to amend certain provisions of the Original Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and intending to be legally bound, the parties hereto agree
that the Original Agreement is hereby amended as follows:
SECTION 1. Defined Terms. Capitalized terms used and not defined herein shall
-------------
have the meanings assigned to such terms in the Original Agreement.
SECTION 2. Amendments. The parties hereto hereby consent and agree to amend
----------
the Original Agreement as follows:
(a) Section 1 of the Original Agreement is hereby amended by inserting the
following at the end of Section (c) (iii) thereof:
Notwithstanding anything to the contrary herein, neither Apollo Investment Fund,
L.P. (and its Affiliates and Associates) on the one hand, nor Artemis America
Partnership (and its Affiliates and Associates) on the other hand, shall be
deemed to beneficially own any securities held by the other party as a result of
the Stockholders Agreement, dated as of July 13, 1999, by and among the Company,
Apollo Investment Fund, L.P. and Artemis America Partnership (as if may be
amended from time to time in accordance with the provisions thereof, the
"Stockholders Agreement")."
(b)Section 1 of the Original Agreement is hereby amended by deleting paragraph
(g) in its entirety and inserting in lieu thereof the following:
<PAGE>
(g) "Exempted Person" shall mean Apollo Advisors, L.P. and its Affiliates and
Associates and Artemis America Partnership and its Affiliates and Associates, so
long as each of Apollo Advisors, L.P. and Artemis America Partnership, together
with its respective Affiliates and Associates, shall not become the Beneficial
Owner of shares of Common Stock then outstanding in excess of its Applicable
Percentage; provided, however, that from and after such time as Apollo Advisors,
-------- -------
L.P. or Artemis America Partnership, together with all of its respective
Affiliates and Associates, shall be the Beneficial Owner of shares of Common
Stock then outstanding in excess of its respective Applicable Percentage, Apollo
Advisors, L.P. or Artemis America Partnership, as the case may be, shall no
longer be deemed an "Exempted Person". For purposes of the foregoing, with
respect to Apollo Advisors, L.P., and its Affiliates and Associates, including
Lion Advisors, L.P. (collectively, "Apollo"), (i) from and after the execution
of the Investment Agreement, dated as of April 7, 1999, between the Company and
Apollo Investment Fund, L.P. (the "Investment Agreement"), and prior to the
Back-stop Closing (as such term is defined in the Investment Agreement), the
term "Applicable Percentage" shall mean two percent (2%) plus the percentage of
the outstanding shares of Common Stock beneficially owned by Apollo on the date
hereof (treating for this purpose the shares to be purchased at the Back-stop
Closing as not beneficially owned by Apollo) and (ii) after the Back-stop
Closing, the term "Applicable Percentage" shall mean two percent (2%) plus the
percentage of the outstanding shares of Common Stock beneficially owned by
Apollo immediately after such closing; provided that Apollo's Applicable
--------
Percentage shall in no event be less than 34%. For purposes of the foregoing,
with respect to Artemis America Partnership ("Artemis"), the term "Applicable
Percentage" shall mean two percent (2%) plus the quotient obtained by dividing
(A) the number of shares of Common Stock which, or the voting rights of which,
Artemis or any of its Affiliates or Associates has the right to acquire, or
acquires, at any time or which otherwise may be distributed to Artemis or to any
of its Affiliates or Associates, in either case by reason of or pursuant to (x)
the terms of the Investment Management Agreement between Artemis and Lion
Advisors, L.P., dated as of June 29, 1990, as amended on April 30, 1999, with
respect to the managed account, (y) the distribution of shares of Common Stock
to the limited partners of Apollo Investment Fund I, L.P., or (z) the terms of
the agreements, dated as of April 5, 1999, as amended on July 13, 1999, between
Artemis America Partnership and Apollo Investment Fund, L.P., by (B) the number
of shares of Common Stock outstanding at the time of any calculation to
determine whether Artemis is an Acquiring Person. Notwithstanding anything to
the contrary contained herein, a "group" (as determined pursuant to Rule 13d-5
of the General Rules and Regulations promulgated under the Exchange Act)
consisting solely of Exempted Persons or of solely Exempted Persons and one or
more transferees in a
<PAGE>
transaction to which Sections 3(i) (after giving effect to the proviso therein)
and 4 of the Stockholders Agreement apply (a "Section 3(i) Transferee") shall
likewise be treated as an Exempted Person hereunder; provided that the foregoing
--------
shall not apply to a group which has beneficial ownership of shares of Common
Stock of a Section 3(i) Transferee not subject to the pro rata voting
requirements of Section 4 of the Stockholders Agreement."
c) Section 7(a) of the Original Agreement is hereby amended by deleting the
phrase "May 31, 2002" appearing in the seventh line from the end thereof and
inserting in lieu thereof the phrase "May 31, 2007".
(d) Exhibits B and C of the Original Agreement are hereby amended by deleting
all references to the phrase "May 31, 2002" appearing therein and inserting in
lieu thereof the phrase "May 31, 2007".
Except as otherwise specified above, there is no amendment of any other term,
condition or provision of the Original Agreement all of which are hereby
ratified and confirmed by the Company.
SECTION 3. Counterparts. This Agreement (a) may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument, (b) shall be effective
only in this specific instance for the specific purpose set forth herein, and
(c) does not allow any other or further departure from the terms of the Original
Agreement, which terms shall continue in full force and effect. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other parties.
SECTION 4. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
--------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
THE CHOICE OF LAW PRINCIPLES THEREOF.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by each of the parties
hereto as of the date first written above.
SAMSONITE CORPORATION
By: /s/Steve Armstrong
----------------------
Name: Steve Armstrong
Title: General Counsel
BANKBOSTON, N.A.
By: /s/Carol Mulvey-Eori
----------------------
Name: Carol Mulvey-Eori
Title: Administration Manager
<PAGE>
Exhibit 10.5
Apollo Investment Fund, L.P.
2 Manhattanville Road
Purchase, NY 10577
July 13, 1999
CONFIDENTIAL
- ------------
Artemis America Partnership
c/o RL&F Service Corporation
Rodney Square
P.O. Box 551
Wilmington, DE 19899
Dear Sirs:
We refer to our letter agreement with you dated April 5, 1999 relating to
Samsonite Corporation (the "April Letter Agreement"). (Capitalized terms not
defined in this letter have the meanings given to them in the April Letter
Agreement.)
Background
- ----------
We made the Bridge Investment contemplated by the April Letter Agreement at
a cash purchase price of $25,410,000. We also entered into the Backstop
Arrangement, which was originally subject to a maximum purchase commitment by us
in the Rights Offering of $12,090,000. Pursuant to the Stockholders Agreement
among us, you and Samsonite that is being entered into simultaneously with this
letter agreement, we have agreed with Samsonite to increase the maximum amount
covered by the Backstop Arrangement to $24,590,000.
Our Agreements with Your
- ------------------------
This will confirm that we have agreed as follows:
1. You agree to purchase from us 50% of the shares comprising the Bridge
Investment at a purchase price of $12,705,000. You will effect cash settlement
against delivery of the shares as of July 27, 1999 or such other date as we may
mutually agree. The Bridge Investment shares that you purchase will be subject
to the same restrictions and will be entitled to the same rights as those
retained by us. Any future adjustment to the purchase price of the Bridge
Investment shares in connection with the completion of the Rights offering will
apply equally to the shares purchased by you and those retained by us.
2. You agree to purchase 50% of any shares required to be purchased by us
pursuant to the Backstop Arrangement, at the same price and on the same terms as
those governing our purchase of such shares.
<PAGE>
3. You understand that the shares to be purchased by you pursuant to this
letter agreement are subject to legal restrictions on transferability under
United States federal securities laws and are also subject to contractual
restrictions relating to voting and transfer.
4. For the avoidance of doubt, you acknowledge that the purchase
commitments reflected above supersede the 50% purchase options granted to you in
the April Letter Agreement.
5. Notwithstanding anything to the contrary in the Stockholders Agreement
referred to above (or any actions taken in accordance with that Agreement) or
the Investment Management Agreement dated as of June 29, 1990 originally between
Lion Advisors, L.P., as manager ("Lion"), and Altus Finance to which you
subsequently became a party and as most recently amended as of April 30, 1999
(the "Management Agreement"), 1,778,523 shares of Common Stock of Samsonite
currently held for your account pursuant to the Management Agreement shall
remain subject to the incentive fee provisions contained in the Management
Agreement (which shall remain in effect with respect to such shares except for
the transfer of voting rights pursuant to the Stockholders Agreement.)
Kindly confirm that this letter accurately sets forth our understanding
regarding your agreement to purchase Samsonite shares from us by signing and
returning a copy of this letter to us at your earliest convenience.
Very truly yours,
Apollo Investment Fund, L.P.
By: Apollo Advisors, L.P.
Managing Partner
By: /s/ Michael D. Weiner
------------------------
Name: Michael D. Weiner
Title: Vice President
Confirmed
Artemis America partnership
By: /s/ Emmanuel Cueff
----------------------
General Secretary
cc: Bernard Attal
<PAGE>
STOCKHOLDERS AGREEMENT Exhibit 10.6
----------------------
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of July 13, 1999,
by and among, Samsonite Corporation, a Delaware corporation (the "Company"),
Apollo Investment Fund, L.P., a Delaware limited partnership ("Apollo"), and
Artemis America Partnership, a Delaware general partnership ("Artemis").
WHEREAS, as of the date hereof, Apollo is the beneficial owner of
approximately 34% of the Company's outstanding common stock, par value $0.01 per
share (the "Common Stock");
WHEREAS, pursuant to an investment agreement, dated as of April 7,
1999 (the "Investment Agreement"), between the Company and Apollo, Apollo made a
$25,410,000 bridge investment in the Company (the "Bridge Investment") and
agreed to back-stop the Company's proposed rights offering (the "Back-stop
Agreement") by making an additional $12,090,000 investment in connection
therewith;
WHEREAS, Lion Advisors, L.P. ("Lion") will transfer to Artemis voting
rights respecting 1,778,523 shares of Common Stock currently held by Lion
pursuant to the terms of the investment management agreement (the "Managed
Account") between Artemis and Lion, such that each of Apollo and Artemis will be
the beneficial owner of approximately 17% of the Common Stock outstanding prior
to the closing of the Bridge Investment;
WHEREAS, pursuant to an agreement, dated as of April 5, 1999, between
Artemis and Apollo, Artemis has the right (but not the obligation) to purchase
either from Apollo or, acting as Apollo's designee, from the Company, up to one-
half of the shares which Apollo has purchased pursuant to the Bridge Investment
and is obligated to purchase pursuant to the terms of the Back-stop Agreement;
WHEREAS, on July 13, 1999 Artemis agreed to purchase from Apollo one-
half of the shares that Apollo purchased pursuant to the Bridge Investment and
is obligated to purchase pursuant to the Back-stop Agreement;
WHEREAS, the Company and BankBoston, N.A., a national banking
association (the "Rights Agent"), are parties to a Rights Agreement, dated as of
May
<PAGE>
1998, as amended on April 7, 1999, and further amended on July 13, 1999, in
order to, among other things, permit the execution and delivery of this
Agreement (the "Rights Agreement");
WHEREAS, the Company, Apollo and Artemis desire to enter into this
Agreement for the purpose of governing certain aspects of the relationship among
the parties hereto; and
WHEREAS, it is in the best interests of the Company, Apollo and
Artemis that such aspects of their relationship be so governed;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound the parties hereto
hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the
-----------
following terms shall have the meanings ascribed to them below:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act"). Notwithstanding anything to
the contrary herein or therein, (x) neither Apollo (and its Affiliates and
Associates) on the one hand, nor Artemis (and its Affiliates and Associates) on
the other hand, are, or shall be deemed to be, an Affiliate or Associate of the
other and (y) none of the persons identified as the initial Independent
Directors in Section 2(a) hereof shall be deemed to be an Affiliate or Associate
of Apollo or Artemis.
(b) The term "Beneficial Owner" shall have the meaning
ascribed to such term in Rule 13d-3 under the Exchange Act, and the terms
"beneficially owned" or "beneficial ownership" shall have a correlative meaning.
(c) The term "Board" shall mean the Board of Directors of
the Company.
(d) The term "Person" shall mean any individual, firm,
corporation, partnership, limited liability company, trust or other entity.
(e) The term "Public Offering" shall mean an
2
<PAGE>
underwritten public offering of equity securities of the Company pursuant to an
effective registration statement under the Securities Act.
(f) The term "Rule 144" shall mean Rule 144 of the rules
and regulations promulgated pursuant to the Securities Act.
(g) The term "Securities Act" shall mean the Securities Act
of 1933.
(h) The term "Stockholder" shall mean Apollo and Artemis;
provided that solely for purposes of Section 4(a) "Stockholder" shall
- --------
include any transferee of Apollo or Artemis in a transaction to which Section
3(i) applies, after giving effect to the proviso contained therein.
(i) The term "Voting Stock" shall mean shares of
Common Stock and any other class of securities of the Company having the power
to elect directors and any other general voting power (and shall include any
shares of Voting Stock issuable upon exchange or conversion of securities
exchangeable for or convertible into shares of Voting Stock).
(j) The term "Third Party" shall mean any person
(other than the Company) that is a prospective purchaser of Voting Stock in an
arms' length transaction from a Stockholder.
Section 2. Board of Directors.
------------------
(a) Each Stockholder agrees to vote, and to cause its Affiliates and
Associates to vote, all shares of Voting Stock beneficially owned or held of
record by such Stockholder and its Affiliates and Associates, at any regular or
special meeting of the stockholders of the Company called for the purpose of
filling posi tions on the Board, or in any written consent executed in lieu of
such a meeting, and shall take all actions within its control that are necessary
to ensure the election to the Board of: (i) the Chief Executive Officer of the
Company, (ii) three (3) designees of Apollo (each of whom shall be a person
regularly employed by Apollo or its Affili ates), (iii) one (1) designee of
Artemis and, if requested at any time by Artemis, a second designee of Artemis
(each of whom (except in the case of Bernard Attal) shall be a person regularly
employed by Artemis or its Affiliates), and (iv) four (4) individuals not being
designees, Affiliates or Associates of Apollo or Artemis (the "Independent
Directors"); provided that, if at any time, the number of shares of
--------
3
<PAGE>
Voting Stock beneficially owned or held of record by Apollo and its Affiliates
and Associates shall be less than 50% of the number of shares of Voting Stock
benefi cially owned or held of record by Artemis and its Affiliates and
Associates, then at all times thereafter, clause (ii) of this sentence shall be
deemed to refer to Artemis in lieu of Apollo and clause (iii) shall be deemed to
refer to Apollo in lieu of Artemis, such that Artemis shall be entitled to three
(3) designees for the Board and Apollo shall be entitled to two (2) designees.
For purposes of the foregoing sentence, (x) Leon D. Black, Robert H. Falk and
Marc J. Rowan shall be deemed to have been designated by Apollo, (y) Bernard
Attal shall be deemed to have been designated by Artemis and (z) Richard R.
Nicolosi, Robert L. Rosen, Mark H. Rachesky and Stephen J. Solarz shall be the
initial Independent Directors.
(b) Each Stockholder agrees that in the event of any vacancy on the
Board, whether caused by the death, disability, retirement, resignation,
removal, termination of term of office or otherwise, with respect to any
director, such Stock holder will use its reasonable best efforts to call, or to
cause the appropriate officers of the Company to call, a special or general
meeting of stockholders and to vote, and to cause its Affiliates and Associates
to vote, all shares of Voting Stock beneficially owned or held of record by such
Stockholder and its Affiliates and Associates for, or to take and to cause its
Affiliates and Associates to take all actions by written consent in respect of
all such shares of Voting Stock in lieu of any such meeting, and shall take all
actions within its control that are necessary to cause, the election to the
Board of (i) in the case of the departure from office for any reason of any
director designated by a Stockholder, another individual to fill such vacancy,
designated in accordance with the provisions of Section 2(a) and this Section
2(b) by the Stock holder who designated the individual whose departure from the
Board caused such vacancy (or by the Persons who have succeeded to such Person's
right to designate one or more directors), and (ii) in the event of any vacancy
on the Board, whether caused by the death, disability, retirement, resignation,
removal, termination of term of office or otherwise, with respect to any
Independent Director, each Stockholder hereby agrees to vote, and to cause its
Affiliates and Associates to vote, all shares of Voting Stock beneficially owned
or held of record by such Stockholder and its Affiliates and Associates for, or
to take and to cause its Affiliates and Associates to take all actions by
written consent in respect of all such shares of Voting Stock in lieu of any
such meeting necessary, and shall take all actions within its control that are
necessary to cause, the election to the Board of the individual selected by a
majority of the remaining Independent Directors to fill such vacancy; provided
--------
that the foregoing shall not apply in the event that the Board takes such action
to so constitute the Board without stockholder approval. Each Stockholder shall
use its
4
<PAGE>
reasonable best efforts to cause the Company to prepare as soon as practicable
after learning that a vacancy on the Board will occur (other than upon
expiration of term) or has occurred, and file as soon as practicable after a
nominee for such vacancy is designated pursuant to this Agreement, any proxy or
information statement required pursuant to the Exchange Act or any applicable
federal or state securities or corpora tion law to be filed and send to
stockholders of the Company prior to the election or assumption of office of
such nominees.
(c) Each Stockholder may at any time request that a person nominated
by it in accordance with this Section 2 be removed as a member of the Board,
with or without cause, and upon the written request of such Stockholder to the
other Stockholder, each other Stockholder agrees to vote, and to cause its
respective Affiliates and Associates to vote, all of its Voting Stock to effect
such removal.
(d) Each of the Stockholders shall use its reasonable best efforts
to, and to cause its Affiliates and Associates to, maintain the composition of
the Executive Committee of the Board (the "Executive Committee") as it exists as
of the date hereof. Notwithstanding the foregoing, if requested by Artemis at
any time, Apollo shall use its reasonable best efforts to, and cause its
Affiliates and Associates to, effect the appointment of a fourth member of the
Executive Committee, who shall be a designee of Artemis.
(e) The foregoing provisions of this Section 2 shall not impose any
obligations on the Company.
Section 3. Tag-Along Rights.
----------------
(a) Each Stockholder hereby agrees that such Stockholder shall not, in
any one transaction or any series of similar transactions, directly or
indirectly, sell or otherwise dispose of any shares of Voting Stock to any Third
Party unless the terms and conditions of such sale or other disposition to such
Third Party shall include an offer by such Third Party to the other Stockholder
(the "Included Of feree") to include, at the option of the Included Offeree, in
the sale or other disposi tion to the Third Party such number of shares of
Voting Stock beneficially owned by such Included Offeree as determined in
accordance with this Section 3. If a Stock holder receives a bona fide offer to
purchase or otherwise acquire (an "Included Offer") any shares of Voting Stock
held by it which it desires to accept (the "Included Shares") from a Third
Party, such Stockholder shall then cause the Included Offer to be reduced to
writing and shall provide written notice (the "Included Notice") of such
5
<PAGE>
Included Offer to the Included Offeree in the manner set forth in this Section
3. The Included Notice shall contain an offer by such Third Party to purchase or
otherwise acquire, in addition to the Included Shares being acquired from such
Stockholder, shares of Voting Stock from the Included Offeree at the same price
and on the same terms as contained in the Included Offer and shall be
accompanied by a true and correct copy of the Included Offer (which shall
identify the Third Party, the number of shares which the Third Party is seeking
to purchase or otherwise acquire, the price contained in the Included Offer and
all the other terms and conditions of the Included Offer). The Included Offeree
shall, within sixty (60) days after the date the Included Notice is given to
such Included Offeree (the "Included Notice Period"), deliver a written notice
to the Stockholder that was the initial recipient of the Included Offer (the
"Tag-Along Notice"), which notice shall specify the number of shares of Voting
Stock held by such Included Offeree which it wishes to sell pursuant to the
Included Offer (the "Tag-Along Shares") and the total number of shares of Voting
Stock then beneficially owned by such Included Offeree. In the event such Third
Party shall modify the Included Offer in any way, the Third Party shall send an
amended Included Notice to the Included Offeree. The Included Offeree shall, if
it so desires to sell, transfer or otherwise dispose of Tag-Along Shares
pursuant to the Included Notice, as so amended, prior to the later of five (5)
days after the date such amended Included Notice is received by the Included
Offeree or the end of the original Included Notice Period, deliver an amended
Tag-Along Notice specifying the amended number of Tag-Along Shares.
(b) The Included Offeree shall have the right to sell pursuant to the
Included Offer a number of Tag-Along Shares equal to the product of (x) the
total number of shares of Voting Stock then beneficially owned by such Included
Offeree multiplied by (y) a fraction, the numerator of which shall be the total
number of shares proposed to be purchased by the Third Party and the denominator
of which shall be the sum of all shares of Voting Stock beneficially owned by
the Stockhold ers. For purposes of this Section 3, the Stockholder and the
Included Offeree shall be hereinafter referred to as "Sellers." If any Seller
has not indicated a desire to sell all of the Included Shares or Tag-Along
Shares, as the case may be, permitted to be sold by it pursuant to this Section
3, then the Seller who has indicated a desire to sell more than the Included
Shares or Tag-Along Shares, as the case may be, permitted to be sold by such
Seller pursuant to the first sentence of this paragraph shall have allocated to
such Seller the right to sell an additional number of Included Shares or Tag-
Along Shares, as the case may be, owned by such Seller until the entire number
of shares available to be sold to the Third Party shall have been allocated
among the Sellers.
6
<PAGE>
(c) Each Seller shall arrange for the transfer of certificates repre-
senting the Included Shares or Tag-Along Shares, as the case may be, to the
Third Party upon delivery of the purchase price for such Included Shares or Tag-
Along Shares, as the case may be.
(d) If at the termination of the Notice Period the Included Offeree
shall not have accepted the offer contained in the Included Notice, such
Included Offeree shall be deemed to have waived any and all of its rights under
this Section 3 with respect to the sale or other disposition of its Tag-Along
Shares to such Third Party; provided that such sale or disposition is completed
--------
on the terms set forth in the Included Notice within thirty (30) days after the
termination of the Notice Period.
(e) Notwithstanding anything contained in this Section 3, there shall
be no liability on the part of any Seller to any other Seller in the event that
the sale of shares pursuant to this Section 3 is not consummated for whatever
reason, unless such sale is not consummated due to the willful misconduct of
such party. Whether a sale of shares is effected pursuant to this Section 3 by a
Seller is in the sole and absolute discretion of such Seller.
(f) In the event that the Third Party does not purchase the Included
Shares and Tag-Along Shares, if any, from the Sellers required to be purchased
by the Third Party in accordance with this Section 3, or the relevant Seller
fails to comply with its obligations under this Section 3, then any transfer by
the relevant Seller to such Third Party shall be null and void and of no effect
whatsoever.
(g) The provisions of Section 3 shall not be applicable to any
transfer of Included Shares made pursuant to (i) a Public Offering, (ii) Rule
144, in a transaction that satisfies the volume limitations thereof, whether or
not such limita tions are then applicable or (iii) sales or other dispositions
to Affiliates or Associates of any Stockholder; provided that such Affiliate and
--------
Associate transferees agree to be bound by this Agreement.
(h) For purposes of this Section 3 only, Artemis shall be deemed to
beneficially own any shares of Common Stock held by Lion in the Managed Account
and neither Apollo nor any of its Affiliates and Associates shall be deemed to
beneficially own any such shares of Common Stock.
(i) Notwithstanding anything to the contrary contained herein, no
7
<PAGE>
transfer of shares of Voting Stock by a Stockholder (or any of its Affiliates or
Associates) shall be effective unless the transferee agrees in writing to be
bound by the terms and provisions of Sections 2, 3 and, insofar as the vote
relates to the election of directors, 4 hereof; provided that this subsection
--------
3(i) shall not apply to (x) any transfer pursuant to clause (i) or (ii) of
subsection 3(g) above and (y) any transfer if, after giving effect to such
transfer, the Included Offeree beneficially owns (collectively with its
Affiliates and Associates) less than 25% of the shares set forth on Schedule I
hereto.
Section 4. Pro Rata Voting.
---------------
(a) Each Stockholder hereby agrees to vote, and shall cause its
Affiliates and Associates to vote, any and all shares of Voting Stock which it
or they have the power or right to vote pro rata with all other shares of Voting
Stock outstanding so that the number of shares of Voting Stock that each
Stockholder (together with its Affiliates and Associates) is entitled to vote in
its sole discretion and not pro rata does not exceed its Applicable Percentage;
provided that the foregoing shall not result in an increase in the number of
- --------
shares of Voting Stock that a Stockholder shall be entitled to vote in its sole
discretion and not pro rata but for the provisions of this Section 4(a). The
term "Applicable Percentage" with respect to each Stockholder means the product
of 34% and a fraction, the numerator of which is the number of shares of Voting
Stock which such Stockholder and its Affiliates and Associates have the right to
vote at such time, and the denominator of which shall be the number of shares of
Voting Stock which all Stockholders in the aggregate, and their Affiliates and
Associates, have the right to vote. All references to Voting Stock held by a
Stockholder who is a transferee of Apollo or Artemis pursuant to Section 3(i)
shall mean and include only such shares that such transferee acquired from
Apollo or Artemis, as the case may be, in a transaction to which Section 3(i)
(after giving effect to the proviso therein) applies.
(b) From and after the date hereof, the obligations of Apollo under
Section 10.2(a) of the Investment Agreement shall terminate and be of no further
force or effect.
Section 5. Rights Agreement Amendments.
---------------------------
(a) The Company hereby represents and warrants that the second
8
<PAGE>
amendment to the Rights Agreement (the "Second Amendment") attached hereto as
Exhibit A has been duly executed and delivered by the Company and is in full
force and effect.
(b) The Company hereby further agrees that, following the execu-
tion of the Second Amendment, it will not undertake to further amend the Rights
Agreement without the prior written consent of each of Apollo and Artemis, which
consent shall not be unreasonably withheld; provided that the foregoing shall be
--------
subject to the fiduciary duties of the Board.
Section 6. Investment Agreement Amendment. The Company and Apollo
------------------------------
hereby agree that Section 2(b)(ii) of the Investment Agreement is hereby amended
by deleting "$12,090,000" appearing therein and inserting in lieu thereof
"$24,590,000". The Company hereby confirms that the registration rights set
forth in the Registration Rights Agreement, dated as of April 7, 1999, between
the Company and Apollo shall apply to any additional shares of Common Stock
acquired by reason of the amendment effected by the foregoing sentence. The
Company and Apollo further agree that the Investment Agreement is hereby amended
by adding the following: "Section 6A. Termination. The Company will
-----------
have the right to cancel, and to cause not to occur, the Back-stop Closing if
the Rights Offering is terminated by the Company by reason of the conditions
thereto, which are set forth in the Company's registration statement as filed
with the Securities and Exchange Commis sion on May 19, 1999, not having been
satisfied.". Artemis agrees to be bound by Section 2(b) of the Investment
Agreement to the same extent as Apollo is so bound.
Section 7. Effectiveness of Agreement; Termination. This Agreement
---------------------------------------
shall not become effective and shall not be binding upon any party hereto unless
and until the Second Amendment becomes effective. If a Stockholder ceases to
beneficially own (collectively with its Affiliates and Associates) at least 25%
of the shares set forth on Schedule I hereto (a "Sub-25% Holder"), the
provisions of Section 2 requiring the other Stockholder to take certain actions
to cause the designees of the Sub-25% Holder to be elected to the Board shall no
longer be effective; however, the provisions of Section 2 requiring the Sub-25%
Holder to take certain actions to cause designees of the other Stockholder to be
elected to the Board shall remain in effect. Except for Section 6 hereof, this
Agreement shall terminate, and the rights and obligations of the parties hereto
shall have no force and effect, upon the earlier to occur of the following: (i)
both Stockholders become Sub-25% Holders, (ii) the expiration of three (3) years
from the date of execution of this Agreement or (iii) the parties hereto
mutually agree on such later date for the
9
<PAGE>
termination of this Agreement; provided, however, that the consent or agreement
-------- -------
of the Company shall not be required with regard to any termination of the terms
or provisions of Sections 2 or 3 hereof.
Section 8. Amendments. The provisions of this Agreement,
----------
including the provisions of this sentence, may not be amended, modified or
supple mented, and waivers or consents to departures from the provisions hereof
may not be given without the prior written consent of the Company and each of
the Stockholders; provided, however, that the consent or agreement of the
-------- -------
Company shall not be required with regard to any termination, amendment,
modification or supplement of, or waivers or consents to departures from, the
terms or provisions of Sections 2 or 3 hereof.
Section 9. No Inconsistent Agreement. Neither Stockholder
-------------------------
will, on or after the date of this Agreement, enter into any agreement with
respect to the Voting Stock which is inconsistent with the rights granted to the
Stockholders in this Agreement or otherwise conflicts with the provisions
hereof.
Section 10. Notices. All notices and other communications under
-------
this Agreement shall be in writing and, unless otherwise provided herein, shall
be deemed duly given if delivered personally, by facsimile transmission (receipt
of which is confirmed) or sent by registered or certified mail (first-class
mail, postage pre-paid, return receipt requested) or by overnight courier or
similar courier service, addressed, (a) if to Apollo, at the following address:
Apollo Investment Fund, L.P., c/o Apollo Advisors, L.P., 2 Manhattan Road,
Purchase, New York 10577 (or if by facsimile transmission to (212) 261-4070)
attention: Michael Weiner, or at such other address as Apollo shall have
furnished to the Company and to Artemis in writing, (b) if to Artemis, at the
following address: Artemis America Partnership c/o RL&F Service Corp., Rodney
Square, P.O. Box 551, Wilmington, Delaware 19899 (or if by facsimile
transmission to 011-331-44112034) with a copy to Heights Advisors, 545 Fifth
Avenue, Suite 940, New York, New York 10017 to the attention of Bernard Attal,
or at such other address as Artemis shall have furnished to the Company and to
Apollo in writing, or (c) if to the Company, at the following address:
Samsonite Corporation, 11200 East 45/th/ Avenue, Denver, Colorado 80239 (or if
by facsimile to (303) 373-6406), to the attention of its General Counsel, or at
such other address (and/or facsimile number), or to the attention of such other
officer, as the Company shall have furnished to Apollo and to Artemis in
writing, in each case with a copy to the attention of Lou R. Kling at the
following address:
10
<PAGE>
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022 (or if by facsimile to (212) 735-2000).
Section 11. Successors and Assigns. This Agreement shall inure
----------------------
to the benefit of and be binding upon the successors of each of the parties
hereto.
Section 12. Counterparts. This Agreement may be executed in any
------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
Section 13. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 14. Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of New York without
giving effect to the choice of law principles thereof.
Section 15. Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
Section 16. Entire Agreement. This Agreement is intended by the
----------------
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
Section 17. Specific Performance. Each party hereto, in addition
--------------------
to being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. Each party hereto hereby agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
11
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by each of
the parties hereto as of the date first written above.
SAMSONITE CORPORATION
By: /s/ Steve Armstrong
-----------------------------------------
Name: Steve Armstrong
Title: General Counsel
APOLLO INVESTMENT FUND, L.P.
By: Apollo Advisors, L.P.,
Its General Partner
By: Apollo Capital Management, Inc.,
Its General partner
By: /s/ Robert H. Falk
------------------------------------
Name: Robert H. Falk
Title: Vice President
ARTEMIS AMERICA PARTNERSHIP
By:
Its General Partner
By: /s/ Emmanuel Cueff
-------------------------------------
Name: Emmanuel Cueff
Title: General Secretary
<PAGE>
Schedule I
----------
Apollo .... 1,779,234 shares of Common Stock plus 50% of any shares purchased
pursuant to the Bridge Investment plus 50% of any shares purchased
pursuant to the Back-stop Agreement (as amended by Section 6 hereof)
(including any shares of Common Stock issued in exchange for or in
respect of the foregoing).
Artemis ... 1,778,523 shares of Common Stock plus any shares purchased pursuant
to the April 5, 1999 and July 13, 1999 letter agreements between
Apollo and Artemis (including any shares of Common Stock issued in
exchange for or in respect of the foregoing).
13
<PAGE>
Exhibit A
SECOND AMENDMENT OF
THE RIGHTS AGREEMENT
This SECOND AMENDMENT OF THE RIGHTS AGREEMENT (the "Agreement") is entered into
as of July 13, 1999, by and between Samsonite Corporation, a Delaware
corporation (the "Company") and BankBoston, N.A., a national banking association
(the "Rights Agent").
BACKGROUND
WHEREAS, the Company and the Rights Agent are parties to the Rights Agreement,
dated as of May 12, 1998, as amended on April 7, 1999 (the "Original
Agreement");
WHEREAS, pursuant to Section 26 of the Original Agreement, the parties hereto
have agreed to amend certain provisions of the Original Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and intending to be legally bound, the parties hereto agree
that the Original Agreement is hereby amended as follows:
SECTION 1. Defined Terms. Capitalized terms used and not defined herein shall
-------------
have the meanings assigned to such terms in the Original Agreement.
SECTION 2. Amendments. The parties hereto hereby consent and agree to amend
----------
the Original Agreement as follows:
(a) Section 1 of the Original Agreement is hereby
amended by inserting the following at the end of Section (c) (iii) thereof:
"Notwithstanding anything to the contrary herein, neither Apollo Investment
Fund, L.P. (and its Affiliates and Associates) on the one hand, nor Artemis
America Partnership (and its Affiliates and Associates) on the other hand, shall
be deemed to beneficially own any
14
<PAGE>
securities held by the other party as a result of the Stockholders Agreement,
dated as of July 13, 1999, by and among the Company, Apollo Investment Fund,
L.P. and Artemis America Partnership (as if may be amended from time to time in
accordance with the provisions thereof, the "Stockholders Agreement")."
(b)Section 1 of the Original Agreement is hereby amended by deleting paragraph
(g) in its entirety and inserting in lieu thereof the following:
(g) "Exempted Person" shall mean Apollo Advisors, L.P. and its Affiliates and
Associates and Artemis America Partnership and its Affiliates and Associates, so
long as each of Apollo Advisors, L.P. and Artemis America Partnership, together
with its respective Affiliates and Associates, shall not become the Beneficial
Owner of shares of Common Stock then outstanding in excess of its Applicable
Percentage; provided, however, that from and after such time as Apollo Advisors,
-------- -------
L.P. or Artemis America Partnership, together with all of its respective
Affiliates and Associates, shall be the Beneficial Owner of shares of Common
Stock then outstanding in excess of its respective Applicable Percentage, Apollo
Advisors, L.P. or Artemis America Partnership, as the case may be, shall no
longer be deemed an "Exempted Person". For purposes of the foregoing, with
respect to Apollo Advisors, L.P., and its Affiliates and Associates, including
Lion Advisors, L.P. (collectively, "Apollo"), (i) from and after the execution
of the Investment Agreement, dated as of April 7, 1999, between the Company and
Apollo Investment Fund, L.P. (the "Investment Agreement"), and prior to the
Back-stop Closing (as such term is defined in the Investment Agreement), the
term "Applicable Percentage" shall mean two percent (2%) plus the percentage of
the outstanding shares of Common Stock beneficially owned by Apollo on the date
hereof (treating for this purpose the shares to be purchased at the Back-stop
Closing as not beneficially owned by Apollo) and (ii) after the Back-stop
Closing, the term "Applicable Percentage" shall mean two percent (2%) plus the
percentage of the outstanding shares of Common Stock beneficially owned by
Apollo immediately after such closing; provided that Apollo's Applicable
--------
Percentage shall in no event be less than 34%. For purposes of the foregoing,
with respect to Artemis America Partnership ("Artemis"), the term
15
<PAGE>
"Applicable Percentage" shall mean two percent (2%) plus the quotient obtained
by dividing (A) the number of shares of Common Stock which, or the voting rights
of which, Artemis or any of its Affiliates or Associates has the right to
acquire, or acquires, at any time or which otherwise may be distributed to
Artemis or to any of its Affiliates or Associates, in either case by reason of
or pursuant to (x) the terms of the Investment Management Agreement between
Artemis and Lion Advisors, L.P., dated as of June 29, 1990, as amended on April
30, 1999, with respect to the managed account, (y) the distribution of shares of
Common Stock to the limited partners of Apollo Investment Fund I, L.P., or (z)
the terms of the agreements, dated as of April 5, 1999, as amended on July 13,
1999, between Artemis America Partnership and Apollo Investment Fund, L.P., by
(B) the number of shares of Common Stock outstanding at the time of any
calculation to determine whether Artemis is an Acquiring Person. Notwithstanding
anything to the contrary contained herein, a "group" (as determined pursuant to
Rule 13d-5 of the General Rules and Regulations promulgated under the Exchange
Act) consisting solely of Exempted Persons or of solely Exempted Persons and one
or more transferees in a transaction to which Sections 3(i) (after giving effect
to the proviso therein) and 4 of the Stockholders Agreement apply (a "Section
3(i) Transferee") shall likewise be treated as an Exempted Person hereunder;
provided that the foregoing shall not apply to a group which has beneficial
- --------
ownership of shares of Common Stock of a Section 3(i) Transferee not subject to
the pro rata voting requirements of Section 4 of the Stockholders Agreement."
c) Section 7(a) of the Original Agreement is hereby amended by deleting the
phrase "May 31, 2002" appearing in the seventh line from the end thereof and
inserting in lieu thereof the phrase "May 31, 2007".
(d) Exhibits B and C of the Original Agreement are hereby amended by deleting
all references to the phrase "May 31, 2002" appearing therein and inserting in
lieu thereof the phrase "May 31, 2007".
Except as otherwise specified above, there is no amendment of any other term,
condition or provision of the
16
<PAGE>
Original Agreement all of which are hereby ratified and confirmed by the
Company.
SECTION 3. Counterparts. This Agreement (a) may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument, (b) shall be effective
only in this specific instance for the specific purpose set forth herein, and
(c) does not allow any other or further departure from the terms of the Original
Agreement, which terms shall continue in full force and effect. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other parties.
SECTION 4. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
--------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
THE CHOICE OF LAW PRINCIPLES THEREOF.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by each of the parties
hereto as of the date first written above.
SAMSONITE CORPORATION
By:
------------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
------------------------------
Name:
Title:
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JULY 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 22,678
<SECURITIES> 0
<RECEIVABLES> 88,554
<ALLOWANCES> 8,207
<INVENTORY> 167,306
<CURRENT-ASSETS> 302,600
<PP&E> 221,182
<DEPRECIATION> 78,493
<TOTAL-ASSETS> 575,097
<CURRENT-LIABILITIES> 138,983
<BONDS> 465,135
192,254
24,410
<COMMON> 210
<OTHER-SE> (320,582)
<TOTAL-LIABILITY-AND-EQUITY> 575,097
<SALES> 371,264
<TOTAL-REVENUES> 371,264
<CGS> 215,522
<TOTAL-COSTS> 215,522
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,929
<INTEREST-EXPENSE> 26,849
<INCOME-PRETAX> 1,929
<INCOME-TAX> 5,794
<INCOME-CONTINUING> (4,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,297)<F1>
<EPS-BASIC> (1.73)
<EPS-DILUTED> (1.73)
<FN>
<F1>Net income (loss) is shown before redeemable preferred stock dividends and
accretion of preferred stock discount $13,925.
</FN>
</TABLE>
