Document/Exhibit Description Pages Size
1: 10-Q Samsonite Corp. - Form 10-Q 27 138K
2: EX-10.1 3rd Amd. to Revolving Credit & Term Loan Agreement 25 50K
3: EX-10.4 Schenley Pension Plan 20 72K
4: EX-10.5 McCrory Pension Plan 20 72K
5: EX-10.6 Purchase Agreement 6 21K
6: EX-21 Subsidiaries of Samsonite 2 7K
7: EX-27 Financial Data Schedule 2 9K
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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, 1996
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: 023214
------------------
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. 16,004,450 shares of common
stock, par value $0.01 per share, as of September 6, 1996.
--------------------------------------------------------------------------------
FORM 10-Q
---------
CONTENTS
--------
[Enlarge/Download Table]
Page Number
-----------
PART I- FINANCIAL INFORMATION
---------------------
Unaudited Consolidated Balance Sheets as of July 31, 1996
and January 31, 1996................................................. 1
Unaudited Consolidated Statements of Operations for the three
months
ended July 31, 1996 and 1995......................................... 3
Unaudited Consolidated Statements of Operations for the six months
ended July 31, 1996 and 1995......................................... 4
Unaudited Consolidated Statement of Stockholders' Equity for the six
months
ended July 31, 1996.................................................. 5
Unaudited Consolidated Statements of Cash Flows for the six months
ended July 31, 1996 and 1995......................................... 6
Unaudited Notes to Consolidated Financial Statements................. 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 14
PART II - OTHER INFORMATION
-----------------
Item 1: Legal Proceedings ........................................... 22
Item 2: Changes in Securities ....................................... 22
Item 3: Defaults upon Senior Securities ............................. 22
Item 4: Submission of Matters to a Vote of Security Holders ......... 22
Item 5: Other Information ........................................... 23
Item 6: Exhibits and Reports on Form 8-K ............................ 23
Signature............................................................ 24
Index to Exhibits ................................................... 25
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
as of July 31, 1996 and January 31, 1996
(in thousands)
[Enlarge/Download Table]
July 31, January 31,
1996 1996
-------- ----------
Assets:
-------
Current assets:
Cash and cash equivalents.............................................. $ 9,367 15,179
Trade receivables, net of allowance for doubtful accounts
of $8,211 and $8,152................................................ 88,358 73,513
Notes and other receivables............................................ 17,419 17,711
Inventories (Note 2)................................................... 129,173 115,736
Deferred income tax assets............................................. 36,689 38,760
Prepaid expenses and other current assets.............................. 16,354 15,990
Assets held for sale................................................... 9,315 9,455
------- --------
Total current assets................................................ 306,675 286,344
Property, plant and equipment - net (Note 3).............................. 136,854 140,912
Intangible assets, less accumulated amortization of $198,623 and
$171,278 (Note 4)...................................................... 132,093 159,492
Other assets and long-term receivables, net of allowance
for doubtful accounts of $10,094 and $10,104........................... 33,373 34,695
------- --------
$608,995 621,443
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1996 AND JANUARY 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(CONTINUED)
[Enlarge/Download Table]
July 31, January 31,
1996 1996
------------ ------------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Short-term debt (Note 5)............................................. $ 21,133 23,487
Current installments of long-term obligations (Note 5)............... 20,492 16,306
Accounts payable..................................................... 41,325 33,520
Other accrued liabilities............................................ 101,908 113,512
------- -------
Total current liabilities......................................... 184,858 186,825
Long-term obligations, less current installments (Note 5).............. 295,255 294,653
Deferred income tax liabilities........................................ 33,475 33,038
Other noncurrent liabilities........................................... 85,843 79,672
Minority interests..................................................... 3,289 2,139
------- -------
Total liabilities................................................. 602,720 596,327
------- -------
Stockholders' equity (Notes 7, 8 and 9):
Preferred stock ($.01 par value; 2,000,000 shares authorized;
no shares issued)................................................. -- --
Common stock ($.01 par value; 60,000,000 shares authorized;
16,004,450 and 15,889,450 shares issued and outstanding).......... 160 159
Additional paid-in capital........................................... 264,088 261,842
Accumulated deficit.................................................. (241,532) (224,547)
Foreign currency translation equity adjustment....................... (5,460) (2,338)
Unearned compensation - restricted stock............................. (981) --
Note receivable...................................................... (10,000) (10,000)
-------- --------
Total stockholders' equity........................................ 6,275 25,116
------- -------
Commitments and contingencies (Note 1C)
$608,995 621,443
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
Three Months Ended July 31,
---------------------------
1996 1995
----------------- ------------
Net sales (Note 1F)...................................................... $179,440 167,670
Cost of goods sold (Note 3)............................................. 110,748 103,503
------- -------
Gross profit.......................................................... 68,692 64,167
Selling, general and administrative expenses (Note 3)................... 57,986 52,073
Amortization of intangible assets (Note 4).............................. 11,407 16,138
------- -------
Operating income (loss)............................................... (701) (4,044)
Other income (expense):
Interest income....................................................... 257 3,098
Interest expense and amortization of debt issue costs
and premium....................................................... (8,924) (10,301)
Other - net (Note 6).................................................. 4,740 5,332
------- --------
Loss before income taxes, minority interest and extraordinary item.... (4,628) (5,915)
Income tax expense....................................................... (1,403) (3,474)
Minority interest in earnings of subsidiaries............................ (152) (60)
------- --------
Loss before extraordinary item........................................ (6,183) (9,449)
Extraordinary loss, net of income tax benefit of $5,589 (Note 5)......... -- (8,042)
------- --------
Net loss.............................................................. $(6,183) (17,491)
======== ========
Loss per share:
Loss before extraordinary item........................................ $ (.39) (.59)
Extraordinary item.................................................... -- (.51)
-------- --------
Net loss.............................................................. $ (.39) (1.10)
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
Six Months Ended July 31,
-------------------------
1996 1995
----------- -----------
Net sales (Note 1F)...................................................... $349,307 325,423
Cost of goods sold (Note 3).............................................. 211,950 197,291
------- -------
Gross profit......................................................... 137,357 128,132
Selling, general and administrative expenses (Note 3).................... 111,391 102,534
Amortization of intangible assets (Note 4)............................... 27,405 31,900
------- -------
Operating income (loss).............................................. (1,439) ( 6,302)
Other income (expense):
Interest income...................................................... 799 3,670
Interest expense and amortization of debt issue costs and............ (18,034) (19,924)
premium............................................................
Other - net (Note 6)................................................. 6,532 3,315
Loss before income taxes, minority interest and extraordinary item... (12,142) (19,241)
Income tax expense....................................................... (4,400) (3,368)
Minority interest in earnings of subsidiaries............................ (443) (197)
-------- ---------
Loss before extraordinary item....................................... (16,985) (22,806)
Extraordinary loss, net of income tax benefit of $5,589 (Note 5)......... -- (8,042)
Net loss............................................................. $(16,985) (30,848)
======== =========
Loss per share:
Loss before extraordinary item....................................... $(1.07) (1.45)
Extraordinary item................................................... -- (.52)
------ --------
Net loss............................................................. $(1.07) (1.97)
======= ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 31, 1996
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
[Enlarge/Download Table]
FOREIGN
CURRENCY UNEARNED
ADDITIONAL TRANSLATION COMPENSATION-
PREFERRED COMMON PAID-IN ACCUMULATED EQUITY RESTRICTED NOTE
STOCK STOCK CAPITAL DEFICIT ADJUSTMENT STOCK RECEIVABLE
--------- ------ ---------- ----------- ----------- ------------- ----------
Balance, January 31, 1996 $ -- 159 261,842 (224,547) (2,338) -- (10,000)
Issuance of 55,000 shares of common stock -- -- 1,004 -- -- -- --
to an officer for cash (Note 9)
Issuance of 60,000 shares of restricted -- 1 1,094 -- -- (1,095) --
common stock to an officer
(Note 9)
Amortization of restricted stock award to -- -- -- -- -- 114 --
compensation expense
Compensation expense accrual for stock -- -- 148 -- -- -- --
bonus awards (Note 9)
Foreign currency translation adjustment -- -- -- -- (3,122) -- --
Net loss -- -- -- (16,985) -- -- --
------ --- ------- --------- ------ ----- --------
Balance, July 31, 1996 $ -- 160 264,088 (241,532) (5,460) (981) (10,000)
====== === ======= ========= ======= ===== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 1996 AND 1995
(IN THOUSANDS)
[Enlarge/Download Table]
Six Months Ended July 31,
-------------------------
1996 1995
------------ -----------
Cash flows provided (used) by operating activities:
Net loss.................................................... $(16,985) (30,848)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Loss from extinguishment of debt.......................... -- 8,042
Loss (gain) on disposition of fixed assets................ (12) (2)
Depreciation and amortization of property,
plant and equipment..................................... 10,651 10,464
Amortization of intangible assets......................... 27,405 31,900
Amortization of debt issue costs and premium.............. 967 (138)
Provision for doubtful accounts........................... 469 543
Amortization of stock awards.............................. 262 --
Changes in operating assets and liabilities:
Trade and other receivables............................. (14,916) (11,346)
Inventories............................................. (13,437) (19,436)
Prepaid expenses and other current assets............... (224) 3,358
Accounts payable........................................ 7,805 (2,434)
Accrued liabilities..................................... (11,604) (8,715)
Other - net............................................. 3,214 ( 633)
-------- -------
Net cash provided (used) by operating activities............. $ (6,405) (19,245)
-------- -------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 1996 AND 1995
(IN THOUSANDS)
(CONTINUED)
[Enlarge/Download Table]
Six Months Ended July 31,
-------------------------
1996 1995
----------- ---------
Cash flows provided (used) by investing activities:
Purchases of property, plant and equipment................................ $(11,890) (11,578)
Net cash from (used by) discontinued operations........................... 5,811 (8,899)
Cash received from spinoff of discontinued operations..................... -- 112,000
Other..................................................................... 663 --
-------- --------
Net cash provided (used) by investing activities....................... ( 5,416) 91,523
-------- --------
Cash flows provided (used) by financing activities:
Net proceeds from (repayment of) short-term debt.......................... (1,978) 14,437
Borrowings (repayments) on long-term debt................................. 8,157 (119,477)
Proceeds from sale of common stock........................................ 1,004 --
Other..................................................................... 1,124 (1,584)
-------- --------
Net cash provided (used) by financing activities....................... 8,307 (106,624)
-------- --------
Effect of exchange rate changes on cash and cash equivalents................. (2,298) (4,382)
-------- --------
Net increase (decrease) in cash and cash equivalents................... (5,812) (38,728)
Cash and cash equivalents, beginning of period............................... 15,179 51,283
-------- --------
Cash and cash equivalents, end of period..................................... $ 9,367 12,555
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest.................................. $ 15,880 33,058
======== ========
Cash paid during the period for income taxes.............................. $ 5,101 7,569
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
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's retail
sales consist primarily of American Tourister products sold through 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
"Restructuring").
The Restructuring has been accounted for pursuant to the American Institute
of Certified Public Accountants Statement of Position 90-7, entitled
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). SOP 90-7 requires that assets and liabilities be
adjusted to their fair values ("fresh-start" values) and that a new
reporting entity be created. On June 30, 1993, for accounting purposes, the
Plan was consummated and SOP 90-7 was adopted. The consolidated financial
statements include the ongoing impact of fresh-start reporting.
C. 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 and results of operations as of July 31, 1996 and for the three-
month and six-month periods ended July 31, 1996 and 1995. These
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1996.
See Note 14 to the aforementioned consolidated financial statements
included in the 1996 Form 10-K for a description of litigation, commitments
and contingencies.
D. 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 from those
estimates.
E. PER SHARE DATA
--------------
Loss per share is calculated based on the weighted average number of shares
outstanding during the period. The weighted average number of shares
outstanding during the six months ended July 31, 1996 and 1995 was
15,924,835 and 15,659,000, respectively. The weighted average number of
shares outstanding during the three months ended July 31, 1996 and 1995 was
15,959,450 and 15,889,450, respectively.
8
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
F. ROYALTY REVENUES
----------------
The Company licenses its brand names to certain unrelated third parties as
well as certain foreign subsidiaries and joint ventures. Net sales include
royalties earned of $11,993,000 and $9,084,000 for the six months ended
July 31, 1996 and 1995, respectively, and $3,664,000 and $4,389,000 for the
three months ended July 31, 1996 and 1995, respectively. Included in
royalties for the six months ended July 31, 1996 is $3.9 million from the
sale of apparel tradename licenses in certain Pacific Rim countries during
the first quarter of fiscal 1997.
2. INVENTORIES
Inventories consisted of the following:
[Enlarge/Download Table]
July 31, January 31,
1996 1996
----------- -----------
(In thousands)
Raw Materials................................................. $42,409 35,827
Work in Process............................................... 9,458 10,959
Finished Goods................................................ 77,306 68,950
-------- ---------
$129,173 115,736
======== =========
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
[Enlarge/Download Table]
July 31, January 31,
1996 1996
----------- -----------
(In thousands)
Land.......................................................... $ 13,459 14,172
Buildings..................................................... 60,148 62,281
Machinery, equipment and other................................ 112,288 106,511
------- -------
185,895 182,964
Less accumulated amortization and depreciation................ (49,041) (42,052)
------- -------
$136,854 140,912
======== =======
Depreciation included in cost of goods sold and selling, general and
administrative expenses related to adjustments of assets and liabilities to
fair value in connection with the adoption of SOP 90-7 consisted of the
following (in thousands):
[Enlarge/Download Table]
Three months ended Six months ended
July 31, July 31,
-------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
"Fresh Start" Depreciation in Cost of Goods Sold................... $ 724 637 1,461 1,255
"Fresh Start" Depreciation in Selling, 162 141 325 278
General and Administrative Expenses............................... ----- ---- ----- -----
$ 886 778 1,786 1,533
Total "Fresh Start" Depreciation.............................. ===== ==== ===== =====
Property and equipment revalued in connection with the adoption of SOP 90-7
are being depreciated over their respective estimated useful lives,
primarily ranging from two to six years.
9
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization, consisted of the
following:
[Enlarge/Download Table]
July 31, January 31,
1996 1996
---------------- ----------------
(In thousands)
Reorganization value in excess of identifiable assets ....... $ -- 22,947
Trademarks................................................... 117,694 119,549
Licenses, Patents and Other ................................. 14,399 16,996
------- -------
$132,093 159,492
======== =======
Amortization of intangible assets consisted of the following (in thousands):
[Enlarge/Download Table]
Three months ended Six months ended
July 31, July 31,
--------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
Amortization of Reorganization Value in Excess of
Identifiable Assets.................................. $ 9,179 13,951 22,947 27,536
Amortization of Licenses, Patents and Other............ 1,300 1,384 2,602 2,763
Amortization of Trademarks............................. 928 803 1,856 1,601
------- ------ ------ ------
$11,407 16,138 27,405 31,900
======= ====== ====== ======
The reorganization value in excess of identifiable assets was amortized
over a three-year period expiring June 1996; licenses, patents and other
are amortized over a period ranging from one to twenty-three years; and
trademarks are amortized over a period ranging from five to forty years.
5. DEBT
Debt consisted of the following:
[Enlarge/Download Table]
July 31, January 31,
1996 1996
----------- ---------------
(In thousands)
Series B Senior Subordinated Notes (a)............... $190,000 190,000
Senior Credit Facility (b)........................... 75,000 58,000
Short-term obligations expected to be refinanced
Capital lease obligations............................ 10,433 11,394
Other (c)............................................ 4,720 4,665
Total debt......................................... 56,727 70,387
-------- -------
Less short-term debt and current installments of 336,880 334,446
long-term obligations.............................. (41,625) (39,793)
-------- --------
$295,255 294,653
======== ========
10
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(a) The Series B Senior Subordinated Notes bear interest at 11% and have
a maturity date of July 15, 2005.
(b) The Senior Credit Facility provides for a $50 million term loan and a
$175 million revolving credit facility. The credit facility matures
July 14, 2000.
The following amounts were outstanding at July 31, 1996 under the
Senior Credit Facility:
Term Loan $50.0 million
Revolving Credit Borrowings $25.0 million
Letters of Credit $57.6 million
Available borrowings were $92.4 million at July 31, 1996.
The Senior Credit Facility is secured by substantially all the
Company's U.S. assets, the capital stock of its principal domestic
subsidiaries, and 66% of the stock of its principal foreign
subsidiaries. The agreement contains financial covenants which require
the Company to maintain certain financial ratios and minimum amounts
of earnings, exclusive of interest, taxes, and non-cash charges. The
agreement also contains covenants limiting the amount of capital
expenditures, investments in certain subsidiaries, and dividends,
among other restrictions. Under the agreement, the Company has no
amount available for the payment of dividends at July 31, 1996. The
Company is in compliance with the terms of such covenants at July 31,
1996.
(c) Other obligations consist of various notes payable to banks by foreign
subsidiaries aggregating $51.4 million and a $5.3 million secured
financing arrangement with a foreign bank. Included in letters of
credit outstanding is a $48.3 million standby letter of credit issued
to secure the debt of foreign subsidiaries.
In July 1995, the Company redeemed its then outstanding senior subordinated
indebtedness with the proceeds from another issuance of subordinated debt.
The redemption price included a contractual premium of $18,000,000 which,
net of unamortized premium of $4,369,000 and income tax benefit of
$5,589,000, is included in the consolidated statements of operations for
the six-month and three-month periods ended July 31, 1995 as an
extraordinary loss on the extinguishment of debt.
6. OTHER INCOME (EXPENSE) - NET
Other income (expense) - net consisted of the following:
[Enlarge/Download Table]
Three months ended July 31, Six months ended July 31,
--------------------------- -------------------------
1996 1995 1996 1995
----------- --------------- --------- ---------------
(In thousands)
Foreign currency transaction income (losses) (a).. $ 652 (156) 2,107 (2,439)
Rental income..................................... 493 434 887 818
Favorable settlement of claim (b)................. 3,802 -- 3,802 --
Sale of television station........................ -- 5,368 -- 5,368
Other............................................. (207) (314) (264) (432)
------ ----- ----- -----
$4,740 5,332 6,532 3,315
====== ===== ===== =====
(a) Foreign currency transaction income for the six months ended July 31,
1996 includes $300,000 of unrealized exchange gains related to open
forward exchange contracts entered into to reduce foreign currency
exposure on certain foreign operations.
(b) Other income of $3,802,000 results from the favorable settlement for
$200,000 of a claim against the Company by a related party. The
Company had previously accrued $4,002,000 for such claim. The claim is
part of the Contingent Liability with Respect to the Old Notes
described in Note 14 to the consolidated financial statements in the
1996 Form 10-K and relates to the claim for interest on overdue
installments of interest accruing prior to the bankruptcy of the
Company's predecessor in 1993. The contingent liability was recorded
as part of the reorganization. The holders of the claim were Apollo
Investment Fund, L.P. ("Apollo") and an affiliate of Apollo. Apollo
and its affiliates own 45.83% of the outstanding shares of the
Company's common stock.
11
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NOTE RECEIVABLE
The note receivable deducted from stockholders' equity at July 31, 1996
arises from the sale of 425,532 shares of the Company's common stock to the
Company's former Chairman and Chief Executive Officer in April 1995 for
$23.50 per share. The note bears interest at 8% per annum. The note is due
April 13, 2000.
8. EMPLOYEE STOCK OPTIONS
The Company has authorized 1,050,000 shares for the granting of options
under the 1995 Stock Option and Award Plan. See Note 10 to the consolidated
financial statements included in the 1996 Form 10-K for a description of
such plan. In addition, the Company has outstanding options to current and
former executives in connection with employment agreements and incentive
plans.
At July 31, 1996, the Company had granted options for a total of 2,853,427
shares at option prices ranging from $11.14 to $32.85 per share. Options
for 1,982,523 shares were exercisable at July 31, 1996.
9. OTHER
Effective May 15, 1996, the employment of Mr. Steven J. Green as Chairman
of the Board, Chief Executive Officer and President ceased, and he was
succeeded as Chief Executive Officer and President by Richard R. Nicolosi.
Mr. Green resigned as a Director of the Company effective May 21, 1996. The
Company charged $2.6 million to general and administrative expenses during
the three months ended July 31, 1996 related to the cessation of Mr.
Green's employment and retention of Mr. Nicolosi.
The Company has granted Mr. Nicolosi options to purchase 425,532 shares of
common stock at an exercise price of $18.25 per share (subject to customary
antidilution adjustments). Options to purchase 186,170 shares of common
stock (the "Series A Options") are time-vesting options and options to
purchase 239,362 shares of common stock (the "Series B Options") are
subject to certain performance requirements with respect to vesting. The
options have a five year term. Fifty percent (50%) of the Series A Options
will vest on May 15, 1997 and the remaining fifty percent (50%) will vest
on May 15, 1998, so long as Mr. Nicolosi remains continually employed by
the Company through such date. All of the Series B Options shall vest on
April 15, 2001, so long as he remains continually employed by the Company
through April 15, 2001, subject to accelerated, performance-based vesting
as follows. The Series B Options will vest on May 15, 1998 if Mr. Nicolosi
remains continually employed by the Company through such date and the
average fair market value of the common stock equals or exceeds $30.00 per
share in any period of 30 consecutive days prior to May 15, 1998.
Notwithstanding the foregoing, if a change of control event occurs prior to
May 15, 1998, (i) all of the Series A Options will automatically vest and
(ii) all of the Series B Options will vest if Mr. Nicolosi remains
continually employed by the Company through the date of such event and
either the average fair market value of the common stock in any period of
30 consecutive days prior to such event or the fair market value of the
common stock as of the date of such event, equals or exceeds $30.00 per
share.
12
SAMSONITE CORPORATION AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Also in connection with the performance by Mr. Nicolosi of services
pursuant to his employment, the Company issued to Mr. Nicolosi 60,000
shares of restricted common stock (the "Restricted Shares"). Fifty percent
(50%) of the Restrict ed Shares will vest on May 15, 1997 and the remaining
fifty percent (50%) will vest on May 15, 1998; provided that if a change of
control event occurs and Mr. Nicolosi remains continually employed by the
Company through the date of such event, then all Restricted Shares that
have not vested will become vested as of the date of such event. The
Company is recognizing compensation expense for the fair market value of
the shares at the date of grant over the two-year vesting period.
On June 6, 1996, the Company sold and issued to Mr. Nicolosi 55,000 shares
of common stock at fair market value of $18.25 per share, or an aggregate
purchase price of $1,003,750.
Effective as of May 15, 1996, the Company entered into agreements with
three executive officers to provide stock bonuses to each of them of 38,889
shares of common stock, payable if the executive remains continually
employed by the Company through the earlier of May 15, 1999 or one year
after a change of control event. The Company is recognizing compensation
expense equal to the fair market value of the shares at May 15, 1996
($18.25 per share) over the three year vesting period.
10. ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of ("Statement 121"), which requires
impairment losses to be recorded on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement
121 in the first quarter of fiscal 1997. Such adoption had no effect on the
consolidated financial statements.
In October 1995, the FASB issued Statement No. 123, Accounting for Stock-
Based Compensation ("Statement 123"), which provides an alternative to APB
Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for
stock-based compensation issued to employees. The Statement allows for a
fair value based method of accounting for employee stock options and
similar equity instruments. However, for companies that continue to account
for stock-based compensation arrangements under Opinion No. 25, Statement
123 requires disclosure of the pro forma effect on net income and earnings
per share of its fair value based accounting for those arrangements. The
Company has elected not to adopt the recognition and measurement provisions
of the Statement; however, the required disclosures will be provided for
its fiscal year ended January 31, 1997.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EFFECTS OF REORGANIZATION ON RESULTS OF OPERATIONS
---------------------------------------------------
Included in the Company's statements of operations are amortization and
depreciation expenses related to adjustments of assets and liabilities to
fair value in connection with the adoption of SOP 90-7. As a result of the
bankruptcy reorganization of the Company's predecessor in 1993, the Company
was required to adjust its assets and liabilities to their fair ("fresh
start") values and create a new entity for financial reporting purposes.
The most significant fresh start adjustment relates to recording
Reorganization Value in Excess of Identifiable Assets, which was amortized
over a three year period ending in June 1996. In addition, the Company
recorded fresh start adjustments to reflect trademarks, licenses, patents
and other intangibles at their fair values, which are being amortized over
periods ranging from one to forty years. Property and equipment adjusted to
fair values in connection with the adoption of SOP 90-7 is being
depreciated over their respective estimated useful lives, primarily ranging
from two to six years.
The effects of the amortization and depreciation of the fresh start
adjustments ("Fresh Start Amortization and Depreciation") on the operating
loss is summarized as follows:
[Enlarge/Download Table]
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Operating loss................................................... $ (701) (4,044) (1,439) (6,302)
Fresh Start Amortization and Depreciation........................ 12,059 16,916 28,721 33,433
------ ------ ------ ------
Operating income before Fresh Start Amortization
and Depreciation.............................................. $11,358 12,872 27,282 27,131
======= ====== ====== ======
Fresh Start Amortization and Depreciation consisted of the following:
[Enlarge/Download Table]
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Fresh Start Amortization:
Amortization of Reorganization Value in Excess
of Identifiable Assets...................................... $ 9,179 13,951 22,947 27,536
Amortization of Licenses, Patents, and Other................. 1,224 1,384 2,448 2,763
Amortization of Trademarks................................... 770 803 1,540 1,601
------- ------ ------ ------
Total Fresh Start Amortization.............................. 11,173 16,138 26,935 31,900
------- ------ ------ ------
Fresh Start Depreciation:
Fresh Start Depreciation in Cost of Goods Sold............... 724 637 1,461 1,255
Fresh Start Depreciation in Selling, General
and Administrative Expenses................................. 162 141 325 278
------- ------ ------ ------
Total Fresh Start Depreciation.............................. 886 778 1,786 1,533
------- ------ ------ ------
Fresh Start Amortization and Depreciation........................ $12,059 16,916 28,721 33,433
======= ====== ====== ======
14
The impact of the fresh start amortization and depreciation on net loss and net
loss per share is summarized as follows:
[Enlarge/Download Table]
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
------------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Fresh Start Amortization and Depreciation................... $12,059 16,916 28,721 33,433
Tax Benefit................................................. (1,181) (1,216) (2,367) (2,418)
After-Tax Impact on Net Loss................................ $10,878 15,700 26,354 31,015
======= ====== ====== ======
Impact on Net Loss Per Share................................ $ .67 .99 1.63 1.98
======= ====== ====== ======
RESULTS OF OPERATIONS
---------------------
THREE MONTHS ENDED JULY 31, 1996 ("SECOND QUARTER OF FISCAL 1997" OR "CURRENT
YEAR") COMPARED TO THREE MONTHS ENDED JULY 31, 1995 ("SECOND QUARTER OF FISCAL
1996" OR "LAST YEAR")
General. The Company analyzes its sales and operations by the following
categories: (1) "European operations" which consist of its western European
manufacturing and distribution operations whose functional currency is the
Belgian franc, (2) "U.S. operations" which includes activities within the U.S.
from the Samsonite and American Tourister manufacturing and distribution
operations and (3) "International operations" which include exports from the
U.S., manufacturing and distribution operations in countries with operations
which are smaller in size compared to the U.S. and European operations
(primarily Canada and Mexico) and global licensing operations.
Results of European operations were translated from Belgian francs to U.S.
dollars for the three months ended July 31, 1996 and 1995 at average rates of
approximately 31.21 and 28.66 francs to the U.S. dollar, respectively. This
represents a decrease in the value of the Belgian franc of 8.9%, which results
in significant decreases in reported sales, cost of sales and other expenses in
the second quarter of fiscal 1997 compared to last year. The most significant
effects from the difference in exchange rates from last year to the current year
are noted in the following analysis and referred to as an "exchange rate
difference."
Net Sales. Total net sales increased to $179.4 million for the second quarter
of fiscal 1997 from $167.7 million for the second quarter of fiscal 1996, an
increase of $11.7 million or 7.0%.
Sales from European operations decreased from $69.2 million last year to $67.0
million in the current year, a decrease of $2.2 million. The exchange rate
difference resulted in a $6.0 million decrease in reported sales versus last
year. The remainder, an increase of $3.8 million, results from an increase in
sales expressed in Belgian francs of 5.4% in the second quarter of fiscal 1997
compared to last year. The increase in sales is attributable to what the Company
believes is increased market share despite a generally weak level of consumer
demand and high unemployment throughout Europe.
U.S. operations sales increased from $80.0 million last year to $90.9 million in
the current year, an increase of $10.9 million or 13.6%. The increase is due to
continued market acceptance of new product lines introduced in the last six
months of fiscal 1996 such as the new upright Ultralite II, Profile and Acclaim
product lines and growth in American Tourister retail sales which increased $2.9
million from the same period last year.
Sales from the International operations increased from $18.5 million last year
to $21.5 million in the current year, an increase of $3.0 million or 16.2% due
to sales from new Far East distribution operations and increased sales in
Mexico.
Gross profit. Total gross profit for the second quarter of 1997 increased from
last year by $4.5 million. Gross margin percentages were consistent with last
year at 38.3%.
15
Gross margins from European operations increased from last year by 2.6
percentage points due to price increases in selected product lines, declining
materials costs, and improving productivity variances compared to last year.
Margins from U.S. operations and export sales decreased from last year by 2.2
percentage points primarily due to lower margins on certain high volume new
product lines, an increase in sales of obsolete goods at low margins,
promotional sales of selected products, and negative productivity variances
caused by the startup of production of new hardside products. To improve U.S.
margins, the Company has announced price increases on certain products effective
as of October 1, 1996, as well as implementing cost improvements to certain
manufacturing processes beginning August 1, 1996.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $5.9 million from the second quarter of fiscal 1996 to the second
quarter of fiscal 1997. As a percent of sales, SG&A was 32.31% in the current
year and 31.06% last year.
European operations SG&A increased by $0.2 million. The exchange rate
difference caused SG&A to decrease by $1.6 million. The remainder, an increase
of $1.8 million, results from an increase in SG&A expressed in Belgian francs of
9.9% from last year. The increase is due primarily to variable selling and
distribution costs, salaries and employee benefits from staff additions, and
increased advertising expenditures.
U.S. SG&A increased from last year due to increased advertising expenses,
increased variable selling and marketing expenses associated with American
Tourister store openings, and $2.6 million of expense incurred in connection
with the cessation of the former CEO's employment and the retention of a new CEO
(see Note 9 to the consolidated financial statements). If the $2.6 million
charge is excluded, total SG&A as a percent of sales is comparable to last year.
SG&A for the International operations increased primarily due to the expenses
incurred in new foreign operations in Singapore, China, and India.
Amortization of intangibles. The Company recorded significant intangible assets
as a result of its reorganization in 1993. See the comparative analysis of
amortization of intangibles included elsewhere herein.
Reorganization value in excess of identifiable assets is fully amortized as of
June 30, 1996, which accounts for the decrease in amortization of intangible
assets from $16.1 million last year to $11.4 million in the current year.
Operating loss. Operating loss decreased by $3.3 million from last year as a
result of the increases in revenues and increased gross profit of $4.5 million
and the decline in amortization of intangibles of $4.7 million, which were
partially offset by increases in SG&A of $5.9 million.
Interest income. Interest income decreased from $3.1 million last year to $0.3
million in the second quarter of the current year. Last year interest income
included $2.9 million realized from a note receivable collected in connection
with the sale of an investment in a television station. Recurring interest
income results from temporary investments of cash on hand and is consistent with
last year.
Interest expense and amortization of debt issue costs and premium. Interest
expense decreased from $10.3 million last year to $8.9 million this year due
primarily to lower levels of outstanding indebtedness in the current year and
lower average interest rates. Current year interest expense includes $484,000 of
amortization of deferred debt acquisition costs. On July 1, 1996, the Company
obtained an amendment to its U.S. Senior Credit Facility which will enable it to
obtain lower rates on amounts outstanding and on amounts of standby letters of
credit outstanding beginning in the third quarter of fiscal 1997 by
approximately .375% per year. At July 31, 1996, $75 million was outstanding
under the Senior Credit Facility which accrued interest at 7.09% and $48.4
million of standby letters of credit were outstanding.
16
Other-net. See Note 6 to the consolidated financial statements for a
comparative analysis of other income (expense). The Company has entered into
certain forward exchange contracts to hedge its exposure to changes in exchange
rates. Other income for the three months ended July 31, 1996 includes income
from such transactions of $0.7 million, $0.3 million of which is unrealized at
July 31, 1996. The realization of such income is subject to changes in exchange
rates during the period prior to settlement of the forward exchange contracts.
All outstanding forward exchange contracts have settlement dates prior to March
1997. In the second quarter of fiscal 1996, such foreign exchange transactions
resulted in a loss of $0.2 million.
Other income of $3,802,000 results from the favorable settlement for $200,000 of
a claim against the Company by a related party. The Company had previously
accrued $4,002,000 for such claim. This claim is part of the Contingent
Liability with Respect to the Old Notes described in Note 14 to the consolidated
financial statements included in the 1996 Form 10-K and relates to the claim for
interest on overdue installments of interest accruing prior to the commencement
of the bankruptcy of the Company's predecessor in 1993. The contingent liability
was recorded as part of the reorganization. The holders of this claim were
Apollo Investment Fund, L.P. ("Apollo") and an affiliate of Apollo. Apollo and
its affiliates own 45.83% of the outstanding shares of the Company's common
stock.
Income tax expense. Income taxes decreased from $3.5 million last year to $1.4
million in the current year. The decrease is due primarily to less nondeductible
amortization of intangible assets in the current year. Although the Company
incurred losses in both the current and prior fiscal years, the relationship
between income tax expense or benefit differs from that expected by applying the
U.S. statutory tax rate to pre-tax losses because of (i) the nondeductibility
for tax purposes of amortization of reorganization value in excess of
identifiable assets, (ii) foreign income tax expense provided on foreign
earnings, and (iii) state income taxes.
Extraordinary loss. The extraordinary loss of $8.0 million in the second
quarter of last year resulted from a loss on the early retirement of debt.
Net loss. The net loss decreased from $17.5 million last year to $6.2 million
this year, a decrease of $11.3 million. The decrease in the net loss is caused
by the total of the decreases in operating losses, interest expense, other
expenses, extraordinary losses, and income tax expense.
SIX MONTHS ENDED JULY 31, 1996 ("FIRST HALF OF FISCAL 1997" OR "CURRENT YEAR")
COMPARED TO SIX MONTHS ENDED JULY 31, 1995 ("FIRST HALF OF FISCAL 1996" OR "LAST
YEAR")
General. Results of European operations were translated from Belgian francs to
U.S. dollars for the six months ended July 31, 1996 and 1995 at average rates of
approximately 30.73 and 29.48 francs to the U.S. dollar, respectively. This
represents a decrease in the value of the Belgian franc of 4.2%, which results
in decreases in reported sales, cost of sales and other expenses in fiscal 1997
compared to last year. The most significant effects from the difference in
exchange rates from last year to the current year are noted in the following
analysis and referred to as an "exchange rate difference."
Net Sales. Total net sales increased to $349.3 million for the first half of
fiscal 1997 from $325.4 million for the first half of fiscal 1996, an increase
of $23.9 million or 7.3%.
Sales from the European operations increased from $133.5 million last year to
$134.3 million in the current year, an increase of $0.8 million. The exchange
rate difference resulted in a $5.7 million decrease in reported sales versus
last year. The remainder, an increase of $6.5 million, results from an increase
in sales expressed in Belgian francs of 4.8% from last year. Despite a generally
weak European economy, sales have increased due to increased market share and
increased sales of diversified products.
U.S. operations sales increased from $153.8 million last year to $170.2 million
in the current year, an increase of $16.4 million or 10.7%. American Tourister
retail sales accounted for $5.5 million of the increase in sales, while the
remainder is primarily due to consumer demand for redesigned upright luggage
lines, particularly lightweight softside products.
17
Sales from the International operations increased from $38.1 million last year
to $44.7 million in the current year, an increase of $6.6 million or 17.3%. Of
the change in revenues from last year, $3.9 million is due to revenue from the
sale of McGregor apparel tradenames in certain Pacific Rim countries. The
remainder is due to sales from new Far East distribution operations and
increased sales in Mexico.
Gross profit. Overall gross profit for the first half of 1997 increased from
last year by $9.2 million. Gross margin decreased by 0.1 percentage point from
the same period last year.
Gross margins from European operations increased by 1.7 percentage points from
last year due to price increases in selected product lines, declining materials
costs, and improving productivity variances compared to last year.
Margins from U.S. operations decreased from last year primarily due to lower
margins on certain fast selling new product lines, an increase in sales of
obsolete goods at low margins, promotional sales of selected products, negative
productivity variances caused by the startup of production of new hardside
products, and a $0.7 million customer credit given on certain American Tourister
sales which were defective. To improve margins in the U.S., the Company has
announced price increases on certain products effective October 1, 1996, as well
as implementing cost improvements to certain manufacturing processes beginning
August 1, 1996.
Gross margin percentages from International operations, excluding the effect of
the sale of licenses, decreased from the first half of 1996 for the same reasons
given for the decline in U.S. margins.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $8.9 million from the first half of fiscal 1996 to the first half
of fiscal 1997. As a percent of sales, SG&A was 31.89% in the current year and
31.51% last year.
European operations SG&A increased by $2.3 million. The exchange rate
difference caused SG&A to decrease by $1.6 million. The remainder, an increase
of $3.9 million, resulted from an increase in SG&A expressed in Belgian francs
of 10.6%. The increase over last year is due to variable selling and
distribution expenses, increases in advertising expenses, increases in salaries
and employee benefits due to staff additions and increases in group insurance
premiums and the impact of credits in the prior year of a reversal of
termination benefits accruals, an increase in the provision for doubtful
accounts due to financial difficulties of certain customers, and increases in
new product development costs.
SG&A for U.S. operations increased by $6.0 million in the first half of fiscal
1997 over the same period last year primarily because of an increase in
advertising expenses of $1.9 million, an increase in American Tourister variable
selling and administrative expenses of $2.8 million due to a higher level of
retail sales activity, $2.6 million of expense incurred in connection with the
cessation of the former CEO's employment and the retention of a new CEO (see
Note 9 to the consolidated financial statements), and net decreases in various
other expenses of $1.3 million.
SG&A for the International operations increased primarily due to the expenses
incurred in new foreign operations in Singapore, China, and India.
Amortization of intangibles. The Company recorded significant intangible assets
as a result of its reorganization in 1993. See the comparative analysis of
amortization of intangibles included elsewhere herein.
Reorganization value in excess of identifiable assets is fully amortized as of
June 30, 1996, which accounts for the decrease in amortization of intangible
assets from $31.9 million last year to $27.4 million in the current year.
Operating loss. Operating loss decreased by $4.9 million from last year as a
result of the increases in revenues which increased gross profit by $9.2 million
and the decrease in amortization of intangibles of $4.5 million, both of which
were offset by increases in SG&A of $8.9 million.
18
Interest income. Interest income decreased from $3.7 million last year to $0.8
million this year. Last year interest income included $2.9 million realized from
a note receivable collected in connection with the sale of an investment in a
television station. Recurring interest income results from temporary investments
of cash on hand and is consistent with last year.
Interest expense and amortization of debt issue costs and premium. Interest
expense decreased from $19.9 million last year to $18.0 million this year due to
lower levels of outstanding indebtedness in the first half of fiscal 1997 and
lower average interest rates.
Other-net. See Note 6 to the consolidated financial statements for a
comparative analysis of other income (expense). The Company has entered into
certain forward exchange contracts to hedge its exposures to changes in exchange
rates. Other income for the six months ended July 31, 1996 includes income from
foreign currency transactions of $2.1 million, $0.3 million of which is
unrealized at July 31, 1996. The realization of such income is subject to
changes in exchange rates during the period prior to the settlement of the
forward exchange contracts. All outstanding forward exchange contracts have
settlement dates prior to March 1997. In the first half of last year, such
foreign exchange transactions resulted in a loss of $2.4 million.
Other income of $3,802,000 results from the favorable settlement for $200,000 of
a claim against the Company by a related party. The Company had previously
accrued $4,002,000 for such claim. This claim is part of the Contingent
Liability with Respect to the Old Notes described in Note 14 to the consolidated
financial statements included in the 1996 Form 10-K and relates to the claim for
interest on overdue installments of interest accruing prior to the commencement
of the bankruptcy of the Company's predecessor in 1993. The contingent liability
was recorded as part of the reorganization. The holders of this claim were
Apollo and an affiliate of Apollo. Apollo and its affiliates own 45.83% of the
outstanding shares of the Company's common stock.
Income tax expense. Income taxes increased from $3.4 million last year to $4.4
million in the current year. The increase in tax expense is due to the decrease
in the pre-tax loss of $7.1 million, amounts of pre-tax earnings from European
and other foreign operations in the current year versus last year, and less
nondeductible amortization of intangible assets in the current year. Although
the Company incurred losses in both the current and prior fiscal years, the
relationship between income tax expense or benefit differs from that expected by
applying the U.S. statutory tax rate to pre-tax losses because of (i) the
nondeductibility for tax purposes of amortization of reorganization value in
excess of identifiable assets, (ii) foreign income tax expense provided on
foreign earnings, and (iii) state income taxes.
Extraordinary loss. The extraordinary loss of $8.0 million last year resulted
from a loss on the early retirement of debt.
Net loss. The net loss decreased from $30.8 million last year to $17.0 million
this year, a decrease of $13.8 million. The decrease in the net loss is caused
by the total of the decreases in operating losses, interest expense, other
expenses, and extraordinary losses, which were partly offset by the increase in
income tax expense.
19
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
One measure of liquidity is commonly referred to as Operating Cash Flow.
Operating Cash Flow is defined as operating income adjusted for noncash
operating expenses, including amortization and depreciation. The Company
believes that Operating Cash Flow 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.
Operating Cash Flow does not take into consideration substantial costs of doing
business, such as interest expense, and should not be considered in isolation to
other measures of performance. Operating Cash Flow for the six months ended July
31, 1996 and 1995 was computed as follows:
[Download Table]
SIX MONTHS ENDED JULY 31,
---------------------------
1996 1995
---- ----
(In thousands)
Operating loss.................................... $(1,439) (6,302)
Fresh Start Amortization and Depreciation......... 28,721 33,433
------ ------
Operating income before Fresh Start Amortization
and Depreciation............................... 27,282 27,131
Other Amortization and Depreciation............... 9,335 8,931
------ ------
Operating Cash Flow............................... $36,617 36,062
======= ======
Operating cash flow increased by $0.6 million from last year, primarily as a
result of the decrease in operating losses discussed elsewhere herein. The
Company believes that the current level of Operating Cash Flow is adequate to
support its existing credit facilities and service the Company's Series B Senior
Subordinated Notes and other long-term obligations.
Another measure of liquidity is net cash provided by operating activities, as
reflected in the Consolidated Statements of Cash Flows included elsewhere
herein. Net cash used by operating activities of $6.4 million for the first half
of fiscal 1997 and $19.2 million in the first half of fiscal 1996, reflects net
cash used by operations of the Company after taking into consideration the
substantial costs of doing business not reflected in Operating Cash Flow.
Cash flows used in operations decreased from $19.2 million in the first half of
fiscal 1996 to $6.4 million in the first half of fiscal 1997, a decrease of
$12.8 million. Of this amount, $10.0 million resulted from a reduction of cash
flow supporting working capital and other operating assets, and an increase in
cash flows provided by operations, adjusted for nonoperating and noncash
charges, of $2.8 million from last year.
Cash flow provided (used) by investing activities decreased from $91.5 million
last year to $(5.4) million this year. Last year's cash flow included the
receipt of $112.0 million from the discontinued water treatment business. Cash
flow provided from discontinued operations in the current year resulted from the
collection of accounts receivable related to the discontinued apparel business.
Capital expenditures were $11.9 million in the current year and $11.6 million
last year. Capital expenditures are made to improve facilities and equipment in
order to manufacture new product lines, increase manufacturing efficiencies, and
enhance the Company's competitiveness and profitability on a worldwide basis.
Cash flows provided (used) by financing activities increased from $(106.6)
million last year to $8.3 million this year, an increase of $114.9 million. Last
year's cash flow from financing activities included $119.5 million of debt
repayment financed largely by the cash received from the discontinued water
treatment business.
20
At July 31, 1996, the Company had working capital of $121.8 million compared to
$99.5 million at January 31, 1996, an increase of $22.3 million. Current assets
increased by $20.3 million due to an increase of $28.3 million in accounts
receivable and inventory and a net decrease in cash and other current assets of
$8.0 million. The increase in accounts receivable and inventories is primarily
due to the cyclical nature of the Company's business. Accounts receivable and
inventory at July 31, 1996 are $6.4 million higher than at July 31, 1995 due to
higher sales levels in the current year. Accounts payable are higher at July 31,
1996 by $10.3 million compared to July 31, 1995 due to improved payables
management in current year.
The Company's cash flow from operations together with amounts available under
its credit facilities were sufficient to fund its operations, scheduled payments
of principal and interest on indebtedness, and capital expenditures. At July 31,
1996, the Company had $92.4 million available under its Senior Credit Facility.
Management of the Company believes that cash flow from operations and available
borrowings under its credit facilities and new credit facilities in emerging
markets will be adequate to fund operating requirements and expansion plans
during the next 12 months. In addition, management currently believes the
Company will be able to meet long-term cash flow obligations from cash provided
by operations and other existing resources.
The Company's principal foreign operations are located in Western Europe, the
economies of which are not considered to be highly inflationary. When
appropriate, the Company will enter into foreign exchange contracts in order to
hedge its exposure on certain foreign operations primarily through the use of
forward delivery commitments. During the past several years, the Company's most
effective hedge against foreign currency changes has been the foreign currency
denominated debt balances maintained in respect to its foreign operations.
Geographic concentrations of credit risk with respect to trade receivables are
not significant as a result of the diverse geographic areas covered by the
Company's operations.
21
SAMSONITE CORPORATION
PART II - OTHER INFORMATION
---------------------------
Item I - Legal Proceedings
-----------------
Reference is made to Note 14 to the consolidated financial statements included
in the Company's Form 10-K Annual Report for the fiscal year ended January 31,
1996 which describes litigation, commitments, and contingencies.
Among the items described under Contingent Liabilities to Pension Benefit
Guaranty Corporation in that Note 14 was the Company's expectation that it would
enter into a final settlement agreement with the Pension Benefit Guaranty
Corporation and the sponsors of the Pension Plans (as described therein) to the
effect set forth in the McCrory Settlement Agreement (also as described therein)
during fiscal year 1997. Such a final settlement agreement was made as of June
20, 1996, and became effective when the Bankruptcy Court entered its order
approving the agreement on August 6, 1996.
Also in that Note 14, under the heading Contingent Liability with Respect to the
Old Notes, reference is made to a claim of approximately $16.4 million. Of this
amount approximately $12.2 million remains outstanding as of July 31, 1996 as a
result of the settlement described in Note 6(b) to the consolidated financial
statements included elsewhere herein.
The Company and certain of its subsidiaries are subject to or are defendants in
various other claims and actions arising in the ordinary course of business.
While it is not possible to predict the outcome of such other claims or actions,
it is management's opinion that, after discussion with counsel, the ultimate
disposition of these other claims and actions will not have a material adverse
effect on the Company's consolidated financial position.
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 stockholders held on June 27, 1996,
the Company's stockholders elected directors and approved three proposals.
Robert L. Rosen, Marc J. Rowan, and Stephen J. Solarz were elected as directors.
The other directors whose term of office continued after the meeting are R.
Theodore Ammon, Bernard Attal, Leon D. Black, Robert H. Falk, Carl C. Icahn,
Richard R. Nicolosi, and Mark H. Rachesky.
A proposal to approve the Samsonite Corporation 1996 Directors' Stock Plan
whereby 200,000 shares of common stock were reserved for the payment of a
portion of directors fees in the Company's common stock was approved (13,534,118
votes for, 50,569 against, 4,675 abstentions, and 60,342 non-votes).
A proposal to approve the authorization of 550,000 additional shares for
issuance under the Samsonite Corporation 1995 Stock Option and Incentive Awards
Plan was approved (13,367,666 votes for, 218,326 against, 4,960 abstentions, and
58,752 non-votes).
22
SAMSONITE CORPORATION
PART II - OTHER INFORMATION (CONTINUED)
---------------------------
A proposal to approve and ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company and its subsidiaries for fiscal 1997 was
approved (13,641,065 for, 6,221 against, and 2,418 abstentions).
Item 5 - Other Information
-----------------
None.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) See Exhibit Index.
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
23
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/ Thomas R. Sandler
----------------------------------------
Name: Thomas R. Sandler
Title: Chief Financial Officer,
Secretary and Treasurer
Date: September 9, 1996
---------------------
24
INDEX TO EXHIBITS
[Download Table]
EXHIBIT DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Incorporation of the
Company./1/
3.2 Certificate of Ownership and Merger dated July 14, 1995./2/
3.3 By-Laws of the Company./1/
4.1 Indenture, dated as of July 14, 1995, between the Company and
United States Trust Company of New York./2/
4.2 Registration Rights Agreement dated July 14, 1995, by and among
the Company, Donaldson, Lufkin & Jenrette Securities Corporation,
and Bear, Sterns & Co., Inc./2/
4.3 Specimen of Notes described in the Indenture./2/
10.1 Third Amendment, dated as of July 1, 1996, to Credit Agreement,
dated July 14, 1995, among the Company and the Banks named
therein (excluding schedules and exhibits thereto).
10.2 Samsonite Corporation Directors Stock Plan /3/
10.3 Samsonite Corporation 1995 Stock Option and Incentive Award Plan,
as amended./3/
10.4 Final Settlement Agreement, made as of June 20, 1996, among the
Company, the Pension Benefit Guaranty Corporation, and others
named therein (excluding exhibits thereto), with respect to the
Schenley Pension Plan.
10.5 Final Settlement Agreement, made as of June 20, 1996, among the
Company the Pension Benefit Guaranty Corporation, and others
named therein (excluding exhibits thereto), with respect to the
McCrory Pension Plan.
10.6 Purchase Agreement, dated as of June 13, 1996, between the
Company and Artemis America Partnership and Apollo Investment
Fund, L.P.
21 Subsidiaries of the Company.
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, 1996 (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 Proxy Statement filed May 23, 1996.
25
Dates Referenced Herein and Documents Incorporated by Reference
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