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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2003

OR

o
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
(State or other jurisdiction of
incorporation or organization)		   36-3511556
(I.R.S. Employer
Identification No.)

11200 East 45th Avenue, Denver, CO
(Address of principal executive offices)
 
80239
(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. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes o    No ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 224,705,324 shares of common stock, par value $0.01 per share, as of December 12, 2003.


FORM 10-Q
CONTENTS

 
   Page Number
PART I—FINANCIAL INFORMATION    
  Item 1: Financial Statements    
    Unaudited Consolidated Balance Sheets as of October 31, 2003 and January 31, 2003   2
    Unaudited Consolidated Statements of Operations for the three months ended October 31, 2003 and 2002   4
    Unaudited Consolidated Statements of Operations for the nine months ended October 31, 2003 and 2002   5
    Unaudited Consolidated Statement of Stockholders' Equity (Deficit) and Comprehensive Loss for the nine months ended October 31, 2003   6
    Unaudited Consolidated Statements of Cash Flows for the nine months ended October 31, 2003 and 2002   7
    Unaudited Notes to Consolidated Financial Statements   9
  Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations   17
    Forward Looking Statements   25
  Item 3: Quantitative And Qualitative Disclosures About Market Risk   26
  Item 4: Controls and Procedures   26
PART II—OTHER INFORMATION    
  Item 1: Legal Proceedings   27
  Item 2: Changes in Securities and Use of Proceeds   27
  Item 3: Defaults upon Senior Securities   27
  Item 4: Submission of Matters to a Vote of Security Holders   27
  Item 5: Other Information   27
  Item 6: Exhibits and Reports on Form 8-K   27
  Signatures   28
  Index to Exhibits   29

Important Notice:

        This Quarterly Report on Form 10-Q (including documents incorporated by reference herein) contains statements with respect to the Company's expectations or beliefs as to future events. These types of statements are "forward-looking" and are subject to uncertainties. See "Forward-Looking Statements" at page 25.

PART I—FINANCIAL INFORMATION


SAMSONITE CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Balance Sheets
as of October 31, 2003 and January 31, 2003
(In thousands)

Assets
   October 31,
2003
   January 31,
2003
Current assets:          
  Cash and cash equivalents   $ 18,970   22,705
  Trade receivables, net of allowances for doubtful accounts of $7,756 and $7,205     82,554   73,558
  Notes and other receivables     15,709   11,703
  Inventories (Note 2)     141,212   138,150
  Deferred income tax assets     4,133   3,435
  Prepaid expenses and other current assets     20,356   20,871
   
 
    Total current assets     282,934   270,422
Property, plant and equipment, net (Note 3)     114,433   112,895
Intangible assets, less accumulated amortization of $63,517 and $62,424 (Note 4)     100,409   101,294
Other assets and long-term receivables, net of allowances for doubtful accounts of $521 and $788     14,125   11,480
   
 
    $ 511,901   496,091
   
 
      (Continued)

See accompanying notes to consolidated financial statements

2


SAMSONITE CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Balance Sheets
as of October 31, 2003 and January 31, 2003
(In thousands, except share data)

Liabilities and Stockholders' Equity (Deficit)
   October 31,
2003
   January 31,
2003
  
Current liabilities:            
  Short-term debt (Note 5)   $ 6,610   9,413  
  Current installments of long-term obligations (Note 5)     1,599   61,248  
  Accounts payable     52,002   52,732  
  Accrued liabilities     80,811   70,718  
   
 
 
    Total current liabilities     141,022   194,111  

Long-term obligations, less current installments (Note 5)
 
 
334,155
 
361,907
 
Deferred income tax liabilities     15,225   13,847  
Other noncurrent liabilities     56,054   60,260  
   
 
 
    Total liabilities     546,456   630,125  
   
 
 
Minority interests in consolidated subsidiaries     11,636   10,341  
Senior redeemable preferred stock, aggregate liquidation preference of $0 and $327,927, net of discount and issuance costs of $0 and $7,604; 0 and 281,131 shares issued and outstanding     —   320,323  
Stockholders' equity (deficit) (Note 7):            
  Preferred stock ($.01 par value; 2,000,000 shares authorized; 159,982 and 0 issued and outstanding)     163,233   —  
  Common stock ($.01 par value; 1,000,000,000 shares authorized; 235,205,324 and 30,365,573 shares issued; 224,705,324 and 19,865,573 shares outstanding)     2,352   304  
  Additional paid-in capital     768,524   490,310  
  Accumulated deficit     (511,939 ) (480,475 )
  Accumulated other comprehensive loss     (48,361 ) (54,837 )
   
 
 
      373,809   (44,698 )
  Treasury stock, at cost (10,500,000 shares)     (420,000 ) (420,000 )
   
 
 
    Total stockholders' equity (deficit)     (46,191 ) (464,698 )
   
 
 
Commitments and contingencies (Notes 1C, 5, 7 and 9)            
    $ 511,901   496,091  
   
 
 

See accompanying notes to consolidated financial statements

3


SAMSONITE CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations
for the three months ended October 31, 2003 and 2002
(In thousands, except per share data)

 
   Three Months Ended October 31,
  
 
   2003
   2002
  
Net sales (Note 1E)   $ 202,421   201,946  
Cost of goods sold     113,282   117,116  
   
 
 
  Gross profit     89,139   84,830  
Selling, general and administrative expenses     71,590   62,477  
Amortization of intangible assets     320   352  
Asset impairment charge (Note 10)     —   196  
   
 
 
  Operating income     17,229   21,805  
Other income (expense):            
  Interest income     57   176  
  Interest expense and amortization of debt issue costs and premium     (10,244 ) (11,956 )
  Other income (expense)—net (Note 6)     (2,333 ) (518 )
   
 
 
  Income before income taxes and minority interest     4,709   9,507  
Income tax expense     (1,422 ) (1,164 )
Minority interest in earnings of subsidiaries     (662 ) (767 )
   
 
 
  Net income     2,625   7,576  
Preferred stock dividends and accretion of preferred stock discount     (3,251 ) (10,881 )
   
 
 
  Net loss to common stockholders   $ (626 ) (3,305 )
   
 
 
  Weighted average common shares outstanding—basic and diluted     224,705   19,866  
   
 
 
  Net loss per common share—basic and diluted   $ —   (0.17 )
   
 
 

See accompanying notes to consolidated financial statements

4


SAMSONITE CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations
for the nine months ended October 31, 2003 and 2002
(In thousands, except per share data)

 
   Nine Months Ended October 31
  
 
   2003
   2002
  
Net sales (Note 1E)   $ 556,514   549,512  
Cost of goods sold     310,853   322,707  
   
 
 
  Gross profit     245,661   226,805  
Selling, general and administrative expenses     198,378   178,484  
Amortization of intangible assets     967   1,004  
Asset impairment charge (Note 10)     —   496  
Provision for restructuring operations (Note 10)     —   2,241  
   
 
 
  Operating income     46,316   44,580  
Other income (expense):            
  Interest income     228   504  
  Interest expense and amortization of debt issue costs and premium     (33,546 ) (35,815 )
  Other income (expense)—net (Note 6)     (7,782 ) (8,120 )
   
 
 
  Income before income taxes and minority interest     5,216   1,149  
Income tax expense     (6,731 ) (5,860 )
Minority interest in earnings of subsidiaries     (2,159 ) (901 )
   
 
 
  Net loss     (3,674 ) (5,612 )
Preferred stock dividends and accretion of preferred stock discount     (27,790 ) (31,588 )
   
 
 
  Net loss to common stockholders     (31,464 ) (37,200 )
   
 
 
  Weighted average common shares outstanding—basic and diluted     88,888   19,862  
   
 
 
Net loss per common share—basic and diluted   $ (0.35 ) (1.87 )
   
 
 

See accompanying notes to consolidated financial statements

5


SAMSONITE CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Statement of Stockholders' Equity (Deficit)
and Comprehensive Loss for the nine months ended October 31, 2003
(In thousands, except share amounts)

 
   Preferred
Stock
   Common
Stock
   Additional
Paid-In
Capital
   Accumulated
Deficit
   Accumulated
Other
Comprehensive
Loss
   Comprehensive
Loss
   Treasury
Stock
  
Balance, February 1, 2003   $ —   304   490,310   (480,475 ) (54,837 )       (420,000 )
Net loss     —   —   —   (3,674 ) —     (3,674 ) —  
Unrealized gain (loss) on cash flow hedges (net of income tax effect of $1,271)     —   —   —   —   (2,133 )   (2,133 ) —  
Reclassification of net losses to net income (net of income tax effect of $857)     —   —   —   —   1,576     1,576   —  
Foreign currency translation adjustment     —   —   —   —   7,033     7,033   —  
                         
     
  Comprehensive loss     —   —   —   —   —   $ 2,802   —  
                         
     
Issuance of 106,000 shares of 8% convertible preferred stock (Note 11)     106,000   —   —   —   —         —  
Conversion of 137/8% senior redeemable preferred stock to 53,982 shares of 8% convertible preferred stock and 204,839,751 shares of common stock and warrants to purchase 15.5 million shares of common stock (Note 11)     53,982   2,048   289,832   —   —         —  
Issuance costs associated with issuance of 8% convertible preferred stock and conversion of 137/8% senior redeemable preferred stock (Note 11)     —   —   (11,618 ) —   —         —  
Preferred stock dividends and accretion of preferred stock discount     3,251   —   —   (27,790 ) —         —  
   
 
 
 
 
       
 
Balance, October 31, 2003   $ 163,233   2,352   768,524   (511,939 ) (48,361 )       (420,000 )
   
 
 
 
 
       
 

See accompanying notes to consolidated financial statements

6


SAMSONITE CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows
for the nine months ended October 31, 2003 and 2002
(In thousands)

 
   Nine Months Ended October 31
  
 
   2003
   2002
  
Cash flows provided by operating activities:            
  Net loss   $ (3,674 ) (5,612 )
  Adjustments to reconcile net loss to net cash provided by operating activities:            
    Non-operating loss (gain) items:            
      Loss (gain) on disposition of fixed assets, net     (1,992 ) 225  
    Depreciation and amortization of property, plant and equipment     13,515   13,441  
    Pension and other post-retirement benefit plan loss (gain)     280   (3,298 )
    Amortization of intangible assets     967   1,004  
    Amortization and write-off of debt issue costs and premium     2,539   1,528  
    Provision for doubtful accounts     393   1,130  
    Provision for restructuring operations     —   2,241  
    Asset impairment charge     —   496  
    Amortization of stock issued for services     —   28  
    Changes in operating assets and liabilities:            
      Trade and other receivables     (8,736 ) (26,982 )
      Inventories     3,915   13,671  
      Prepaid expenses and other current assets     (473 ) (1,171 )
      Accounts payable and accrued liabilities     4,076   23,109  
    Other, net     (4,648 ) (2,033 )
   
 
 
  Net cash provided by operating activities   $ 6,162   17,777  
   
 
 
      (Continued)  

See accompanying notes to consolidated financial statements

7


SAMSONITE CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows
for the nine months ended October 31, 2003 and 2002
(In thousands)

 
   Nine Months Ended October 31,
  
 
   2003
   2002
  
Cash flows provided by (used in) investing activities:            
  Purchases of property, plant and equipment   $ (8,818 ) (7,305 )
  Proceeds from sale of assets held for sale and property and equipment     3,423   184  
  Other, net     —   (82 )
   
 
 
    Net cash used in investing activities     (5,395 ) (7,203 )
   
 
 
Cash flows provided by (used in) financing activities:            
  Net payments of short-term obligations     (3,225 ) (1,333 )
  Net payments of long-term obligations     (91,342 ) (61,538 )
  Proceeds from issuance of convertible preferred stock     106,000   —  
  Issuance costs of convertible preferred stock and new senior credit facility     (14,261 ) —  
  Other, net     564   (337 )
   
 
 
    Net cash used in financing activities     (2,264 ) (63,208 )
   
 
 
Effect of exchange rate changes on cash and cash equivalents     (2,238 ) (1,041 )
   
 
 
    Net decrease in cash and cash equivalents     (3,735 ) (53,675 )
Cash and cash equivalents, beginning of period     22,705   69,390  
   
 
 
Cash and cash equivalents, end of period   $ 18,970   15,715  
   
 
 
Supplemental disclosures of cash flow information:            
  Cash paid during the period for interest   $ 23,967   25,820  
   
 
 
  Cash paid during the period for income taxes   $ 7,257   3,789  
   
 
 
Non-cash transactions:            
      Non-cash transactions are described in Notes 1, 4, 7, 10 and 11.            

See accompanying notes to consolidated financial statements

8


SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements

1. General

        The principal activity of Samsonite Corporation and subsidiaries (the "Company") is the manufacture and distribution of luggage, casual bags, business cases and travel related products throughout the world, primarily under the Samsonite® and American Tourister® brand names and other owned and licensed brand names. The principal customers of the Company are department/specialty retail stores, mass merchants, catalog showrooms, warehouse clubs and office superstores. The Company also sells its luggage and other travel related products through its Company-owned stores. In addition, the Company designs and sells or licenses fashion oriented clothing and footwear in Europe, Asia and the United States.

        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 for a fair statement of the financial position as of October 31, 2003 and results of operations for the three and nine month periods ended October 31, 2003 and 2002. 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, 2003.

        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.

        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 (loss) 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.

        Net loss per share for the three months ended October 31, 2003 and 2002 and the nine months ended October 31, 2003 and 2002 is computed based on a weighted average number of shares of common stock outstanding during the period of 224,705,324 and 19,865,573, and 88,887,663 and 19,861,690, respectively. Basic loss per share and loss per share—assuming dilution are the same for the three and nine month periods ended October 31, 2003 and 2002 because of the antidilutive effect of common stock equivalents when there is a net loss to common stockholders. There are options to purchase 1,787,711 and 1,829,918 shares outstanding at October 31, 2003 and 2002, respectively.

9


        The Company licenses its brand names to certain unrelated third parties as well as to certain of its foreign subsidiaries and joint ventures. Net sales include royalties earned of $15,833,000 and $14,234,000 for the nine months ended October 31, 2003 and 2002, respectively, and $6,831,000 and $5,073,000 for the three months ended October 31, 2003 and 2002, respectively.

        Certain reclassifications were made to the consolidated financial statements for prior periods to conform to the October 31, 2003 presentation.

        The Company accounts for derivative financial instruments in accordance with the requirements of Statement of Financial Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), and its corresponding amendments under SFAS No. 138 and SFAS No. 149. SFAS 133 requires the Company to measure all derivatives at fair value and to recognize them in the consolidated balance sheet as an asset or liability, depending on the Company's rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported in other comprehensive income and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging instruments and ineffective portions of hedges are recognized in earnings in the current period.

        From time to time, the Company enters into derivative transactions to hedge interest rates on floating rate debt obligations and forecasted foreign currency transactions. These derivatives are classified as cash flow hedges. From time to time, the Company also enters into derivative transactions to reduce exposure to the effect of exchange rates on the earnings results of foreign operations (primarily the effect of changes in the euro exchange rate on the results of the Company's significant European operations). These transactions are not allowed hedge accounting treatment under SFAS 133; the Company records these instruments at fair market value and records realized and unrealized gains in Other Income—Expense—Net.

        Net gains or losses on interest rate hedges are recorded in interest expense when reclassified to earnings. Net gains or losses on hedges of forecasted foreign currency transactions are reclassified to revenues or cost of sales depending on the type of transaction being hedged. Net gains or losses on cash flow hedges are reclassified from other comprehensive income as the underlying hedged transactions occur. At October 31, 2003, cash flow hedges for forecasted foreign currency transactions extend until August 2004. The estimated amount of net gains from foreign currency hedges expected to be reclassified into earnings within the next 12 months is $1.3 million, net of taxes. The amount ultimately reclassified into earnings will be dependent on the effect of changes in currency exchange rates over the next 12 months.

10


2. Inventories

        Inventories consisted of the following:

 
   October 31,
2003
   January 31,
2003
 
   (In thousands)
Raw Materials   $ 16,335   21,431
Work in Process     4,407   4,653
Finished Goods     120,470   112,066
   
 
    $ 141,212   138,150
   
 

3. Property, Plant and Equipment

        Property, plant and equipment consisted of the following:

 
   October 31, 2003
   January 31, 2003
  
 
   (In thousands)

  
Land   $ 11,835   11,484  
Buildings     80,012   76,408  
Machinery, equipment and other     146,073   138,362  
   
 
 
      237,920   226,254  
Less accumulated amortization and depreciation     (123,487 ) (113,359 )
   
 
 
    $ 114,433   112,895  
   
 
 

4. Intangible Assets

        Goodwill with a gross book value of $6.5 million ($3.3 million net of accumulated amortization) and the Samsonite and American Tourister tradenames with a gross book value of $107.0 million ($84.1 million net of accumulated amortization) are no longer amortized beginning February 1, 2002. Additionally, as of October 31, 2003, the Company has $2.4 million of goodwill recorded in connection with an adjustment of the Company's minimum pension liability, which is not subject to amortization. All of the Company's other intangible assets are subject to amortization. There were no significant acquisitions of intangible assets during the nine months ended October 31, 2003. Changes in the exchange rate between the U.S. dollar and other foreign currencies, primarily the euro, affect the reported gross and net book value of the Company's intangible assets. The components of intangible assets, which continue to be amortized, were as follows (in thousands):

 
   October 31, 2003
   January 31, 2003
  
 
   Gross Carrying
Amount
   Accumulated
Amortization
   Gross Carrying
Amount
   Accumulated
Amortization
  
Tradenames   $ 16,419   (7,437 ) 16,419   (6,820 )
Licenses, patents and other     31,569   (29,992 ) 31,583   (29,737 )
   
 
 
 
 
    $ 47,988   (37,429 ) 48,002   (36,557 )
   
 
 
 
 

11

        Amortization expense for the net carrying amount of intangible assets at October 31, 2003 is estimated to be $1.3 million in fiscal 2004, $1.3 million in fiscal 2005, $1.2 million in fiscal 2006, $1.0 million in fiscal 2007 and $0.9 million in fiscal 2008.

5. Debt

        Debt consisted of the following:

 
   October 31,
2003
   January 31,
2003
  
 
   (In thousands)

  
Senior Credit Facility(a)            
  Term loan   $ —   9,000  
  Revolving credit     —   83,453  
New Revolving Credit Facility(a)     8,000   —  
Senior Subordinated Notes(b)     322,861   322,861  
Other obligations(c)