**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**FORM 10-K**

**(Mark One)**

**x**                               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended January 31, 2007**

**OR**

**o**                                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition periodfrom                             to**

**Commissionfile number 0-23214**

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**SAMSONITE CORPORATION**

(Exact name of registrantas specified in its charter)

| **Delaware**                             |   | **36-3511556**      |
|------------------------------------------|--------|---------------------|
| (State or other jurisdiction Of          |   | (I.R.S. Employer    |
| incorporation or organization)           |   | Identification no.) |
| **575 West Street, Suite 110**      |   | ** **          |
| **Mansfield, Massachusetts**             |   | **02048**           |
| (Address of principal executive offices) |   | (Zip Code)          |

Registrant’s telephone number, including area code: **(508) 851-1400**

Securities registered pursuant to Section 12(b) ofthe Act:

**None**

Securities registered pursuant to Section 12(g) ofthe Act:

**Common Stock, par value $.01 per share**

(Title of class)

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Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes o No x

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act. Yes o No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports) and (2) has been subject to such filing requirementsfor the past 90 days. Yes x No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K isnot contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer (as defined in Rule 12b-2 of the Act). Seedefinition of “large filer” and “large accelerated filer” in Rule 12b-2of the Exchange Act. Large Accelerated Filer o  AcceleratedFiler o Non-accelerated Filer x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o No x

As ofApril 30, 2007, the registrant had outstanding 742,032,974 shares ofCommon Stock, par value $.01 per share. The aggregate market value of suchCommon Stock held by non-affiliates of the registrant, based upon the closingsales price of the Common Stock on July 31, 2006, as reported on the OTCBulletin Board was approximately $65.6 million. Shares of Common Stockheld by each officer and director and by each person who owns 10 percentor more of the outstanding voting stock have been excluded in that such personsmay be deemed to be affiliates. This determination of affiliate status is notnecessarily a conclusive determination for other purposes.

**Documents incorporated by reference:**   Portions of theregistrant’s definitive proxy statement for its 2007 Annual Meeting ofStockholders are incorporated by reference into Part III of this Form 10-K.Alternatively, we may file an amendment to this Form 10-K to providesuch information within 120 days at the end of the fiscal year covered bythis report

 

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**INDEX**
|                                                          | ** ** | ** **                                                                                                                      | ** ** | **Page** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **PART I**                                          |       |                                                                                                                            |       |     |       |   |   |
| Item  1.                                                 |       | Business                                                                                                                        |       |     | 3          |   |   |
| Item  1A.                                                |       | Risk  Factors                                                                                                                   |       |     | 12         |   |   |
| Item 1B.                                                 |       | Unresolved Staff  Comments                                                                                                      |       |     | 20         |   |   |
| Item  2.                                                 |       | Properties                                                                                                                      |       |     | 21         |   |   |
| Item 3.                                                  |       | Legal Proceedings                                                                                                               |       |     | 21         |   |   |
| Item 4.                                                  |       | Submission of Matters to a Vote of Security Holders                                                                             |       |     | 22         |   |   |
| **PART II**                                         |       |                                                                                                                            |       |     |       |   |   |
| Item 5.                                                  |       | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities             |       |     | 23         |   |   |
| Item 6.                                                  |       | Selected Financial  Data                                                                                                        |       |     | 24         |   |   |
| Item 7.                                                  |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations       |       |     | 25         |   |   |
| Item 7A.                                                 |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                     |       |     | 44         |   |   |
| Item 8.                                                  |       | Financial  Statements and Supplementary Data                                                                                    |       |     | 45         |   |   |
| Item 9.                                                  |       | Changes in and  Disagreements with Accountants on Accounting and Financial Disclosure                  |       |     | 45         |   |   |
| Item 9A.                                                 |       | Controls and  Procedures                                                                                                        |       |     | 45         |   |   |
| Item 9B.                                                 |       | Other Information                                                                                                               |       |     | 46         |   |   |
| **PART III**                                        |       |                                                                                                                            |       |     |       |   |   |
| Item 10.                                                 |       | Directors and  Executive Officers of the Registrant                                                                             |       |     | 47         |   |   |
| Item 11.                                                 |       | Executive  Compensation                                                                                                         |       |     | 47         |   |   |
| Item 12.                                                 |       | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                 |       |     | 47         |   |   |
| Item 13.                                                 |       | Certain  Relationships and Related Transactions                                                                                 |       |     | 47         |   |   |
| Item 14.                                                 |       | Principal  Accountant Fees and Services                                                                                         |       |     | 47         |   |   |
| **PART IV**                                         |       |                                                                                                                            |       |     |       |   |   |
| Item 15.                                                 |       | Exhibits and  Financial Statement Schedule                                                                                      |       |     | 48         |   |   |
| Signatures                                               |       |                                                                                                                            | 49         |     |       |
| Index to  Consolidated Financial Statements and Schedule |       |                                                                                                                            | F-1        |     |       |
| Index to Exhibits                                        |       |                                                                                                                            | E-1        |     |       |

 

**Important Notice:**

This Annual Report on Form 10-K (includingdocuments incorporated by reference herein) contains statements with respect tothe Company’s expectations or beliefs as to future events. These types ofstatements are “forward-looking” and are subject to uncertainties. See “Forward-LookingStatements” under Item 1.

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**PART I**

**ITEM 1.**                BUSINESS

**General Development**

We are one of the world’s largest and most recognizeddesigners and distributors in the luggage industry, as well as one of theleading distributors of business, computer, outdoor, and casual bags. We sellour products under a number of well-known brand names, primarily *Samsonite*®* Black Label, Samsonite*®, *American**Tourister*®,and *Lambertson Truex*®*,*andlicensed brand names such as *Lacoste*® and *Timberland*®. With net sales of $1.1billion for our fiscal year ended January 31, 2007, an increase ofapproximately 10.7 percent from the preceding fiscal year, we are the leader inthe global luggage industry and significantly larger than any of our primarilyregionally based competitors. Our net sales for the fiscal years ended January 31,2006 and January 31, 2005 were $966.9 million and $902.9 million,respectively. Our compound annual growth rate, or CAGR, on sales from fiscalyear 2004 to fiscal year 2007 was 11.3 percent.

In fiscal year 2007, we had a consolidated loss tocommon stockholders of $145.2 million after preferred stock dividends of $138.4million and the cumulative effect of an accounting change of $1.4 million. Theconsolidated loss for fiscal 2007 also includes $22.5 million in premiums paidon the repurchase of our 87¤8% SeniorSubordinated Notes due 2011, the repurchase and redemption of our Floating RateSenior Notes due 2010 and the related write off of deferred financing costs. Infiscal 2006 and 2005, we had a consolidated loss to common stockholders of $1.5million and $23.4 million, respectively.

Our product assortment includes product linesappealing to many types of consumers, from those focused on luxury under the *Lambertson Truex* product line and onpremium products under the *Samsonite Black Label*line; those focused on quality, functionality and durability which are featuredin the *Samsonite* lines; orvalue-conscious consumers who prefer the *AmericanTourister*brand. In addition to using our *Samsonite*and *American Tourister* brand names on theproducts we manufacture or distribute, we license these brand names to thirdparties for use on products that include travel accessories, leather goods,furniture and other products.

Our principal corporate office is at 575 West Street, Suite 110,Mansfield, Massachusetts 02048, our telephone number is (508) 851-1400,and our main website is www.samsonite.com. In May 2006, we opened a newexecutive office in the United Kingdom at 4 Mondial Way, Harlington, MiddlesexUB3 5AR where our Chief Executive Officer and executives responsible for coreglobal functions are or will be based. Our telephone number in the UnitedKingdom is (44) 208-564-4200. We were incorporated in Delaware in1987.

Our products are sold in over 100 countries at varioustypes of retail establishments including department stores, high street shopsand luggage specialty stores, mass merchants, warehouse clubs, computer andelectronic superstores, office superstores, bookstores, and travel productstores. We also sell certain products through over 300 Samsonite-operatedretail stores in North America, Europe, Asia and Latin America, and inshop-in-shop concessions principally in Asia and in franchised retail stores.In addition, our products are sold through www.samsonitecompanystores.com,www.samsoniteblacklabel.com and the websites of many of our customers. Wedesign the majority of our luggage products at our facilities in Europe, NorthAmerica and Asia. Our products are produced by third party suppliers thatsatisfy Samsonite’s quality and production standards or Samsonite-operatedmanufacturing facilities. Sales in Europe, North America, and in our othermarkets (including Asia and Latin America) comprised 41.9 percent, 35.3percent, and 21.6 percent of our net sales, respectively, in fiscal year 2007.Licensing revenues comprised the remaining 1.2 percent of total revenues.

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Our fiscal year ends on January 31.References to a fiscal year denote the calendar year in which the fiscal yearended; for example, “fiscal 2007” refers to the 12 months ended January 31,2007. Our foreign subsidiaries generally have fiscal year ends of December 31and results are included through that date.

**Products andDevelopment**

We distribute a broad range of products that includesoftside, hardside and hybrid (combination hardside and softside) luggage,business and computer bags, outdoor and casual bags, shoes, accessories and otherrelated products.

Belowis our market positioning for each of our principal brands:

| **Brand Name**             | ** ** | ** ** | ** ** | **Percentage of  Net Product Sales**Fiscal Year  2007 | ** ** | **Marketing Positioning** | ** ** | **Consumers**                               |
|----------------------------|------------|------------|------------|-------------------------------------------------------|------------|---------------------------|------------|---------------------------------------------|
| **Owned  Brand Names:**    |       |       |       |                                                  |       |                      |       |                                        |
| *Samsonite Black Label*    |       |       | 1.6        | %                                                     |       | Premium                   |       | Very affluent                               |
| *Lambertson Truex*         |       |       | —     | %*                                                    |       | Luxury                    |       | Very affluent                               |
| *Samsonite*                |       |       | 70.0       | %                                                     |       | High-quality, innovative  |       | Upper income, affluent                      |
| *American Tourister*       |       |       | 15.0       | %                                                     |       | Quality and value         |       | Middle to lower income  and value-conscious |
| **Licensed  Brand Names:** |       |       |       |                                                  |       |                      |       |                                        |
| *Lacoste*                  |       |       | 5.8        | %                                                     |       | Premium sport and casual  |       | Affluent                                    |
| *Timberland*               |       |       | 0.6        | %                                                     |       | Casual and outdoor        |       | Affluent                                    |
| Other                      |       |       | 7.0        | %                                                     | ** ** | ** **                |       |                                        |
| Total                      |       |       | 100.0      | %                                                     |       |                      |       |                                        |

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****                   **A 63% interest inLambertson Truex was acquired by the Company effective as of July 6, 2006.*

*LicensedProducts.*   We license our trademarks primarilyfor use on related product categories that are made and sold by licenseeseither worldwide or in certain geographic regions. Our licensees are selectedfor competency in their product categories and usually sell parallel lines ofproducts under their own or other brands. Examples of licensed products includeleather business and computer cases (in North America only), furnitureproducts, travel accessories, photo and audio storage gear, personal leathergoods, umbrellas, cellular phone cases, school bags, shoes and children’sproducts. Net sales include royalties earned and sales of licenses of $14.0million, $16.6 million and $19.9 million, for the years ended January 31,2007, 2006 and 2005, respectively. For the year ended January 31, 2005, wehad royalties of $4.9 million from a luggage manufacturer and distributor inJapan. In December 2004 the license agreement with our Japanesedistributor lapsed and the Company initiated direct market sales in Japan.

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Thefollowing table sets forth an overview of the percentage of our fiscal year2007 revenues from global sales of luggage, business and computer cases, andoutdoor and casual bags by product categories:

| **Product  Category**                    | ** ** | ** ** | ** ** | **Percentage of  Net Sales,  Fiscal Year  2007** | ** ** | **Principal Products**                                                                   | ** ** | **Key Brands**                                                                      | ** ** | **Main Distribution Channels**                                                                              |
|------------------------------------------|------------|------------|------------|--------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|
| **Luggage**                              |       |       | 66.8       | %                                                |       | Hardside and softside  luggage, garment bags, carry on bags                              | * *   | *Samsonite Black Label,  Lambertson Truex*                                          |       | Direct retail stores,  specialty stores and high-end department  stores                                |
| ** **                               |       |       |       |                                             |       |                                                                                     | * *   | *Samsonite*                                                                         |       | Mid-level department  stores, specialty stores, national chains, warehouse clubs, direct retail  stores     |
| ** **                               |       |       |       |                                             |       |                                                                                     | * *   | *American Tourister*                                                                |       | National chains, mass  merchants, specialty stores, direct retail stores                                    |
| **Casual and Outdoor****Bags**           |       |       | 12.5       | %                                                |       | Duffel bags, tote bags, backpacks, shoulder and hip  

bags, school bags,  handbags | * *   | *Lambertson Truex, Samsonite Black Label, Samsonite, Lacoste, Timberland*

* * |       | Specialty stores, department stores, national chains, warehouse clubs, sport  and  

outdoor retailers |
| ** **                               |       |       |       |                                             |       |                                                                                     | * *   | *American Tourister*                                                                |       | National chains, mass merchants,  specialty stores                                                          |
| **Business and Computer** **Cases** |       |       | 12.0       | %                                                |       | Briefcases, business cases, computer cases                                               | * *   | *Lambertson Truex,  Samsonite Black Label*                                          |       | Direct retail stores, specialty stores and high-end department stores                                       |
|                                     |       |       |       |                                             |       |                                                                                     | * *   | *Samsonite*                                                                         |       | Department and specialty  stores, office superstores, OEMs, warehouse clubs                                 |
|                                     |       |       |       |                                             | * *   | * *                                                                                 | * *   | *American Tourister*                                                                |       | Mass merchants                                                                                              |
| **Other**                                |       |       | 8.7        | %                                                |       | Small leather goods,  footwear, clothing, travel accessories                             | * *   | *Samsonite Black Label,  Lambertson Truex*                                          |       | Direct retail stores,  high  end department stores, specialty  stores                                  |
|                                     |       |       |       |                                             |       |                                                                                     | * *   | *Samsonite, Lacoste*                                                                |       | Department stores, specialty  stores,                                                                       |
|                                     |       |       |       |                                             |       |                                                                                     | * *   | *American Tourister*                                                                |       | Department stores, specialty  stores, mass merchants                                                        |
| Total                                    |       |       | 100.0      | %                                                |       |                                                                                     | * *   | * *                                                                            |       |                                                                                                        |

* *

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*Our product categories are describedbelow.*

*Softside Luggage.*   Thesoftside luggage category includes suitcases, garment bags and soft carry-onsuitcases. Approximately 90 percent of the softside luggage we sell is made forus by independent finished goods suppliers located around the world. We producethe balance of our softside luggage and garment bags in our own facilitieslocated in Eastern Europe. Our softside products are sold under all of ourmajor brands.

Over the past few years,Samsonite has introduced a number of innovative proprietary features in itssoftside luggage products in response to consumer demands for increased ease ofuse and better interior organization, mobility and protection. An example isthe SpaceMaster carry-on/tote designed to fit easily in airline overhead binsor under seats.

*Hardside Luggage.*   Wemanufacture most of our hardside suitcases in Company-owned factories.Our hardside luggage is sold under the *Samsonite*, *Samsonite Black Label* and *AmericanTourister* brands. Each line includes a variety of sizes and stylesto suit differing travel requirements. We currently manufacture hardsidesuitcases using three basic processes: injection molding, vacuum forming andpressure forming. Two of these processes require different types of plasticresin; the third uses proprietary, SRP (self-reinforcing polymer) laminates.Our hardside suitcases include proprietary features to reduce the case’s overallweight, which facilitates packing and transport.

*Hybrid Luggage.*   Wehave introduced products that include important proprietary designs andfeatures of both the hardside and softside luggage. Generally, hybrid casessuch as *X’Lite*use our variouspolymer-molding technologies to form the structural, protective shell portion,with textile-based soft portions forming the rest of the product. Such travelproducts use our patented, proprietary process to mold sleek, tough polymerframes around laminated fabric panels to form extremely light shells.

*Business and ComputerCases.*   We sell a variety of business andcomputer cases under our *Lambertson Truex,**Samsonite Black Label*, *Samsonite*and *American Tourister*brand names. We are pursuing innovations in lighter weight and more fashionablestyles meeting the functionality requirements of modern travelers. Our latestintroductions are a line of women’s computer bags, a line of casual businesscases and a mobile office computer bag with Spinner wheels. We design and haveour suppliers manufacture our softside business cases and computer cases. Inaddition, we license our brands to experienced business case distributors forthe sale of certain products in the United States.

*Outdoor and Casual Bags.*   Theoutdoor and casual bag market includes duffel bags, casual luggage, tote bags,athletic bags, traditional backpacks, daypacks, and shoulder bags. We haveexpanded our business in this growing market by increasing distribution ofproducts under our licensed *Lacoste* brandand acquiring a majority interest in American luxury accessory brand *Lambertson Truex*. Additionally, the Company has obtained thelicense of the *Timberland* brand to extend itsreach in the outdoor and casual bag markets and began distribution of *Timberland* products during fiscal 2007. We believe that byoffering consumers a number of product lines with varying styles and pricepoints, we have the opportunity to capture a larger portion of this market.

**Regions and Store Locations**

Our products are sold inover 100 countries around the world from the retail locations of others, fromour own stores, over the Internet at www.samsonitecompanystores.com,www.samsoniteblacklabel.com and at the websites of a number of our customers.Retail channels of distribution primarily include department and specialtystores, national and mass merchant retailers, warehouse clubs and our ownretail stores.

Sales of our products tendto be only moderately seasonal. Sales are slightly higher in the third andfourth quarters of fiscal years when the back-to-school shopping seasonincreases sales for backpack and casual products and when holiday travel and gift-shoppingincreases sales for our travel products and accessories.

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Asummary of net revenues follows:

| ** **                  | ** ** | **Net Revenues**               | ** ** |
|-----------------------------|------------|-------------------------------------|------------|
| ** **                  | ** ** | **Fiscal Year 2007**      | ** ** | **Fiscal Year 2006** | ** ** | **Fiscal Year 2005** | ** ** |
| ** **                  | ** ** | **(amounts in millions)** | ** ** |
| Europe                      |       |                                | $          | 448.4 |   |   |   | 417.4 |   |   |   | 406.0 |   |   |
| North America               |       |                                | 377.5      |   |   |   | 363.9 |   |   |   | 343.0 |   |   |
| Asia                        |       |                                | 182.8      |   |   |   | 127.7 |   |   |   | 99.0 |   |   |
| Latin America               |       |                                | 48.2       |   |   |   | 41.8 |   |   |   | 36.1 |   |   |
| Corporate &  Other |       |                                | 13.5       |   |   |   | 16.1 |   |   |   | 18.8 |   |   |
| Total                       |       |                                | $          | 1,070.4 |   |   |   | 966.9 |   |   |   | 902.9 |   |   |

 

*Europe.*   Our*Samsonite* and *SamsoniteBlack Label* products in Europe are sold through specialty luggageand leather goods stores and department stores. We also sell our productsthrough over 50 Company-operated Samsonite Black Label and Samsonite retail stores and outlets locatedthroughout Western and Central Europe. In order to preserve the premium imageof the *Samsonite* brand, *Samsonite*brand products are not distributed through discount retailers. Our *American Tourister* brand has been introduced in Europe aswell as in Asia to establish a single global brand name in the discount channel(known in Europe as “hypermarkets”). *AmericanTourister* products are also sold through the traditionaldistribution channels (department and specialty stores) in Europe. Our directsales and product demonstration force of approximately 130 people servescompanies with retail outlets throughout Europe.

In over 20 Europeanmarkets where we do not have a direct sales force, we sell our products throughdistributors and agents. These distributors and agents, as well as thosementioned under “Elsewhere in the World” below, handle various travel-relatedproducts in addition to our products. Distribution agreements generally providefor mutual exclusivity, whereby distributors do not handle competitors’ luggageproducts and we do not sell to other distributors or agents in their territory.

*North America.*   Our*Samsonite Black Label* products are soldin high-end department and specialty luggage stores. Our *LambertsonTruex* products are sold in high-end department stores. Our *Samsonite* and *American Tourister*branded products are sold in North America primarily through traditionalluggage retail distribution channels such as mid-level department stores andluggage specialty stores. Some national retailers and warehouse clubs carry *Samsonite* and *American Tourister*products uniquely designed for them. *American Tourister*products are primarily sold to middle income and value conscious consumersthrough discount channels such as mass merchants where we do not distribute the*Samsonite* brand. Our direct sales forceof approximately 40 professionals services our customers’ retail outletsthroughout North America.

We currently operate over150 retail stores in North America that distribute *Samsonite*and, to a lesser extent, *American Tourister*products. In fiscal year 2007, approximately 31.7 percent of our sales in NorthAmerica came from our retail stores.

*Asia.*   Wesell our products through Company-operated Samsonite retail stores, Companyoperated shop-in-shop concessions in department stores and non-Company operatedfranchise stores as well as specialty stores and travel stores. We marketdirectly in Australia, Japan, Korea, India, China, Hong Kong, Singapore,Taiwan, Thailand and Malaysia. In other Asian markets where we do not marketdirectly, we sell through distributors and agents. Our *American Tourister* brand is sold inselective Asian markets through hypermarkets, specialty stores and departmentstores. Revenues from Asian operations increased 43.1 percent from fiscal year2006 to fiscal year 2007.

*Latin America.*   Our*Samsonite and American Tourister* brandedproducts are sold in Latin America primarily through traditional luggage retaildistribution channels such as department stores and luggage specialty stores. Wealso operate over 20 retail stores in Latin America that distribute *Samsonite*and*American Tourister* products. A number of these stores arecompany outlet stores that provide a profitable distribution channel toliquidate our excess and discontinued products. As *AmericanTourister* products are 

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primarily sold tomiddle income and value conscious consumers, discount channels such as massmerchants and warehouse clubs are especially important to the distribution of *American Tourister* branded products in Latin America.Revenues from Latin America increased 15.3 percent from fiscal year 2006 tofiscal year 2007.

*Elsewhere in the World.*   Inmarkets outside Europe, North America, Asia and Latin America, we sell ourproducts either directly by export or through agents and distributors or underlicense. Products sold in these international markets are shipped from Easternand Western Europe or Asia depending upon product type and availability. Insome instances, we entered new markets through third party distributors andsubsequently acquired these third party distributors as the markets developed.In a number of these markets, our distributors operate monobrand Samsonite“franchise” stores that provide a vehicle for distributing the products inmarkets where organized distribution is not widespread.

**Distribution Channels**

*Specialty stores.*   Ourproducts are currently sold in specialty luggage stores around the world. Salesthrough specialty stores represented approximately 26.6 percent of our netproduct sales in fiscal year 2007, compared with 26.1 percent and 26.5 percentof our net product sales in fiscal year 2006 and fiscal year 2005,respectively.

*Department stores.*   Ourproducts are currently sold in department stores, such as Macy’s, Lane Crawfordand Harrods. Department store sales represented approximately 22.5 percent ofour net product sales in fiscal year 2007, compared with 22.3 percent and 21.3percent of our net product in fiscal year 2006 and fiscal year 2005,respectively.

*Mass merchants.*   Ourproducts are currently sold in mass merchant stores such as Wal-Mart in theUnited States and Auchan in Europe. Sales through mass merchant storesrepresented approximately 6.0 percent of our net product sales in fiscal year2007, compared with 6.3 percent and 5.4 percent of our net product sales infiscal year 2006 and fiscal year 2005, respectively.

*Office superstores.*   Ourproducts are currently sold in office superstores such as Staples in the UnitedStates. Sales through office superstores represented 3.1 percent of our netproduct sales in fiscal year 2007, compared with 3.8 percent and 4.8 percent ofour net sales in fiscal year 2006 and fiscal year 2005, respectively.

*Warehouse clubs.*   Ourproducts are currently sold in warehouse clubs mostly in the United States,such as Costco. Sales through warehouse clubs represented approximately 2.1percent of our net product sales in fiscal year 2007, compared with 1.9 percentof our net product sales in fiscal year 2006 and fiscal year 2005.

*Retail stores.*   Ourproducts are also sold through our network of directly operated stores. Ourstores reinforce Samsonite’s global position as a leading, worldwide luxurytravel and accessories brand. We currently operate over 300 retail storesworldwide that distribute *Samsonite*, *Samsonite Black Label*, and *AmericanTourister* products, a variety of travel-related products, andour excess and discontinued products. We also operate shop-in-shop concessions,primarily in Asia. We have also entered into “franchise” arrangements with retailersthat enable us to assist the retailer with store location, signage, and retailmarketing in exchange for exclusive supply arrangements in Asia (mainly India,South Korea and China).

*Other channels.*   Ourproducts are currently sold in other channels throughout the world such asdiscounters, exclusive label, premium and other distributors and agents. Salesthrough other channels represented 22.5 percent of our net product sales infiscal year 2007, compared with 21.5 percent and 20.7 percent of our net salesin fiscal years 2006 and 2005, respectively.

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**Advertising**

Advertising resources arecommitted to brand advertising programs that promote the brand image andproduct features of our luggage and related products. Samsonite’s globaladvertising strategy is a fully integrated and targeted advertising effortthrough print, billboards, public relations, in-airport, on-line, and in-storeadvertising. During fiscal year 2007, we reinforced Samsonite’s positioning asa premium lifestyle brand by executing a host of strategic communicationinitiatives. We also featured internationally recognized business and fashioncelebrities in our advertising. For example, during fiscal year 2007, we featuredSir Richard Branson, actress Isabella Rossellini and Spanish flamenco dancerJoaquín Cortés in our advertising, while in fiscal year 2008, we will featureadvertising campaigns with fashion designer Alexander McQueen, race car driverDanica Patrick, and French actor Jean Reno. High profile public relationsevents such as our “House of Samsonite” press and media events back ouradvertising initiatives and support key product launches such as *Samsonite Black Label* by AlexanderMcQueen. We assist our trade customers in adapting their advertising to ourglobal advertising campaigns through various cooperative advertising programs.We employ other promotional activities to further support our trade customersand increase product sales, including in-store point of sale print support anddisplay fixturing along with consumer loyalty programs. In fiscal year 2007 wespent approximately $77.5 million on advertising and marketing promotionactivities, an increase of 9.5 percent compared with fiscal year 2006. For thelast five fiscal years we have expended, on average, in excess of $57.6 millionannually in global communications, cooperative advertising programs, publicrelations, and promotional activities (such as catalogues, point of displaymaterials, trade shows and sales samples) to support the sale of our brandedproducts.

**Manufacturing and Sourcing Products**

We believe that our largesize and leading market position allows us to achieve volume driven purchasingand manufacturing economies of scale. Our global product-sourcing networkconsists of various third party finished goods suppliers located principally inAsia and Samsonite-operated manufacturing facilities. Our global sourcingnetwork enables us to obtain economies of scale by sourcing products fromcountries with low production costs while maintaining the same qualitystandards as are applied to the products we manufacture ourselves. We continueto adjust our business model to reduce fixed manufacturing costs and to adopt amore variable cost model that increases the amount of goods sourced fromlower-cost production regions, which are primarily in Asia. Over the pastseveral years we have closed several manufacturing facilities in the UnitedStates, Mexico, Belgium, Spain, France and Slovakia. Our remainingmanufacturing facilities include hardside plants in Oudenaarde, Belgium andNashik, India; and a softside plant in Szekszard, Hungary. Our initiatives arereflected in the ratio of manufactured softside products declining from 23percent in fiscal year 2004 to 10 percent in fiscal year 2007.

In fiscal year 2007, wepurchased 90 percent of our softside and hybrid products from third-partyvendors in Asia. We select different third-party vendors to benefit fromdifferences in manufacturing costs, payment terms and shipping costs. We do notrely on any single third-party vendor whose loss would be material to us.The remaining 10 percent of our softside and hybrid products was produced inCompany-operated factories. Further, substantially all of our hardside productsare manufactured in our own facilities.

Softside luggage isprimarily made from fabric including nylon, polyester and vinyl as well asaluminum, steel, plastics and leather. These materials are purchased fromvarious vendors throughout China and Taiwan and are readily available. Thehardside luggage is composed primarily of polypropylene, which we source fromtwo European suppliers, and various combinations of ABS (acrylinonitrilebutadiene styrene) and polycarbonate, which we source from suppliers in Indiaand Europe. None of these hardside materials is difficult for us to obtain asnumerous third party vendors exist.

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We maintain a vigorousquality control program for goods manufactured at our own plants and at third-partyvendor facilities. New products are put through a series of simulation andstress tests to assure durability and strength. In our manufacturing facilitiesand our own quality assurance offices, we use quality control inspectors,engineers and lab technicians to monitor product quality and productionstandards at vendors’ production facilities.

**Competition**

Competition in theworldwide luggage industry is very fragmented. We have several regionalcompetitors in each of our markets (Europe, North America, Latin America andAsia). However, no other company operates on a similar scale to us globally.

Throughout our regionalmarkets we compete based on brand name recognition, reputation for productquality, product differentiation, new product innovation, customer service,high-quality consumer advertising campaigns and quality to price comparisons.We are well established in the distribution channels critical to luggagedistribution, which we believe gives us a competitive advantage.

The manufacture ofsoftside luggage is labor intensive but not capital intensive; therefore,barriers to entry by competitors in this market segment are relatively low.This is reflected by the many small competitors present in the softside luggagemarket. In addition, we compete with various large retailers, some of whom areour customers, who have the ability to purchase private-label softside luggagedirectly from low-cost manufacturers. The manufacture of hardside and hybridluggage is more capital intensive and there are relatively few finished goodsvendors; consequently, barriers to entry are relatively high. Nonetheless, wehave several competitors worldwide in the hardside luggage market.

**Customers**

Our customers includespecialty stores featuring luggage products, major department stores that carryluggage, retail chain stores, mass merchants, office superstores, warehouseclubs, premium sales (sales direct to business), Internet retailers anddiscounters. We also sell certain products directly to consumers throughSamsonite-operated retail stores in Europe, North America, Latin Americaand Asia and over the Internet at our www.samsonitecompanystores.com andwww.samsoniteblacklabel.com websites. We do not depend on any single customerfor more than 3.2 percent of our consolidated revenues.

**Management Information Systems**

Samsonite has successfullystarted the process of replacing its legacy ERP systems with the SAP EnterpriseResource Planning (SAP) system. This software will enable the Company toglobalize its data, processes and organization. It will assure data integrityand consistency of information across all entities in the organization.

As of February 2007,we had implemented the SAP system in Canada and had commenced implementation inthe United States. We expect implementation of the entire system to besubstantially completed in calendar year 2009.

**Environmental Matters**

Our operations throughoutthe world are subject to federal, state and local environmental laws andregulations. These environmental laws and regulations govern the generation,storage, transportation, disposal and emission of various substances. We workto ensure that our existing operations comply fully with these laws andregulations. Although compliance involves continuing costs, the ongoing costsof compliance with existing environmental laws and regulations have not had,nor are they expected to have, a material effect upon our cash flow or financialposition. From time to time we have incurred, or accrued for, cleanup orsettlement costs for environmental cleanup matters associated, or alleged tohave been associated, with our historic operations. To date these expenses havenot had a material effect upon our 

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cashflow or financial position. Unknown, undiscovered or unanticipated situationsor events may require us to increase the amount we have accrued for anyenvironmental matters.

**Trademarks, Patents and Product Development**

We are the registered ownerof *Samsonite*®, *AmericanTourister*®, *Lambertson Truex®*and other trademarks. As of January 31, 2007, we had approximately 1,929trademark registrations and 237 trademark applications pending in the UnitedStates and abroad covering luggage, travel equipment, apparel products andretail services. Our *Samsonite* and *American Tourister* trademarks are of material importance toour business. Our trademark registrations in the United States and elsewherewill remain in existence for as long as we continue to use and renew them on atimely basis.

We also own approximately121 United States patents and approximately 802 patents in selected foreigncountries (i.e., patents of inventions, industrial design registrations andutility models). In addition, we have approximately 352 patent applicationspending worldwide for such intellectual property registrations. We pursue apolicy of seeking patent protection where appropriate for inventions embodiedin our products. The patents we hold provide us with a significant competitiveadvantage in applicable portions of our business primarily associated withhardside and hybrid luggage products. Our patents and pending patentapplications cover features, designs and processes in most of our mid- andhigher-priced product lines. Although some companies have sought to imitatesome of our patented products and our trademarks, we have generally beensuccessful in enforcing our worldwide intellectual property rights.

We devote significantresources to new product design, development and innovation. We estimate thatwe have spent on average $8.2 million per year over the last three fiscal yearson new product design and development. We start with market research toidentify consumers’ functional requirements and style preferences. Onceidentified, we employ in-house and external designers and development engineersto develop new products that respond to those requirements and stylepreferences. In addition, we attempt to differentiate ourselves from ourcompetitors by offering products that are innovative and distinctive in styleand functionality. Our Creative Director has an extensive background in thedesign of luxury bags and accessories and is responsible for all global designfunctions.

**Employees and Labor Relations**

At January 31, 2007,we had approximately 5,000 employees worldwide, with approximately1,300 employees in North America, 1,700 employees in Europe, 1,700employees in Asia and 300 employees in Latin America. In the United States,approximately 100 employees are unionized under a contract that is renewedevery three years and was most recently renewed in April 2005. At January 31,2007 we employed in our European manufacturing plants approximately 500 workerslocated in Belgium and approximately 300 workers located in Hungary. In Europe,union membership is not definitively known to Samsonite, as union membership isconfidential and varies from country to country. It is probable that most ofour European workers are affiliated with a union, but we have no way ofofficially confirming this. Most European union contracts have a one-yearduration. We believe our employee and union relations are generallysatisfactory.

**Forward Looking Statements**

The Private SecuritiesLitigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor forforward-looking statements made by or on behalf of the Company. TheCompany and its representatives may, from time to time, make written or verbalforward-looking statements, including statements contained in the Company’sfilings with the Securities and Exchange Commission and in its reports tostockholders. Generally, the inclusion of the words “believe”, “expect,” “intend,”“estimate,” “anticipate,” “will,” “project,” “plan,” and words or terms ofsimilar substance identify statements that constitute “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933 and Section 21E of the Securities Exchange Act of 1934 that areintended to come within the safe harbor 

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protectionprovided by those sections. All statements addressing operating performance,events, or developments that the Company expects or anticipates will occur inthe future, including statements relating to advertising and marketingstrategy, sourcing strategy, sales growth, earnings or earnings per sharegrowth, and market share, as well as statements expressing optimism orpessimism about future operating results, are forward-looking statementswithin the meaning of the Reform Act. The forward-looking statements areand will be based upon management’s then-current views and assumptionsregarding future events and operating performance, and are applicable only asof the dates of such statements. The Company undertakes no obligation andexpressly disclaims any obligation, to update or alter any forward-lookingstatements, whether as a result of new information, future events, orotherwise.

By their nature, allforward-looking statements involve risks and uncertainties. Actualresults may differ materially from those contemplated by the forward-lookingstatements for a number of reasons, including but not limited to the riskfactors set forth in Item 1A. Risk Factors.

**ITEM1A.**        RISK FACTORS

***Events whichnegatively affect travel levels adversely affect our business.***

Demand for our products isaffected by the public’s attitude towards the safety of travel, particularlyair travel, the international political climate and the political climate ofdestination countries. Hostilities in the Middle East and other regions, eventssuch as terrorist attacks and the threat of additional attacks, and theresulting political instability and concerns over safety and security aspectsof traveling, may have an adverse impact on demand for our products.Additionally, the incidence or spread of contagious diseases (such as SevereAcute Respiratory Syndrome, commonly known as SARS, or Avian flu) may lead to ageneral reluctance by the public to travel, which could cause a decrease indemand for our luggage products and, as a result, may have an adverse effect onour sales, results of operations and financial condition. Any restrictions onairline activity imposed as a result of increased regulation (such as inrelation to noise pollution, greenhouse gas emissions and other environmentallaws) may also adversely affect our business.

***A downturn in the economy may affect consumerpurchases of our products, which could adversely affect our sales.***

Our sales levels arecorrelated to general economic and business conditions in the global markets inwhich we sell our products. Our business is subject to economic conditions inour major markets, including recession, inflation, deflation, general weaknessin retail and travel markets, and changes in consumer purchasing power. Anysignificant declines in general economic conditions or uncertainties regardingfuture economic prospects that affect consumer spending habits could have amaterial adverse effect on consumer purchases of our products and adverselyaffect our sales and gross profit margins. Moreover, a downturn in the economymay particularly affect consumer purchases of premium or luxury items, such as *Samsonite Black Label* and *Lambertson Truex* products.

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***Our inability torespond to changes in consumer demands and market trends could adversely affectour sales.***

Our success depends on ourability to identify, originate and define product and market trends as well asto anticipate, understand and react to changing consumer demands in a timelymanner. Our future business prospects are dependent on our ability to enhanceour existing luggage products and accessories and to develop and marketinnovative new offerings that achieve market acceptance. Our products mustappeal to a broad range of consumers whose preferences cannot be predicted withcertainty and are subject to rapid change. Consumer preferences differ inmarkets around the world. For example, in the United States, consumerpreferences are primarily driven by price and features of the product, while inEurope and Asia, there is an increased focus on brand recognition. Theenhancement of our luggage products and development of additional products aresubject to all of the risks associated with new product development, includingunanticipated delays, misjudgment of market trends, expenses or otherdifficulties that could result in the abandonment of or substantial change inour product development projects and the marketing or acceptance of theseenhancements or new offerings. In addition, failure to continually enhance ourproducts and to keep pace with market trends could result in a decrease insales of our products.

***Our ability to continue our sales growth is dependentupon the further implementation of our growth strategies, which we may not beable to sustain.***

During recent years, wehave experienced a growth in sales driven in part by our new products andgeographical expansion and retail expansion strategies. Our ability to continuethis growth is dependent on the successful continuation of these strategies.This includes diversification of our product offerings to include items beyondluggage, such as footwear and licensed products, and expansion of ourCompany-operated Samsonite retail and outlet locations. There can be noassurance that the expansion of our product offerings will be successful orthat new products will be profitable or generate sales comparable to those wehave recently experienced or that our increased emphasis on growth in the luxurygoods market will result in our brand names and products achieving a highdegree of consumer acceptance in that market. If we misjudge the market for ourproducts, we may be faced with significant excess inventory for some productsand missed opportunities for other products.

Implementation of ourbusiness strategy also involves the continued expansion of our network ofCompany-operated retail stores around the world. Over the next year, our goalis to open and operate directly or through franchises a number of additionalSamsonite Black Label retail locations in large-market, fashion-orientedinternational shopping districts in major cities throughout the world, as wellas a number of additional Samsonite stores in high-traffic street locationsand/or shopping malls. Our ability to continue opening these new storelocations depends upon, among other things, our ability to operate them at aprofit, finance their opening and operations, secure them at reasonable rentalrates and hire and train management and personnel to staff the stores. If wecannot address these challenges successfully, we may not be able to expand ourbusiness or increase our revenues at the rate we currently contemplate.

***Part of our retail strategy relies upon ourability to lease quality locations at competitive prices. We may incursignificant costs if our retail strategy fails and we are forced to closeretail locations.***

We lease the majority ofour Company-operated retail stores. We are planning to increase our network ofCompany-operated retail stores around the world. Accordingly, the success ofthis aspect of our strategy is in part dependent on our ability to secureaffordable, long-term leases and to secure renewals of such leases. AdditionalSamsonite Black Label retail stores will be located in areas typicallyassociated with the sale of luxury goods. Such properties are generally highlysought after, and we may face intense competition from other companies forthese locations. There can be no assurance that we will be able to purchase orlease desirable store locations or renew existing store leases on acceptableeconomic terms.

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In addition, we may besubject to potential financial risk associated with the cost of prematurelyterminated leases. Failure of the Company-operated retail stores to growrevenues as expected may oblige management to close a store (or stores) andthereby terminate a lease agreement prior to its expiration. While we try toenter into leases that provide us with flexibility in terms of termination,premature termination of a lease agreement may cause us to incur assetwrite-downs for store lease acquisition costs, leasehold improvements, fixturesand fittings or inventory or incur a portion of the future lease costs aftertermination. In addition, it is possible that we may have to incur rental andother charges after closing such stores for undetermined periods up to thelease expiry date.

***We must be able tomaintain effective distribution channels that serve our customers’ purchasingpatterns, and satisfactory control of our wholesale and license distributionchannels is critical.***

The retail market ismarked by rapid changes in distribution channels and customer purchasingpatterns. Our products are sold through diverse distribution channels, from ourCompany-operated stores, through our website, and through retail locations ofothers, including department and specialty stores, national and mass merchantretailers, and warehouse clubs. Therefore, maintaining good relationships withsuperior distribution or joint venture partners and establishing newdistribution channels to better serve our customers’ purchasing patterns is keyto our continued success. The increasing bargaining power of entities in thewholesale sector could result in them exerting downward price pressure onproducts that they distribute. Additionally, if distribution channel trends andpurchasing preferences change and we are not positioned to take advantage ofsuch changes, we could be excluded from important market segments and our salesand results of operations could be adversely affected.

To achieve thegeographical breadth that we are targeting, in some countries we enter intojoint ventures to run our business. There can be no assurance that such jointventures will prove successful. We also rely on our ability to control ourdistribution networks and licensees to ensure that our products are sold inenvironments consistent with our brand image. Any action by any significantwholesale customer or licensee, such as presenting Samsonite products in amanner inconsistent with our preferred positioning, could be damaging to ourbrand image. If, due to regulatory, legal or other constraints, we are in anyway unable to control our wholesale distribution networks and licensees, theSamsonite brand image, and therefore our results and profitability, may beadversely affected.

***Some of our productlines are manufactured under licensed trademarks and any failure to retain orrenew such licenses on acceptable terms may have an adverse effect on ourbusiness.***

Our license agreement withLacoste allows us to design, manufacture and market an extensive range ofluggage, bags and leather goods under the *Lacoste* brandname. Products sold under the *Lacoste*brand**name accounted for revenues of $61.0 million, or 5.8percent of our revenues, in fiscal year 2007. Additionally, we are party to alicense agreement with the Timberland Company, or Timberland, which allows usto design, manufacture and market luggage, business and computer cases andbackpacks under the *Timberland*brand name. The Lacoste license agreement requires us, in each year, to achieveincreasing minimum net sales of *Lacoste*branded goods in the various territories in which we have agreed to sell suchgoods. The Timberland license agreement requires us in each year to achieveincreasing minimum net sales of *Timberland*branded goods and to make increasing annual royalty payments to Timberland. Ifthese minimum net sales are not achieved, Lacoste and Timberland have the rightunder their respective license agreements to terminate their respective licenseagreements for a particular territory (in the case of the Lacoste licenseagreement) or in full (in the case of the Timberland license agreement). TheLacoste and the Timberland license agreements expire on December 31, 2010and December 31, 2011, respectively. There can be no assurance that wewill be successful in maintaining or renewing the Lacoste or Timberlandlicenses, or other licenses which are of commercial value to us, on terms thatare acceptable to us. The loss of the Lacoste or Timberland licenses could havea material adverse affect on our business, results of operations and financialcondition.

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***Failure to maintainthe stature of our brands or a positive image of our company could have anadverse effect on our operating results and financial condition.***

Our financial performanceis influenced by the success of our brands, which, in turn, depends on factorssuch as product design, the distinct character of the products, the materialsused to manufacture the products, the image of our stores, communicationactivities, including advertising, public relations and marketing, and generalcorporate profile. Additionally, our business strategy relies, in part, uponthe successful carry-over of the *Samsonite* brandname to other product categories and the luxury goods market. Failure of the *Samsonite* brand name to carry-over to other products or theluxury goods market, or failure to maintain or increase the stature of ourpre-existing brands or to successfully develop new brands could have an adverseeffect on our operating results and financial condition.

***We may not be ableto realize the cost-saving benefits associated with the use of overseas thirdparty vendors, and our vendors may be unable to deliver products in a timelycost-effective manner or to meet our quality standards.***

A significant portion ofour net sales is derived from products that are manufactured by third partyvendors, a majority of which are located in Asia and Eastern Europe. A significantchange in these countries’ economic policies could adversely affect our abilityto manufacture our products in such countries. The implementation of highertariffs, quotas or other restrictive trade policies by those countries to whichthese third party vendors export their products could negatively impact thecost-saving benefits of these outsourced operations overseas. These factorscould adversely affect our ability to maintain or commence low-cost operationsoutside the United States and the European Union. Additionally, the violationof labor or other laws by any of our third party vendors, or the divergence ofthird party vendors’ labor practices from those generally accepted as ethicalby us or others in the United States and the European Union, could damage ourreputation and force us to find alternative manufacturing sources.

These third party vendorsare subject to many risks, including foreign governmental regulations,political unrest, disruptions or delays in shipments, changes in local economicconditions and trade issues. These factors, among others, could influence theability of these third party vendors to make or export our productscost-effectively or at all or to procure some of the materials used in theseproducts. We depend upon the ability of these vendors to secure a sufficientsupply of raw materials, adequately finance the production of goods ordered andmaintain sufficient manufacturing and shipping capacity. Additionally, currencyexchange rate fluctuations could increase the cost of raw materials or laborfor these third party vendors, which they could pass along to us, resulting inhigher costs and lower margins for our products, if we cannot pass these highercosts on to customers.

If any of these factorswere to render a particular country undesirable or impractical as a source ofsupply, there could be an adverse effect on our business. Our reliance on thesevendors and the lack of direct control over these operations could subject usto difficulty in obtaining timely delivery of products of acceptable quality.In addition, a vendor’s failure to ship products to us in a timely manner or tomeet our quality standards could cause us to miss the delivery daterequirements of our customers. The failure to make timely deliveries may causeour customers to cancel orders, refuse to accept deliveries, demand reducedprices or reduce future orders, any of which could harm our sales, reputationand overall profitability.

***We are dependent onour trademarks and patents, and our products may be the subject of counterfeitreproduction.***

As a leading luggagemanufacturer and retailer, we are dependent on our ability to protect andpromote our trademarks, patents and other proprietary rights. We believe thatour trademarks are adequately supported by applications for registrations,existing registrations and other legal protections in our principal markets. Weown approximately 121 U.S. patents and approximately 802 patents (i.e., patentsof inventions, industrial design registrations and utility models) in selectedforeign countries. In addition, 

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we haveapproximately 352 patent applications for such intellectual propertyregistrations pending worldwide. We pursue a policy of seeking patentprotection where appropriate for inventions embodied in our products. The lossof some or all of the protection of the patents could make it easier for othercompanies to enter our markets and compete against us by eroding our ability todifferentiate our products. We cannot exclude the possibility that ourintellectual property rights may be challenged by others or that we may beunable to register our intellectual property rights or otherwise adequatelyprotect them in some jurisdictions. In addition, there can be no assurance thatother companies will not be able to design and build competing products in amanner that does not infringe our patents.

Furthermore, the luggageretail market is subject to numerous instances of product counterfeiting andother trademark infringements. A significant presence of counterfeit productson the market can negatively impact both the sales and the brand image of amanufacturer. Although we devote substantial resources on a worldwide basis tothe protection of our intellectual property rights including, when appropriate,taking legal action, there can be no assurance that the actions taken by us toestablish and protect the use of our intellectual property will be successful.The law and practice relating to the protection of intellectual property rightsvaries greatly from country to country and, as a result, our rights are morevulnerable in some jurisdictions than others. If any of our products are thesubject of widespread counterfeit production or other similar trademarkinfringements, our business, financial condition and results of operationscould be adversely affected.

***The luggage marketis highly fragmented; we face competition from many smaller competitors.***

We compete with manydomestic and international companies in our global markets. We compete based onbrand name recognition, consumer advertising, product innovation, quality,differentiation of product features, customer service and price. The worldwideluggage market is highly fragmented, meaning that we have many competitors. Ourproducts compete with other brands of products within their product categoryand with private label products sold by retailers, including some of ourwholesale customers. We compete with numerous manufacturers, importers anddistributors of luggage, accessories and other products for the limited spaceavailable for the display of these products to the consumer. Given the generalavailability of contract-manufactured products, barriers to entry into themanufacturing of softside luggage are relatively low and we face competitionfrom many low-cost manufacturers of inexpensive, softside luggage products. Forexample, we have faced increased competition in the low to mid-end of the luggagemarket due to competitors introducing new products at lower prices. If ourcompetitors reduce the price at which they sell their products, we may beforced to reduce the price of our products which may reduce our revenues and/orgross profit margins. We cannot guarantee that we will be able to competeeffectively in the future in our markets.

***Failure to attractand retain key and qualified personnel may adversely affect our ability toconduct our business.***

Our future successdepends, in large part, on the efforts and abilities of our executive officersand design teams who execute our business strategy and identify and pursuestrategic opportunities and initiatives. In particular, we are highly dependenton the continued services of Marcello Bottoli, our President and ChiefExecutive Officer, and other executive officers and key employees who possessextensive industry knowledge. We are a party to employment agreements withthese executives which provide for compensation and other benefits. Theagreements also provide for severance payments under certain circumstances. Theloss of the services of these persons for any reason, as well as any negativemarket or industry perception arising from that loss, could have a materialadverse effect on our business. We may incur costs to replace key employees wholeave, and our ability to execute our business model could be impaired if wecannot replace departing employees in a timely manner. As the business grows,we will need to attract and retain additional qualified personnel and develop,train and manage an increasing number of management level, sales and otheremployees. We cannot guarantee that we will be able to attract and retainpersonnel as needed in the future.

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***Certain corporatetransactions require the approval of our major stockholders.***

Our three majorstockholders and their affiliates control approximately 85% of our votingstock. Samsonite is a party to a July 31, 2003 Stockholders’ Agreementwith the major stockholders and others relating to the ownership rights andcorporate governance of Samsonite. Pursuant to the terms of the StockholdersAgreement, the major stockholders have agreed to take all actions in theirpower to elect nominees selected by the major stockholders to our board ofdirectors in the future. As a result, eight of the ten members of our board ofdirectors are nominees of the major stockholders. In addition, our ability totake certain actions, including amending our charter, commencing bankruptcyproceedings and taking certain corporate actions (including debt incurrences,stock issuances, acquisitions, asset sales and the like), is subject to thewritten consent of either all or two-thirds (depending on the action) of themajor stockholders so long as the major stockholders collectively continue tohold at least 25% of our outstanding voting stock. Accordingly, for theforeseeable future, our major stockholders will exercise significant influenceover our board of directors and business and operations.

The level of ownership ofthe voting stock by the major stockholders may have the effect of making moredifficult, or of discouraging, absent the support of such major stockholders, aproxy contest, a merger involving Samsonite, a tender offer, an open marketpurchase program or purchases of Samsonite common stock that could give holdersof such stock the opportunity to realize a premium over the then-prevailingmarket price for their shares of common stock.

***The business of oursubsidiaries with international operations may be adversely affected byinternational business risks and fluctuations in currency exchange andtranslation rates.***

Approximately 65.2 percentof our net revenues for fiscal year 2007 were attributable to our European andother foreign operations, which include significant operations throughout Asiaand Latin America, and approximately 34.8 percent of our net revenues forfiscal year 2007 were attributable to our U.S. sales and licensing revenues. Inaddition to our U.S. and European distribution subsidiaries, we have whollyowned distribution subsidiaries in Canada, Latin America (Mexico, Colombia andPeru) and Asia (Singapore, Hong Kong, China, Japan, Taiwan and Malaysia). Wehave manufacturing subsidiaries in Belgium, Hungary and India. We are also apartner in joint ventures in Europe (Italy and Russia), Latin America (Brazil,Argentina and Uruguay), Asia (South Korea, India, Thailand and Australia), andthe Middle East (United Arab Emirates). Our operations may be affected byeconomic, political, social and governmental conditions in the countries wherewe have manufacturing facilities or where our products are sold. In addition,our operations could be adversely impacted by unfavorable exchange rates, newor additional currency or exchange controls, other restrictions being imposedon our operations, or expropriation.

Our financial conditionand results of operations may be adversely affected by fluctuations in thevalue of the U.S. dollar compared to the euro and other currencies. In fiscalyears 2007, 2006 and 2005, 65.2%, 62.5% and 61.8%, respectively, of ourrevenues were denominated in currencies other than the U.S. dollar.****As we reportour financial results in U.S. dollars, we also face a currency translation riskto the extent that the assets, liabilities, revenues and expenses of oursubsidiaries and joint ventures are denominated in currencies other than theU.S. dollar. Most of those subsidiaries operate using the functional currencyof the country in which it is located. During fiscal years 2007, 2006 and 2005,our results of operations were positively impacted by the strengthening of theeuro and other foreign currencies relative to the U.S. dollar. While exchangerate fluctuations over the past several years have been to our benefit, futurematerial fluctuations in the exchange rates of foreign currencies relative tothe U.S. dollar could have a material adverse effect upon our business,financial condition or results of operations.

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***Any materialweaknesses in our internal control over financial reporting could result in amisstatement in our financial statements.***

In preparing our financialstatements for fiscal year 2006, our Chief Executive Officer and ChiefFinancial Officer evaluated the effectiveness of our disclosure controls andprocedures and concluded that, as of January 31, 2006, we did not maintaineffective internal control over financial reporting because of a materialweakness in our internal control over accounting for income taxes, includingthe calculation of deferred tax asset valuation allowances, which resulted inus having to restate our consolidated financial statements for fiscal years2003, 2004 and 2005. We engaged an independent registered public accountingfirm (other than our auditors, KPMG LLP) to perform an analysis of our internalcontrol over accounting for and disclosure of income taxes. In response totheir recommendations, we have expanded our tax accounting staff and undertakena more rigorous analysis of controls over tax accounting and disclosures. As aresult, as of January 31, 2007, we did not have any material weakness inour internal control over financial reporting. Any future material weaknessesin our internal control over financial reporting or our failure to remediatesuch material weaknesses could result in a misstatement in our financialstatements not being prevented or detected and could adversely affect investorconfidence in the accuracy and completeness of our financial statements, aswell as our stock price.

***Our business may beadversely affected if we continue to encounter complications in connection withthe implementation of our SAP information management software.***

We are in the process ofreplacing all of our various business information systems worldwide with theSAP system. As of February 2007, we had implemented the SAP system inCanada and had commenced implementation in the United States. We expectimplementation of the entire system to be completed in calendar year 2009. Wehave, to date, experienced some delays in this implementation. These delays andother implementation difficulties have led to shipping delays and a slowdown ofsales, not all of which may be recovered. Any further delay in theimplementation of, or disruption in the transition to our new or enhancedsystems, procedures or controls, could harm our ability to ship our products ina timely manner, accurately forecast sales demand, manage our supply chain,achieve accuracy in the conversion of electronic data and records and to reportfinancial and management information on a timely and accurate basis. Failure toproperly or adequately address these issues could result in the diversion ofmanagement’s attention and resources and impact our ability to manage ourbusiness and our results of operations.

***We have relocatedcertain of our management functions to the United Kingdom (“U.K.”). Suchrelocation, if not structured in an appropriate manner on an ongoing basis,could lead to material adverse tax consequences for the group.***

We have relocated a numberof our executive officers and other senior management, together with certain ofour management functions, to the U.K. We have sought to structure therelocation and the ongoing exercise of such functions in a manner that will notcause Samsonite Corporation to become tax resident in the U.K. or to have apermanent establishment there for U.K. tax purposes. There is no advanceclearance procedure in the U.K. for agreeing whether a company is resident inthe U.K. or whether a company has a U.K. permanent establishment but, as partof our relocation process, we have submitted applications to the U.K. and U.S.tax authorities with a view to agreeing a bilateral “Advance Pricing Agreement”in relation to the transfer pricing of certain management services to beprovided from the United Kingdom to the group, which applications includedetails of the relocation and the management functions being or to be carriedout in the U.K. While we believe that we are structuring our managementfunctions in a way that achieves our objectives, there can be no assurance thatwe will succeed in doing so, or that the U.K. tax authorities will agree withour approach. Should we not succeed in structuring our affairs so SamsoniteCorporation does not to become tax resident in the U.K. and so SamsoniteCorporation does not to have a permanent establishment there, or should theU.K. tax authorities disagree with our approach, it is our intention to seekalternative solutions in relation to the 

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locationand structure of our management functions. The inability to implement thistransition without Samsonite Corporation becoming resident or having apermanent establishment in the U.K. could lead to material adverse taxconsequences for the group.

***We have a leveragedcapital structure which could adversely affect our financial health, and ourability to service our indebtedness and to grow our business.***

As of January 31,2007 we had total indebtedness of $501.9 million and a stockholders’ deficit of$222.3 million. Our substantial debt could have consequences to securityholders, including:

·       itmay require us to dedicate a substantial portion of our cash flow fromoperations to the payment of principal and interest on our indebtedness, whichwould reduce the cash flow available to us for operations, working capital,capital expenditures, acquisitions and general corporate purposes;

·       itmay limit our ability to obtain additional financing for working capital,capital expenditures, product development and general corporate purposes;

·       itmay make us more vulnerable in the event of a downturn in general economicconditions or in our industry; and

·       itmay limit our ability to adjust to changing market conditions and place us at acompetitive disadvantage to less-leveraged competitors.

There can be no assurancethat our cash flow and capital resources will be sufficient for us to makepayments on our indebtedness or meet our other obligations in the future. Ifour cash flow and other capital resources are insufficient, we may be forced toreduce or delay capital expenditures, sell assets, try to obtain additionalequity capital or refinance or restructure our debt, which among other thingscould potentially impair our growth strategy. There can be no assurance thatany of those alternatives would be successful or allow us to meet our scheduledobligations in the future.

***If interest ratesrise, our operating results may decline due to higher borrowing costs.***

We are party to a seniorcredit facility, consisting of a $450 million senior secured term loan facilitywhich was drawn in full as of January 31, 2007 and an $80 million seniorsecured revolving credit facility of which $18 million was drawn at January 31,2007. Borrowings under the senior credit facility bear interest at ratesadjusted periodically depending on our financial performance as measured eachfiscal quarter and interest rate market conditions. We also have othershort-term credit lines that we use from time to time to finance our foreignoperations that are variable rate obligations. At January 31, 2007, we hadborrowings of $12.1 million under these other short-term credit lines.Borrowings under the senior credit facility and the short-term credit linesvary from time to time throughout the year as our business needs fluctuate. Ifinterest rates rise, our interest expense will increase and our results ofoperations will be adversely affected.

***We are subject torestrictive covenants imposed by our senior credit facility and by an agreementwe are party to with the Pension Benefit Guaranty Corporation.***

During fiscal 2007, theCompany entered into a new senior credit facility (the “Senior Credit Facility”)consisting of a senior secured term loan facility, a senior secured revolvingcredit facility (the “Revolving Credit Facility”) and a letter of creditsub-facility. The Senior Credit Facility contains financial and other covenantsthat, among other things, limit the Company’s ability to draw down the fullamount of the Revolving Credit Facility, engage in transactions with itsaffiliates, incur any additional debt outside of the Senior Credit Facility,create new liens on any property, make acquisitions, participate in certainmergers, consolidations, acquisitions, liquidations, asset sales, investments,or make distributions or cash dividend payments to its equity holders or withrespect to its subordinated debt. Such covenants will affect our operatingflexibility and may require us to seek the consent of the lenders to certaintransactions that we 

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may wishto carry out. Agreements governing future indebtedness could also containsignificant financial and operating restrictions. Any failure to comply withthe covenants in our Senior Credit Facility or in any other indebtedness towhich we are a party could result in an event of default, which could permitacceleration of the relevant indebtedness and acceleration of debt under otherinstruments that may contain cross-acceleration or cross-default provisions. Weare not certain whether we would have, or be able to obtain, sufficient fundsto make these accelerated payments.

We are also party to anagreement with the Pension Benefit Guaranty Corporation, or PBGC, pursuant towhich we have granted to PBGC an equal and ratable lien in an amount of$66.6 million in the assets pledged as security under our credit facilityreferred to above. We have also agreed not to transfer any of our assets heldin the United States to any of our subsidiaries or other businesses outside ofthe United States (other than in the ordinary course of business) for the termof the agreement.

***We have significantunderfunded and unfunded U.S. pension and post-retirement obligations, whichcould adversely affect our liquidity.***

Since fiscal year end January 31,2003, the estimated accumulated benefit obligation (the actuarial present valueof benefits attributed to employee service and compensation levels prior to themeasurement date without considering future compensation levels), or ABO, hasexceeded the fair value of the assets of our pensions plans. This result isprimarily due to the decline in equity markets during and after 2002 and adecline in the discount rate used to estimate the pension liability because oflower U.S. interest rates since 2002. The ABO exceeded the fair value of planassets as of December 31, 2006, 2005 and 2004 by $53.0 million, $56.9million and $42.2 million, respectively. The same facts that affected ABO alsorequired that we take a charge (credit) to other comprehensive income (loss) of$(6.4) million, $9.2 million and $17.8 million, for the years ended January 31,2007, 2006 and 2005, respectively. Accounting rule changes adopted as of January 31,2007 required the Company to accrue an additional liability for underfundedpension and post-retirement obligations of $1.3 million, reduce intangibleassets by $1.3 million and increase accumulated comprehensive loss by $2.6million. Funding amounts for the underfunded U.S. pension plan are determinedby regulatory requirements, which have been changed recently and will becomeeffective in 2008 with transition rules that apply for four years. TheCompany estimates that the minimum required contributions and payments for theU.S. pension and post-retirement benefits in fiscal 2008 will be approximately$16.5 million and from $6.0 million to $27.0 million in fiscal years 2009 - 2012.Future market conditions and interest rates significantly impact future assetsand liabilities of our pension plans and future minimum required fundinglevels, and similar charges or credits to stockholders’ equity may be requiredin the future upon measurement of plan obligations at the end of each planyear.

***We cannot assureinvestors that we will make dividend payments in the future.***

On December 20, 2006,our Board of Directors approved a special cash distribution in an aggregateamount of $175 million, consisting of dividends on our shares of common stockand our then outstanding convertible preferred stock and certain dilutionadjustment payments to holders of certain of our outstanding stock options (the“Distribution”). On January 5, 2007, as part of the Distribution we paiddividends in an amount of approximately $0.23 per share of common stock. Otherthan the dividends paid in connection with the Distribution, we have notdeclared any cash dividends on our common stock and do not currently anticipatepaying cash dividends in the foreseeable future. The payment of dividends willbe a business decision to be made by our Board of Directors from time to timebased on such considerations as the Board of Directors deems relevant. Inaddition, dividends are payable only out of funds legally available underDelaware law, subject to any restrictions contained in our debt instruments.The payment of dividends on our common stock is currently limited by certainprovisions of our senior credit facility.

**ITEM1B.**       UNRESOLVED STAFF COMMENTS

Not Applicable.

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**ITEM 2.**                PROPERTIES

Thefollowing table sets forth certain information relating to our principaloffices, warehouse and manufacturing properties and facilities. All of ourmanufacturing plants, in our opinion, have been adequately maintained and arein good operating condition. We believe that our existing facilities havesufficient capacity, together with sourcing capacity from third parties, tohandle our sales volumes for the foreseeable future. The owned plant and realestate in India is pledged as security on a loan.

| **Segment**                | ** ** | **Description**                         | ** ** | **Owned or Leased** | ** ** |
|----------------------------|------------|-----------------------------------------|------------|-------------------------------|------------|
| **Corporate and Americas** |       |                                    |       |                          |       |
| Mansfield, MA              |       | Americas  headquarters                  |       | Leased                        |       |
| **Europe**                 |       |                                    |       |                          |       |
| London, England            |       | Executive  offices                      |       | Leased                        |       |
| Oudenaarde,  Belgium       |       | Manufacturing  plant, office, warehouse |       | Leased/Owned                  |       |
| Szekszard,  Hungary        |       | Manufacturing  plant                    |       | Owned                         |       |
| Saltrio, Italy             |       | Office,  warehouse                      |       | Owned                         |       |
| Madrid, Spain              |       | Office                                  |       | Leased                        |       |
| **Asia**                   |       |                                    |       |                          |       |
| Mumbai, India              |       | Office                                  |       | Leased                        |       |
| Nashik, India              |       | Manufacturing  plant, warehouse         |       | Owned                         |       |
| Bhiwandi, India            |       | Warehouse                               |       | Leased                        |       |
| Ningbo, China              |       | Assembly  plant, warehouse              |       | Owned                         |       |
| Seoul, Korea               |       | Office                                  |       | Leased                        |       |
| Singapore                  |       | Warehouse                               |       | Leased                        |       |
| Hong Kong                  |       | Office,  warehouse                      |       | Leased                        |       |
| Bandar Sunway,  Malaysia   |       | Office,  warehouse                      |       | Leased                        |       |
| Melbourne,  Australia      |       | Office,  warehouse                      |       | Leased                        |       |
| **North  America**         |       |                                    |       |                          |       |
| Denver, CO                 |       | Office,  warehouse                      |       | Leased                        |       |
| Jacksonville, FL           |       | Warehouse                               |       | Leased                        |       |
| Stratford, Canada          |       | Warehouse                               |       | Leased                        |       |
| **Latin  America**         | ** ** | ** **                              | ** ** | ** **                    | ** ** |
| Mexico City,  Mexico       |       | Office,  warehouse                      |       | Owned                         |       |
| Buenos Aires,  Argentina   |       | Office,  warehouse                      |       | Leased/Owned                  |       |
| Uruguay                    |       | Warehouse                               |       | Leased                        |       |
| Sao Paulo, Brazil          |       | Office                                  |       | Leased                        |       |

 

We also maintain numerousleased sales offices and retail outlets throughout the world.

**ITEM 3.**                LEGALPROCEEDINGS

Samsonite Europe N.V. and one of its subsidiaries wasthe subject of a lawsuit filed in France in November 2006 related to the August 31,2005 sale of the Henin-Beaumont, France manufacturing facility (the “H-B site”)(see Note 4 to the consolidated financial statements included elsewhere herein fora more detailed description of the H-B site sale). The plaintiff in thelawsuit, Workers Council Energyplast (“Workers Council”), seeks to overturn the****sale of the H-B site and the relatedtransfer of the Company’s liability and responsibility for employee pension andsocial costs for the 202 employees at the H-B site. On March 13, 2007, theTribunal de Grande Instance in Paris (the “Court”) dismissed the claim onprocedural grounds. Counsel for the Workers Council initiated appeal on April 11,2007 and announced that in appeal the 202 workers will join in the lawsuit.Samsonite was notified of the filing of the appeal on April 16, 2007. 

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The Company believes thatthe appeal of the Court’s decision is without merit and intends to vigorouslydefend its position; however, an unfavorable resolution of this matter couldhave a material adverse effect on the Company’s financial position and resultsof operations, which the Company is unable to estimate at this time.

The Company is also aparty to various other legal proceedings and claims in the ordinary course ofits business. The Company believes that the outcome of these other matters willnot have a material adverse effect on its consolidated financial position,results of operations or liquidity.

**ITEM 4.**                SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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**PART II**

**ITEM 5.**                MARKETFOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES

TheCompany’s common stock, par value $.01 per share (the “Common Stock”), istraded by dealers using the OTC Bulletin Board under the symbol “SAMC.OB”. Thetable below sets forth the high and low per share sale prices for the CommonStock for fiscal years 2006 and 2007 and through April 25, 2007 (asreported on the OTC Bulletin Board). The over-the-counter market quotationsshown below reflect inter-dealer prices, without retail mark-up, mark-down orcommission and may not necessarily represent actual transactions. The closingprice of the common stock on the OTC Bulletin Board on April 25, 2007 was$1.14 per share.

| ** **                                         | ** ** | **High** | ** ** | **Low** | ** ** |
|----------------------------------------------------|------------|----------|------------|---------|------------|
| ***Fiscal  2008***                                 |       |     |       |    |       |
| February 1,  2007 through April 25, 2007 |       | $        | 1.15       |    | 0.95       |   |
| ***Fiscal  2007***                                 |       |     |       |    |       |
| Fiscal quarter ended:                              |       |     |       |    |       |
| April 30, 2006                                |       | $        | 1.16       |    | 0.79       |   |
| July 31, 2006                                 |       | $        | 1.31       |    | 0.82       |   |
| October 31, 2006                              |       | $        | 1.05       |    | 0.80       |   |
| January 31, 2007                              |       | $        | 1.21       |    | 0.83       |   |
| ***Fiscal  2006***                                 |       |     |       |    |       |
| Fiscal quarter ended:                              |       |     |       |    |       |
| April 30, 2005                                |       | $        | 1.50       |    | 0.55       |   |
| July 31, 2005                                 |       | $        | 1.04       |    | 0.75       |   |
| October 31, 2005                              |       | $        | 0.90       |    | 0.55       |   |
| January 31,  2006                             |       | $        | 0.95       |    | 0.58       |   |

 

As of April 25, 2007, the number of holders ofrecord of our Common Stock was 331.

On December 21, 2006, the Company’s Board ofDirectors approved a special cash distribution in an aggregate amount of $175million (the “Distribution”) consisting of dividends on the Company’s commonstock totaling $53.3 million, dividends on the Company’s convertible preferredstock totaling $116.1 million and dilution adjustment payments to holders ofcertain of the Company’s outstanding stock options totaling $5.6 million. Thetotal dividend per share of common stock and to preferred stockholders on an asconverted basis was approximately $0.23. In connection with the Distribution,holders of more than 99% of the convertible preferred stock converted theirconvertible preferred stock into common stock effective as of January 4,2007.

The payment of dividends is at the discretion of ourBoard of Directors and depends upon, among other things, the Company’searnings, financial condition, capital requirements, extent of bankindebtedness and contractual restrictions with respect to the payment ofdividends. The terms of our indebtedness currently contain provisions whichlimit our ability to pay dividends on our common stock.

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**ITEM 6.**                SELECTEDFINANCIAL DATA

Theselected historical consolidated financial information presented below isderived from our audited consolidated financial statements and should be readin conjunction with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and the Company’s consolidated financialstatements and related notes thereto included elsewhere in this Form 10-K.

| ** **                                                          | ** ** | **Year ended January 31,**                             | ** ** |
|---------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                          | ** ** | **2007**                                                              | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                          | ** ** | **(in thousands, except per share amounts)** | ** ** |
| **Statement of Operations data**                                    | ** ** | ** **                                                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                                           |       | $                                                                     | 1,070,393  |   | 966,886 |   | 902,896 |   | 776,451 |   | 752,402 |   |
| Gross profit                                                        |       | $                                                                     | 545,942    |   | 470,381 |   | 417,014 |   | 347,907 |   | 321,294 |   |
| Gross margin percentage                                             |       | 51.0                                                                  | %          | 48.7 | % | 46.2 | % | 44.8 | % | 42.7 | % |
| Operating income                                                    |       | $                                                                     | 79,840     |   | 73,035 |   | 65,735 |   | 67,690 |   | 68,739 |   |
| Net income (loss) before  cumulative effect of an accounting change |       | $                                                                     | (8,229     | ) | 13,321 |   | (9,698 | ) | 2,751 |   | (2,455 | ) |
| Cumulative effect of an  accounting change                          |       | $                                                                     | 1,391      |   | — |   | — |   | — |   | — |   |
| Net income (loss)                                                   |       | $                                                                     | (6,838     | ) | 13,321 |   | (9,698 | ) | 2,751 |   | (2,455 | ) |
| Preferred stock  dividends                                          |       | $                                                                     | (138,386   | ) | (14,831 | ) | (13,683 | ) | (31,055 | ) | (42,837 | ) |
| Net loss to common  stockholders                                    |       | $                                                                     | (145,224   | ) | (1,510 | ) | (23,381 | ) | (28,304 | ) | (45,292 | ) |
| Weighted average common  shares outstanding—basic and diluted  |       | 266,665                                                               |       | 226,587 |   | 224,764 |   | 122,842 |   | 19,863 |   |
| Net loss per common  share—basic and diluted                   |       | $                                                                     | (0.54      | ) | (0.01 | ) | (0.10 | ) | (0.23 | ) | (2.28 | ) |
| **Balance Sheet data (as of end of period)**                        |       |                                                                  |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                          |       | $                                                                     | 78,548     |   | 85,448 |   | 56,378 |   | 29,524 |   | 22,705 |   |
| Property, plant and  equipment, net                                 |       | $                                                                     | 103,999    |   | 89,100 |   | 98,810 |   | 114,471 |   | 112,895 |   |
| Total assets                                                        |       | $                                                                     | 651,125    |   | 567,251 |   | 563,083 |   | 501,888 |   | 493,664 |   |
| Long-term  obligations (including current Installments)             |       | $                                                                     | 489,819    |   | 297,832 |   | 338,841 |   | 327,567 |   | 423,155 |   |
| Stockholders’ deficit                                          |       | $                                                                     | (222,274   | ) | (51,213 | ) | (56,342 | ) | (29,385 | ) | (470,447 | ) |
| Cash dividend declared per common share                             |       | $                                                                     | 0.23       |   | — |   | — |   | — |   | — |   |

 

Duringfiscal 2007, the Company made a $175.0 million Distribution to common and preferredshareholders and dilution adjustment payments to certain holders of the Company’sstock options, retired $174.7 million of its outstanding 8 7/8% SeniorSubordinated notes due 2011 and €85.3 million (equivalentto $112.5 million on the payment date) outstanding Floating Rate Notes. TheCompany accrued $6.2 million in additional convertible preferred stockdividends through June 15, 2007 as part of the Distribution. In connectionwith the distribution and note retirements, approximately $2.6 million inexpenses related to the transactions were charged to SG&A in fiscal 2007and $22.5 million of tender and call premiums and the write-off of deferredfinancing costs were charged to Other Income (Expense) during fiscal 2007. Inconnection with the Distribution to finance these transactions, the Companyentered into a new senior credit facility consisting of a $450 million seniorsecured term loan facility and an $80 million senior secured revolving creditfacility including a letter of credit sub-facility. See “ITEM 7. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

TheCompany has implemented various restructuring plans and incurred restructuringcharges in each of its fiscal years 2003 through 2007, which may affect thecomparability of the selected historical consolidated financial informationpresented above, and the comparability of such information to future years’financial information. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” for further discussion of the fiscal 2007,2006 and 2005 restructurings.

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**ITEM 7.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion summarizesthe significant factors and events affecting results of operations and thefinancial condition of the Company for each of the three years ended January 31,2007, 2006 and 2005 and should be read in conjunction with the selectedfinancial data and the consolidated financial statements of the Company andnotes thereto beginning on page F-1. References to a fiscal yeardenote the calendar year in which the fiscal year ended; for example, “fiscal2007” refers to the 12 months ended January 31, 2007 (or December 31,2006 in the case of foreign operations). The Company’s operations consistprimarily of the design, manufacture and distribution of luggage, as well asbusiness, computer, outdoor, casual bags and footwear and the operation ofretail stores throughout the world. We sell our products under a number ofbrand names, primarily *Samsonite Black Label**®, Samsonite**®,* and *American Tourister**®*, as well as *Lambertson Truex**®*, and licensed brandnames including *Lacoste**® *and *Timberland**®*. TheCompany also licenses its brand names and is involved with the design and saleof footwear. The discussion is organized under the following headings: Fiscal2007 Cash Distribution, Executive Overview, Results of Operations, Liquidityand Capital Resources, Off-Balance Sheet Financing and Other Matters, CriticalAccounting Policies and New Accounting Standards.

**Fiscal 2007 CashDistribution**

During fiscal 2007, the Company made a special cashdistribution to stockholders in an aggregate amount of $175.0 million (the “Distribution”),consisting of dividends of $53.3 million on the Company’s common stock,dividends of $116.1 million paid in respect of dividend participation rights ofthe Company’s then outstanding convertible preferred stock, and dilutionadjustment payments of $5.6 million to the holders of certain of the Company’soutstanding stock options. In connection with the Distribution, the Companyentered into a new senior credit agreement, consisting of a $450.0 million termloan facility and an $80.0 million revolving credit facility, and completedtender offers (the “Tender Offers”), for its $164.9 million outstanding SeniorSubordinated Notes due 2011 (the “Senior Subordinated Notes”), and €100.0million (or approximately $131.6 million) outstanding Floating Rate SeniorNotes due 2010 (the “Floating Rate Notes”). The proceeds of the term loanfacility, together with a portion of the proceeds of the revolving creditfacility and cash on hand, were used to finance the Distribution and to retirethe $164.7 million aggregate principal amount of Senior Subordinated Notes and €85.3million (or approximately $112.5 million) aggregate principal amount ofFloating Rate Notes that were purchased pursuant to the Tender Offers. On February 1,2007, after the end of fiscal 2007, the Company redeemed and retired anadditional €14.5million (or approximately $19.1 million) aggregate principal amount of theFloating Rate Notes. Pursuant to the terms of the certificate of designationgoverning the convertible preferred stock, the Distribution resulted in theacceleration of the accrual of dividends on the convertible preferred stockthrough June 15, 2007. During fiscal 2007, the Company accrued additionaldividends of $6.2 million as a result of this acceleration.

In connection with theretirement of the Senior Subordinated Notes and the Floating Rate Notes, theCompany incurred cash tender premiums totaling approximately $16.9 million thatwere charged to Other Expense. The Company also incurred legal and advisoryexpenses related to the Distribution of approximately $1.8 million that werecharged to Selling, General and Administrative (“SG&A”) expenses and costsrelated to the origination of the new credit facility of approximately $6.2million that were deferred and will be amortized to interest expense over theterm of the new credit facility. Deferred financing costs of $5.2 millionrelated to the retired debt were also charged to Other Expense. Out of the total$175.0 million Distribution, $174.2 million was charged to Accumulated Deficitand $0.8 million, which related to additional stock compensation expense forstock options calculated under applicable accounting standards, was charged toSG&A expenses.

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**Executive Overview**

The Company had significantly improved results forfiscal 2007 compared to the prior year. The Company believes these results wereachieved as a result of the continuing execution of its strategic plan.

The Company’sbusiness plan involves the following strategies:

·  Increasing sales by positioning Samsonite asan elite, lifestyle brand through enhancing product assortment, acquiringcomplementary brands, expanding geographically, expanding our retail storeoperations, pursuing new product categories and increasing investment levels inhigh-impact brand promotional activities.

·  Increasing gross profit margins by assuringthat new product introductions carry higher margins than the products they arereplacing, expanding Samsonite’s presence in the higher price-point and highermargin luxury segment of the market, making price increases where possible,continuing the sourcing versus manufacturing rationalization and optimizationand leveraging economies of scale in our supply chain to generate efficienciesand lower fixed costs.

·  Controlling and refocusing SG&A expensesaway from non-sales generating expenses in general and administrative costs togrowth generative investments in brand support and promotion and retailexpansion.

·  Improving cash flow through enhancements inoperational performance and a reduction in working capital levels achieved bystreamlining product lines, optimizing inventory levels and aggressivelymanaging customer credit and vendor payment terms.

·  Focusing capital expenditures on growth generativeinvestment opportunities.

Consolidated revenues for the year ended January 31,2007 increased to $1,070.4 million from $966.9 million in the prior year,an increase of $103.5 million, or 10.7%. The increase in revenues resultedprimarily from increases in sales of *SamsoniteBlack Label* products and products sold under the *Lacoste* and *Timberland* licensed brand names, the expansion of theCompany’s worldwide retail store operations, the acquisition of a majority interestin Lambertson Truex, LLC, an American accessories business focused on theluxury market, the acquisition of a majority interest in joint ventures inThailand and Australia and strong global economic conditions. The revenuesincrease was also driven by increased spending on brand and product support,with global sales and advertising spending increasing to $77.5 million infiscal 2007 from $70.8 million in the prior year. The Company’s U.S.retail store operations, which are predominantly factory outlet stores,experienced a decline in sales due to an overall trend towards lower sales inrural markets and a reduction in the total number of factory outlet stores thatwe operate.

Operating income increased to $79.8 million in fiscal2007 from $73.0 million in fiscal 2006, an increase of $6.8 million, or 9.3%.Execution of the Company’s strategic plan to improve margins resulted in a 230basis point increase in gross profit margins to 51.0% in fiscal 2007 from 48.7%in the prior year. Consolidated gross profit was $545.9 million in fiscal 2007compared to $470.4 million in the prior year, an increase of $75.5 million, or16.1%. Operating income is calculated after deduction for restructuring chargesand expenses of $5.5 million and $11.2 million and asset impairment charges of$1.6 million and $5.5 million during fiscal 2007 and fiscal 2006,respectively. In fiscal 2007, these charges related primarily to the plannedclosure of the Company’s Denver, Colorado facilities and related consolidationof its corporate functions in its Mansfield, Massachusetts office, the plannedrelocation of distribution functions from the Company’s Denver, Coloradofacilities to the southeast region of the U.S., and the closure of the Company’sEuropean subsidiary’s softside manufacturing plant in Samorin, Slovakia.Consolidated SG&A was 42.9% of sales in fiscal 2007 compared to 39.4% infiscal 2006 and increased by $78.3 million in absolute terms primarily becauseof increased variable expenses associated with higher sales levels, expansionof worldwide retail store operations, and the opening of the Company’sexecutive office in 

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London. The SG&Aincrease from the prior year includes increased advertising and promotionexpenses of $6.7 million, increased expenses related to the implementation ofthe new global SAP system of $3.7 million, expenses of $6.1 million related tothe write-off of deferred stock offering costs related to a postponed secondarystock offering and $1.8 million of expenses associated with the Distribution. SG&Afor fiscal 2007 includes the effect of adopting Statement of FinancialAccounting Standards 123 (revised 2004), *Share-BasedPayment* (“SFAS 123R”) and includes $7.0 million in stockcompensation expense recognized under the provisions of SFAS 123R. The net lossto common stockholders was $145.2 million in fiscal 2007 compared to $1.5million in the prior year.

The Company also made progress in reducing the numberof SKU’s (stock keeping units) associated with its core product lines, reducingthe level of days outstanding for accounts receivable, and extending paymentterms to suppliers. In absolute dollar terms and adjusted for translation ratesfrom last year to this year, both inventory and receivables have increasedbecause of the expanded *Lacoste*and *Samsonite Black Label* productlines and higher sales levels. Net working capital (accounts receivable plusinventory less accounts payable) increased in fiscal 2007 by approximately$18.1 million primarily because of higher accounts receivable and inventorybalances; however, average net working capital efficiency (average net workingcapital divided by sales), a measure of efficient working capital deployment,declined 123 basis points in fiscal 2007 to 15.4%. At January 31, 2007,the Company had cash on hand of $78.5 million and total debt of $501.9 million.This compares to cash on hand of $85.4 million and total debt of $307.2 millionat January 31, 2006. Subsequent to the end of fiscal year 2007, theCompany redeemed additional Floating Rate Notes, reducing total debt and cashby $19.1 million.

The Company plansto continue execution of its strategic business plan and believes it hassignificant opportunities for future improvements to consolidated sales,margins and working capital. Key challenges the Company faces in executing itsstrategic plan in fiscal 2008 include the following:

·  Accelerating growth in the luxury luggage andcasual bag markets through the *Samsonite Black Label,**Lambertson Truex*, *Lacoste* and *Timberland*brandnames by focusing on product innovation, category diversification and retailexpansion.

·  Introducing and developing Lambertson Truex’sown retail concept, as a complement to the Company’s continuing premium andselective distribution strategy.

·  Launching *SamsoniteBlack Label* footwear in select markets in preparation for a broaderexpansion in the future.

·  Clarifying the *Samsonite* brand positioning by reinforcing the brand’s highand mid-end product lines.

·  Continuing to expand the *American Tourister* brand in Europe andAsia.

·  Continuing our plan to open *Samsonite Black Label* and *Samsonite*retailstores.

·  Executing direct entries into markets where weare negotiating new joint ventures.

·  Continuing to improve gross margins byintroducing new products at higher gross margins than the products they arereplacing, improving supply chain logistics, including better economies ofscale and further reducing fixed manufacturing costs.

·  Completing our supply chain organizationalmigration and initiating a preferred vendors program.

·  Implementing the SAP system globally.

The successful executionof the Company’s strategic business plan is subject to the risks anduncertainties as described elsewhere herein under Item 1A. Risk Factors.

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**Results ofOperations**

For purposes of thismanagement’s discussion and analysis of operations, we are analyzing our netsales and operations as follows: (i) “Europe” operations, which includeEuropean sales, manufacturing and distribution, wholesale and retailoperations; (ii) the “North America” operations, which includeU.S. Wholesale, U.S. Retail, Canada operations and the operations ofLambertson Truex, LLC, which were acquired in fiscal 2007; (iii) “LatinAmerica” operations, which include operations in Mexico, Brazil, Argentina andUruguay; (iv) “Asia” operations, which include the sales, manufacturingand distribution operations in India, Hong Kong, China, Singapore, South Korea,Japan, Taiwan, Thailand, Malaysia and Australia; and (v) Other Operationswhich include certain licensing activities and Corporate headquarters. In May 2006,the Company opened a London office where its Chief Executive Officer andcertain other key executives are located.

**Fiscal 2007Compared to Fiscal 2006**

*Net Sales.**   The following is a summary ofthe Company’s revenues by geographic area:*

| ** **    | ** ** | **Year ended  January 31,** | ** ** |
|---------------|------------|---------------------------------------|------------|
| ** **    | ** ** | **2007**                              | ** ** | **2006** | ** ** |
| ** **    | ** ** | **(in millions)**                | ** ** |
| Europe        |       | $                                     | 448.4      |   | 417.4 |   |
| North America |       | 377.5                                 |       | 363.9 |   |
| Asia          |       | 182.8                                 |       | 127.7 |   |
| Latin America |       | 48.2                                  |       | 41.8 |   |
| Other         |       | 13.5                                  |       | 16.1 |   |
| **Total**     |       | $                                     | 1,070.4    |   | 966.9 |   |

 

On a U.S. dollar basis, sales from European operationsincreased to $448.4 million in fiscal 2007 from $417.4 million infiscal 2006, an increase of $31.0 million, or 7.4%. Changes in currencytranslation rates from fiscal 2006 to fiscal 2007 had the effect of increasingreported European sales by $6.3 million. Expressed in the local Europeancurrency (euros), fiscal 2007 sales increased by 5.9%, or the U.S. constantdollar equivalent (calculated using the prior year average translation rate) of$24.7 million, from fiscal 2006. The increase in European sales is dueprimarily to the larger selection of products offered by the Company and thediversity of channels through which such products are sold, which contributedto an approximately 5.7% increase in sales, and an increase in pricesimplemented since the prior year which contributed to an approximately 3.4%increase in sales. These increases were offset by a 3.2% decline in overallvolume of units sold. Increased sales (expressed in constant dollars toeliminate the effect of euro exchange rate changes on year-to-year comparisons)of American Tourister products, Samsonite Black Label products and Lacosteproducts contributed $14.5 million, $5.7 million and $5.5 million,respectively, to the increased European sales in fiscal year 2007, and theintroduction of Timberland products to the Company’s brand portfoliocontributed an additional $4.9 million to the increase in European sales. An increasein sales from Company-operated retail stores also contributed to the salesincrease in Europe due primarily to an increase in the number of stores inEurope during fiscal year 2007. The Company had over 50 Company-owned retailstores open throughout Europe at the end of fiscal 2007, including SamsoniteBlack Label stores.

Sales from the North America operations increased to$377.5 million in fiscal 2007 from $363.9 million in fiscal 2006, anincrease of $13.6 million, or 3.7%. The Company acquired a majorityinterest in Lambertson Truex, LLC, in the second quarter of fiscal 2007, whichcontributed $4.6 million to the increase in North American sales compared tothe prior year.

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U.S. Wholesale sales for fiscal year 2007 increased to$238.0 million from $227.3 million in fiscal year 2006, an increase of $10.7million, or 4.7 per cent. Sales of *Lacoste*products, which were introduced in fiscal year 2006, contributed $2.4 millionto the increased U.S. Wholesale sales in fiscal year 2007, and the introductionof *Timberland* products in fiscalyear 2007 contributed an additional $1.7 million to the increased U.S.Wholesale sales. Sales through traditional distribution channels (specialty anddepartment stores) increased by $6.5 million over the prior year, and sales throughthe mass merchant and warehouse club channels each increased $2.4 million overthe prior year. These increases were offset somewhat by lower sales through theexclusive label and computer/superstore channels.

U.S. Retail sales decreased to $116.9 million infiscal 2007 from $119.3 million in fiscal 2006, a decrease of $2.4 million, or2.0%. In our Company-operated retail stores, comparable store sales for fiscal2007 decreased by 1.6%. Comparable store sales decrease is calculated bydividing aggregate sales for stores open for each full month in the currentyear by aggregate sales for the same stores open for the corresponding fullmonth in the prior year. Stores must be open for 13 months before they areincluded in the calculation. Relocated stores (within the same mall location)and remodeled stores are included in the computation of comparable store sales.When a store is closed, its sales are no longer included in the comparablestore calculation. The Company believes that the U.S. Retail store sales (whichare comprised primarily of factory outlet stores) continue to be depressed by atrend toward lower store sales in rural markets and a reduction of the totalnumber of factory outlet stores that we operate. The Company had 178 storesopen throughout the U.S. at the end of fiscal 2007, including three SamsoniteBlack Label stores, compared to 189 stores open at the end of the prior year.The Company continuously evaluates individual store profitability and does notrenew outlet store leases when the location and results are not a strategic fitwith the Company’s retail strategy. As part of the Company’s strategy ofopening Samsonite Black Label stores in large market, fashion orientedinternational shopping districts, the Company opened three Samsonite BlackLabel stores in the U.S. in fiscal 2007 including stores on Madison Avenue inNew York, Union Square in San Francisco and Copley Place in Boston.

Canadian sales increased to $18.0 million in fiscal2007 from $17.3 million in fiscal 2006, an increase of $0.7 million, or 4.0%.

Sales from Asian operations increased to $182.8million in fiscal 2007 from $127.7 million in fiscal 2006, an increase of$55.1 million, or 43.1%. The Company acquired majority interests in jointventures in Australia and Thailand in the second quarter of fiscal 2007, whichcontributed $9.5 million and $4.1 million, respectively, to the increase inAsian sales over the prior year. Sales in all countries in the Asian operatingregion increased during fiscal 2007, except for Malaysia which had a slightdecline in sales. The increase in sales was primarily driven by economic growthin this region and the expansion of Company-owned retail store operations inAsia. The countries in which sales grew most significantly were India, China,Japan, Hong Kong and South Korea, which had increased sales of $12.4 million,$8.9 million, $7.2 million, $4.5 million and $3.2 million, respectively(excluding the effect of local currency exchange rate changes compared to theU.S. dollar). Changes in exchange rates of the various Asian currenciesincreased sales in U.S. dollars by $2.8 million compared to the prior yearprimarily due to the increase in the value of the South Korean won relative tothe U.S. dollar.

Sales from Latin American operations increased to$48.2 million in fiscal 2007 from $41.8 million in fiscal 2006, anincrease of $6.4 million, or 15.3%, due in part to increased sales of *Lacoste* branded products. Although all ofthe Latin American countries in which we operate had increased sales over theprior year, the most significant increase was in Mexico, with a $2.9 millionincrease over the prior year due to expanded distribution channels and theintroduction of *Lacoste* and *Samsonite Black Label* products.

Other revenues, comprised primarily of licensingrevenues, declined to $13.5 million in fiscal 2007 from $16.1 million in fiscal2006, a decline of $2.6 million, or 16.1%, primarily because revenues receivedin the prior year included $3.2 million from a one-time sale of certain appareltradename rights.

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*GrossProfit.**  *TheCompany includes the following types of costs in cost of goods sold: directproduct purchase and manufacturing costs, duties, freight-in, receiving,inspection, internal transfer costs, and procurement and manufacturingoverhead. The Company includes the following types of costs in SG&A:warehousing, order entry, billing, credit, freight-out, warranty, salaries andbenefits of administrative and sales personnel, rent, insurance, taxes, officesupplies, professional fees, travel, communications, advertising, investorrelations, public company expenses and other expenses of a general andadministrative nature not directly related to the cost of acquiring ormanufacturing its products. Other comparable companies may include warehousing,freight-out and other types of costs that the Company includes in SG&A incost of goods sold. The Company had combined warehousing and freight-outexpenses of $57.4 million and $56.4 million during fiscal 2007 and 2006,respectively.

Consolidated gross profit in fiscal 2007 was$545.9 million compared to $470.4 million in fiscal 2006, an increaseof $75.5 million. Consolidated gross margin as a percentage of salesincreased by 230 basis points to 51.0% in fiscal 2007 from 48.7% in fiscal2006.

Gross margins for Europe increased to 50.9% in fiscal2007, from 47.5% in the prior year period, an increase of 340 basis points.Gross margin percentages increased for the year due primarily to sales priceincreases in the first and third quarters of fiscal 2007, lower fixedmanufacturing costs from prior year operational restructurings, increased salesof higher margin products, such as *SamsoniteBlack Label, Lacoste* and *Timberland*products, and expansion of the European retail division, which provides highergross profit margins as a percentage of sales.

Gross margins for North America increased to 43.7% infiscal year 2007 from 43.2% in the prior year, an increase of 50 basis points.This increase reflects an increase in U.S. Wholesale gross marginpercentage to 34.1% in the current year from 33.5% in the prior year, which isprimarily a result of the introduction of new product categories with highermargins. U.S. Retail gross profit margins increased to 63.5% in fiscal 2007compared to 61.5% in fiscal 2006, due primarily to price increases and sales ofhigher margin products.

Gross margins for Asia increased to 62.6% in fiscal2007 from 60.5% in the prior year, an increase of 210 basis points. Theincrease is due primarily to sales of higher margin products such as *Samsonite Black Label*and *Lacoste* and the increase in Companyoperated retail store sales.

Gross margin for Latin America increased to 54.3% infiscal 2007 from 51.7% in the prior year, an increase of 260 basis points. Theincrease was primarily due to price increases and a sales mix of products withhigher margins.

*Selling,General and Administrative Expenses.**  *Consolidated SG&A in fiscal2007 was $459.5 million compared to $381.2 million in fiscal 2006, anincrease of $78.3 million, or 20.5%. The Company includes warehousing andfreight-out costs in SG&A expenses, while comparable companies may includesuch costs in costs of goods sold. For fiscal 2007 and fiscal 2006, the Companyhad warehousing and freight-out expenses of $57.4 million and $56.4 million,respectively. As a percent of sales, consolidated SG&A increased to 42.9%in fiscal 2007 from 39.4% in fiscal 2006. Consolidated advertising andpromotional expenses increased to $77.5 million (7.2% of sales) in fiscal 2007from $70.8 million (7.3% of sales) in fiscal 2006.

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SG&A for Europe increased to $165.5 million infiscal 2007 compared to $140.5 million in fiscal 2006, an increase of $25.0million. Without taking into account the exchange rate effect, EuropeanSG&A expense increased $22.6 million in fiscal 2007 compared to the prioryear. The increase is due primarily to increased expense related to theexpansion of the European retail store business, increased advertising expense,increased selling expense in support of higher sales in new distributionchannels and new product categories and higher provision for doubtful accountsdue to a bad debt write-off in fiscal 2007. Additionally, prior year SG&Awas reduced by a credit for the recovery of $1.1 million as compensation for aclaim.

SG&A for North America increased to $140.9 millionin fiscal 2007 compared to $128.6 million in fiscal 2006, an increase of $12.3million, or 9.6%, due to increased advertising expense, an increase in sellingand marketing expenses including expenses for *Lacoste*and *Timberland* products, higherrent expense primarily associated with the *SamsoniteBlack Label* stores and additional depreciation expense including theimpact of the accelerated depreciation on the Company’s legacy systems as aresult of the implementation of the SAP system in North America.

SG&A for Asian operations increased to $75.9million in fiscal 2007 compared to $58.9 million in fiscal 2006, an increase of$17.0 million, or 28.9%. Without taking into account the exchange rate effect,Asian SG&A expense increased $16.0 million, or 27.2%, as compared to theprior year. SG&A for the Company’s joint ventures in Thailand andAustralia, which were acquired in fiscal 2007, contributed $2.0 million and$2.7 million, respectively, to the increase. SG&A for Asian operations increasedprimarily due to the increase in sales volumes in that region, and due to theexpansion of Company-owned retail store operations in Asia. SG&A as apercentage of sales decreased to 41.5% in fiscal 2007 from 46.1% in fiscal2006. Advertising and promotional expense for Asian operations declined by $1.1million.

SG&A for Latin American operations increased to$19.3 million in fiscal 2007 compared to $17.1 million in fiscal 2006, anincrease of $2.2 million due primarily to higher advertising, marketing anddevelopment costs.

SG&A for the corporate headquarters and licensingincreased to $57.9 million in fiscal 2007 compared to $36.1 million in fiscal2006, an increase of $21.8 million. This increase in SG&A is due primarilyto the write-off of deferred stock offering costs of $6.1 million related to apostponed secondary offering in fiscal 2007, an increase in SAP implementationcosts of $3.6 million, an increase of $1.8 million in transaction costsassociated with the Company’s new senior credit facility entered into onDecember 20, 2006, and increased stock compensation costs of $1.5 million.The remainder of the increase is due primarily to increased overhead associatedwith the opening of the executive office in London.

*Provisionfor Restructuring Operations and Asset Impairment Charge.**  *During fiscal 2007, the Companyrecorded restructuring charges in its European and U.S. operations totaling$3.8 million, asset impairment charges of $1.6 million, and $1.7 million ofrestructuring related expenses that are included in cost of goods sold(inventory writedowns, consulting expenses and other). During the prior year, the Company recorded restructuring chargestotalling $11.2 million and asset impairment charges of $5.4 million, primarilyin its European operations, including $1.2 million of restructuring relatedexpenses that were included in cost of goods sold.

The fiscal 2007 European restructuring charge relatesto the closure on June 30, 2006 of the Company’s softside manufacturingplant in Samorin, Slovakia. The closure was the result of the Company’scontinuing consolidation of its softside manufacturing capacities and itstransition from sourcing manufactured products through Company-owned andoperated facilities to sourcing manufactured products from third-partymanufacturers. The Company recorded a provision for restructuring operations of$1.3 million for employee severance costs, which relates to the approximately360 employees who worked at the plant, and an asset impairment charge of $1.6million, which relates to the writedown of real estate, machinery and equipmentassociated with the plant. The Company estimates that the sale of the 

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plant will result in theelimination of annual fixed manufacturing overhead of approximately $1.1million, which includes $0.4 million of depreciation expense. From past experience,plant restructuring and outsourcing activities have had a favorable impact onour unit product costs. We expect similar effects on product costs in thefuture as a result of continued restructurings and outsourcing manufacturing.The impact on future gross margins is difficult to quantify as margins areaffected not only by costs but also by economic conditions, consumerpreferences and demand for products and competition, all of which influenceproduct pricing.

The fiscal 2007 U.S. restructuring charge relates tothe planned closure of the Company’s Denver, Colorado facilities, consolidationof its corporate functions in its Mansfield, Massachusetts office and plannedrelocation of distribution functions to the southeast region of the U.S. TheCompany expects the consolidation and relocation to be completed byApril 30, 2008. In connection with the consolidation and relocation, theCompany expects to incur severance and retention costs of approximately $3.7million relating to approximately 210 employees who will be affected by therelocation and consolidation. The severance and retention costs are beingaccrued monthly over the expected period employees must remain employed inorder to receive severance and retention benefits. During fiscal 2007, severanceand retention benefits of $2.5 million were accrued. The Company also expectsthat it will incur approximately $3.0 million of costs for new employeetraining, employee relocation and recruiting and expenses of moving inventoryand distribution systems, and these costs are expected to be expensed as theyare incurred.

The fiscal 2006 European restructuring charge relatesto the restructuring of the Company’s Henin-Beaumont, France facility (the “H-Bsite”). A restructuring charge of $8.6 million was recorded for the sale of theH-B site and related restructuring costs. The Company also incurred legal andconsulting costs of approximately $1.2 million related to the sale of the H-Bsite that were included in cost of goods sold for fiscal 2006. An asset impairmentcharge of $5.4 million was recorded upon the decision to sell the H-B site forthe write-off of the net book value of the H-B site property, plant andequipment sold (see “ITEM 3. LEGAL PROCEEDINGS”). Also, during fiscal 2006, theCompany relocated its softside development center from Torhout, Belgium to itsOudenaarde, Belgium location and eliminated the remaining positions at its TresCantos, Spain manufacturing facility. The Company recorded a restructuringcharge of $1.4 million during fiscal 2006 related to severance obligations for18 employees terminated as a result of these actions.

*InterestExpense and Amortization of Debt Issue Costs and Premium.**  *Interest expense declined to$30.3 million in fiscal 2007 from $30.5 million in fiscal 2006. Thedecline in interest expense is due to lower amortization of debt issue costsduring fiscal 2007 compared to fiscal 2006. See also “Executive Overview” whichdescribes a series of transactions consummated in December 2006 and January 2007that changed the Company’s capital structure.

During fiscal 2006 the Company retired $30.1 millionof the Senior Subordinated Notes. In connection with the retirement of thenotes, the Company incurred costs of $2.7 million which were charged to otherexpense for market premiums of $2.1 million and the write-off of $0.6 millionof deferred financing costs.

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*Other Income (Expense)—Net.**  *The following is a comparative analysis of thecomponents of Other Income (Expense)—Net.

| ** **                                                                                                  | ** ** | **Year ended  January 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                  | ** ** | **2007**                              | ** ** | **2006** | ** ** |
| ** **                                                                                                  | ** ** | **(in millions)**                | ** ** |
| Net gain (loss)  from foreign currency forward delivery contracts                                           |       | $                                     | (0.1       | ) | 1.2 |   |
| Gain (loss) on  disposition of fixed assets, net                                                            |       | 3.3                                   |       | (0.1 | ) |
| Foreign currency  transaction gains (losses)                                                                |       | 1.1                                   |       | (0.5 | ) |
| Pension expense                                                                                             |       | (3.2                                  | )          | (2.8 | ) |
| Redemption  premium and expenses on retirement of senior subordinated notes and floating  rate senior notes |       | (22.5                                 | )          | (2.7 | ) |
| Due diligence  costs                                                                                        |       | —                                |       | (2.8 | ) |
| Other, net                                                                                                  |       | (2.1                                  | )          | (2.2 | ) |
|                                                                                                        |       | $                                     | (23.5      | ) | (9.9 | ) |

 

Net gain (loss) from forward foreign currency deliverycontracts represents the net of realized and unrealized gains and losses onhedges of the Company’s earnings from its European operations. These hedges donot qualify for hedge accounting treatment under SFAS 133 and are marked tomarket at the end of each accounting period. For fiscal 2007, this amount iscomprised primarily of unrealized losses. During fiscal 2006 the Company hadrealized gains of $2.2 million and unrealized losses of $1.0 million.

Foreign currency transaction gains (losses) includedin other income (expense) represent the gain or loss on intercompany payablesand receivables denominated in currencies other than the functional currency.Foreign currency gains (losses) on settlement of accounts receivable or payablerelated to operational items are recorded in cost of sales.

Pension expense represents the actuarially determinedpension cost associated with the pension plans of two companies unrelated toour operations whose pension obligations were assumed by us as a result of a1993 agreement with the Pension Benefit Guaranty Corporation. The plans werepart of a controlled group of corporations of which we were a part prior to1993. For a further discussion of pension plan expense, see “Pension Plans”under Critical Accounting Policies.

The Company incurred redemption premiums of $17.3million and $2.1 million in fiscal 2007 and fiscal 2006, respectively, andwrote-off deferred financing expenses of $5.2 million and $0.6 million infiscal 2007 and fiscal 2006, respectively, related to the retirement of itsSenior Subordinated Notes and Floating Rate Notes.

Due diligence costs in fiscal 2006 relate toaccounting and legal costs incurred to perform due diligence on a potentialacquisition, which was not completed.

Other, net expense was $2.1 million in fiscal2007, which is approximately equal to the Other, net expense in fiscal 2006 andis comprised primarily of bank charges and other miscellaneous expenses.

*IncomeTax Expense.**  *Incometax expense increased to $27.2 million in fiscal 2007 from$16.5 million in fiscal 2006. The increase in income tax expense is dueprimarily to higher income before taxes in Europe and Asia. The differencebetween expected income tax expense, computed by applying the U.S. statutoryrate to income from continuing operations, and recognized income tax expenseresults primarily because of (i) the tax rate differential on foreignearnings, (ii) permanent differences for stock compensation, (iii) stateincome taxes, (iv) the change in the valuation allowance primarilyattributable to U.S. net operating losses that do not provide a benefit, and (v) U.S.taxes on foreign dividends and deemed dividends.

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*PreferredStock Dividends.**  *Thisitem represents the accrual of dividends on the Company’s previouslyoutstanding 8% convertible preferred stock that was issued in the 2003recapitalization. Dividends had accrued on the preferred stock since July 31,2003 and compounded quarterly. In addition to accruing dividends of $16.1million on the preferred stock, during fiscal 2007, as part of the Distributionthe Company paid $116.1 million in respect of dividend participation rights ofthe Company’s then outstanding convertible preferred stock. Under the terms ofthe convertible preferred stock, the Distribution accelerated dividends on thepreferred stock through June 15, 2007, and the Company accrued additionaldividends of $6.2 million as a result of this acceleration. In connection with theDistribution, holders of more than 99% of the 8% convertible preferred stockconverted their preferred shares into shares of common stock effective January 4,2007. At the end of fiscal 2007, only eleven shares of the convertiblepreferred stock remained outstanding. Subsequent to the end of fiscal 2007, theremaining eleven shares of convertible preferred stock were also converted intoshares of common stock, and there are currently no shares of convertiblepreferred stock outstanding.

*Net Loss to CommonStockholders.**  *Thenet loss to common stockholders increased to $145.2 million in fiscal 2007from $1.5 million in fiscal 2006, and the net loss per common shareincreased to $0.54 in fiscal year 2007 from $0.01 per common share in fiscalyear 2006. The weighted average number of shares of common stock outstandingused to compute loss per share in fiscal years 2007 and 2006 was 266,664,942and 226,587,304, respectively. The Company had 742,006,783 shares of commonstock outstanding as of January 31, 2007. The increase in common shares asof January 31, 2007 compared to the prior year is due to the conversion of159,071 shares of 8% convertible preferred stock into 514,832,157 shares ofcommon stock effective January 4, 2007.

**Fiscal 2006Compared to Fiscal 2005**

*Net Sales.**  *The following is a summary of the Company’s revenuesby geographic area:

| ** **    | ** ** | **Year ended  January 31,** | ** ** |
|---------------|------------|---------------------------------------|------------|
| ** **    | ** ** | **2006**                              | ** ** | **2005** | ** ** |
| ** **    | ** ** | **(in millions)**                | ** ** |
| Europe        |       | $                                     | 417.4      |   | 406.0 |   |
| North America |       | 363.9                                 |       | 343.0 |   |
| Asia          |       | 127.7                                 |       | 99.0 |   |
| Latin America |       | 41.8                                  |       | 36.1 |   |
| Other         |       | 16.1                                  |       | 18.8 |   |
| **Total**     |       | $                                     | 966.9      |   | 902.9 |   |

 

On a U.S. dollar basis, sales from European operationsincreased to $417.4 million in fiscal 2006 from $406.0 million infiscal 2005, an increase of $11.4 million, or 2.8%. Changes in currencytranslation rates from fiscal 2005 to fiscal 2006 had a very small effect onreported European sales. Expressed in the local European currency (euros),fiscal 2006 sales increased by 3.0%, or the U.S. constant dollar equivalent(calculated using the prior year average translation rate) of$12.2 million, from fiscal 2005. The increase in European sales isattributable to the southern and eastern European countries where we postedsales increases from the prior year. This overall increase in European salesoccurred despite weak or flat economic conditions throughout the westernEuropean countries and the United Kingdom where sales declined from the prioryear. Fiscal 2006 sales trends were away from structured hardside and softsideluggage sales, which declined by a combined 5% and towards casual and outdoorproduct sales, which increased by 28% over the prior year. Sales of *Lacoste* brand products accounted for much of the increase inthe sales of casual bag products. European sales continue to be concentrated inthe department and specialty store channels, which accounted for approximately70% of total European sales in both fiscal 

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2006 and 2005. The Companyhad approximately 50 retail stores open throughout Europe at the end of fiscal2006.

Sales from the North America operations increased to$363.9 million in fiscal 2006 from $343.0 million in fiscal 2005, anincrease of $20.9 million, or 6.1%. The United States and Canada enjoyedstrong economies during fiscal 2006 and increased demand for air travel. Thestrong economy coupled with increased advertising and promotional expenses andwell-accepted new product offerings contributed to an 11.7% increase in U.S.wholesale sales, which increased from $203.5 million to $227.3 million. Fiscal2006 sales trends were away from hardside luggage, which declined to 6.2% ofNorth American sales in fiscal 2006 from 8.1% in fiscal 2005, and towardsoftside luggage, which increased to 71.5% of North American sales in fiscal2006 from 67.0% in fiscal 2005. Sales of casual and outdoor bags wereapproximately the same as the prior year. Business and computer case salesdeclined by approximately 6.1% from the prior year. Sales through traditionaldistribution channels (department and specialty stores) increased by$9.4 million, or 12.5%, over the prior year; sales in non-traditionalchannels (exclusive label, mass merchants, warehouse clubs, office productsuperstores) increased by $9.0 million, or 10.6% over the prior year as theCompany strategically terminated economically unattractive relationships withselect OEMs and certain retailers. Sales in the traditional channel andnon-traditional channels were about 41% and 55%, respectively, of totalwholesale sales in both fiscal years 2006 and 2005. Our U.S. retail sales,which are primarily through Company-operated factory outlet stores, declined by$3.8 million, a decrease of 3.1%. Sales in factory outlet stores were adverselyaffected by higher gas prices and price discounting at urban and suburbanmalls. U.S. wholesale and retail sales were helped by consumer acceptance forthe Spinners product (a four wheel system which is featured in severaldifferent product lines). In our company-operated retail stores, comparablestore sales for fiscal 2006 increased by 0.7%. Comparable store sales increaseis calculated by dividing aggregate sales for stores open for each full monthin the current year by aggregate sales for the same stores open for thecorresponding full month in the prior year. Stores must be open for 13 monthsbefore they are included in the calculation. Relocated stores (within the samemall location) and remodeled stores are included in the computation of comparablestore sales. When a store is closed, its sales are no longer included in thecomparable store calculation. There were 189 company-operated retailstores at January 31, 2006 and 2005. Canadian sales increased by $0.9million from $16.5 million in fiscal 2005 to $17.4 million in fiscal 2006.

Sales from Asia operations increased to $127.7 millionin fiscal 2006 from $99.0 million in fiscal 2005, an increase of$28.7 million or 29.0%. The increase in sales is primarily due to highersales in South Korea and China, which increased by $5.9 million and $4.9million, respectively. Asian sales growth resulted from an increase in thenumber of retail stores and the introduction of new product lines during theyear.

Sales increased in all our Latin America operations to$41.8 million in fiscal 2006 from $36.1 million in the prior year, or15.8%. Sales in Mexico and Brazil increased $2.6 million and $1.4 million,respectively, due to improved category management, economic conditions, andconsumer acceptance of new products.

The decrease in Other revenues of $2.7 millionwas primarily due to the termination of an agreement with a Samsonite licenseein Japan, which caused royalty revenues to decline by $4.5 million. Otherrevenues also include a $3.2 million gain on the sale of certain appareltrademark rights.

*GrossProfit.**  *TheCompany includes the following types of costs in cost of goods sold: directproduct purchase and manufacturing costs, duties, freight-in, receiving,inspection, internal transfer costs, and procurement and manufacturingoverhead. The Company includes the following types of costs in SG&Aexpenses: warehousing, order entry, billing, credit, freight-out, warranty,salaries and benefits of administrative and sales personnel, rent, insurance,taxes, office supplies, professional fees, travel, communications, advertising,investor relations, public company expenses and other expenses of a general andadministrative nature not directly related to the cost of acquiring ormanufacturing its products. Other comparable companies may include warehousing,freight-out and other types of costs that the Company 

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includes in SG&A incost of goods sold. For the year ended January 31, 2006 and 2005, theCompany had warehousing and freight-out expenses of $56.4 million and $55.1million, respectively.

Consolidated gross profit in fiscal 2006 was$470.4 million compared to $417.0 million in fiscal 2005, an increaseof $53.4 million. Consolidated gross margin as a percentage of salesincreased by 250 basis points to 48.7% in fiscal 2006 from 46.2% in fiscal 2005.

Gross margins for Europe increased to 47.5% in fiscal2006, from 45.0% in the prior year period, an increase of 250 basis points.Gross margin percentages increased for the year due primarily to sales priceincreases and increased product sourcing from the Far East at lower productcosts and reduction of fixed manufacturing costs from restructurings.

Gross margin percentage for North America increased to43.2% in fiscal year 2006, from 41.7% in the prior year period, an increase of150 basis points. This increase is primarily due to an increase inU.S. Wholesale gross margin percentage to 33.5% in the current year from31.1% in the prior year, which is a result of price increases and increasedsales in higher margin channels. U.S. Retail gross profit margins increased to 61.5%in fiscal 2006 compared to 58.9% in fiscal 2005, due primarily to priceincreases and a change in product offerings to higher margin products.

Gross margin for Asia increased to 60.5% in fiscal2006, from 56.4% in the prior year, an increase of 410 basis points. Theincrease is primarily due to price increases and increased sales within highermargin sales channels such as department stores.

Gross margin for Latin America increased to 51.7% infiscal 2006, from 45.3% in the prior year, an increase of 640 basis points. Theincrease was primarily driven by stronger local currencies, which results inhigher reported sales and lower product costs on purchases paid for in U.S.dollars.

*Selling,General and Administrative Expenses.**  *Consolidated SG&A in fiscal2006 was $381.2 million compared to $341.5 million in fiscal 2005, anincrease of $39.7 million or 11.6%. The Company includes warehousing andfreight-out costs in SG&A expenses, while comparable companies may includesuch costs in costs of goods sold. For the years ended January 31, 2006and 2005, the Company had warehousing and freight-out expenses of $56.4 millionand $55.1 million, respectively.

SG&A for Europe increased by $4.2 million,primarily due to a $4.3 million increase in advertising expense and a $2.5million increase in variable selling expense and other SG&A expense of $0.3million, offset by reductions of $1.3 million in bad debt expense and $1.6million in other administrative expense. The bad debt provision was reducedbecause improved enforcement of credit terms and better collection efforts havereduced exposure to bad debts.

SG&A for North America increased by approximately$4.7 million due to increased advertising expense of $2.9 million, increasedwarehousing costs of $1.0 million and various other increases of$0.8 million.

SG&A for Asia increased by $19.3 million due to$7.9 million of expenses from the Japanese joint venture operations, increasedadvertising and promotional expense of $5.9 million, and increased variableselling expenses associated with higher sales levels. Operations of the Japanjoint venture had not commenced in the prior year so its SG&A wasincremental to total Asian SG&A in fiscal 2006.

SG&A for Latin America increased by $3.4 milliondue primarily to variable selling expenses associated with higher sales levelsand higher advertising levels.

SG&A for the corporate headquarters and licensingincreased by approximately $8.1 million due to SAP system implementationexpenses of $5.7 million that were not incurred in the prior year, an increasein pension expense of $3.2 million, an increase in stock and deferredcompensation expense of $1.5 million, 

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an increase of $1.0million for global marketing and design, offset by a decrease in consultingexpense of $2.2 million and various other decreases totaling $1.1 million.

*Provisionfor Restructuring Operations and Asset Impairment Charge.**  *The Company recorded restructuringcharges totaling $11.2 million and asset impairment charges of $5.4 millionduring fiscal year 2006, primarily in the European segment, including $1.2million of restructuring related expenses that are included in cost of sales.

A restructuring and impairment charge was incurred inconnection with the August 31, 2005 sale of the Henin-Beaumont, Francefacility (the “H-B site”). The Company made cash payments to the purchaser of$9.9 million and has an additional payment obligation of $1.4 million in 24months, all of which relates to the assumption by the purchaser of the Company’sliability and responsibility for employee pension and social costs for the 206employees at the H-B site. A restructuring charge of $8.6 million was recordedrelated to these payments, which represents the amount of the cash paymentobligations less amounts previously accrued for pension liabilities for the H-Bsite employees. The Company also incurred legal and consulting costs ofapproximately $1.2 million related to the sale of the H-B site that areincluded in cost of sales. An asset impairment charge of $5.4 million was alsorecorded upon the decision to sell the H-B site for the write-off of the netbook value of the H-B site property, plant and equipment sold to the purchaser.In connection with the sale, the Company agreed to purchase luggage productsfrom the purchaser of the H-B site for a period of 24 months following the sale(see “ITEM 3. LEGAL PROCEEDINGS”).

The Company also relocated its softside developmentcenter from Torhout, Belgium to its Oudenaarde, Belgium facility and eliminatedthe remaining positions at its Tres Cantos, Spain manufacturing facility. Eachfacility had been significantly downsized and restructured over the pastseveral years. A restructuring charge of $1.4 million was recorded related toseverance obligations for 18 employees terminated as a result of theseactions.

The restructuring and impairment charges relate to thesale of the Company’s hardside manufacturing facility in France and theshutdown of its Torhout, Belgium and Tres Cantos, Spain facilities, part of theCompany’s continuing efforts to reduce fixed manufacturing costs by closinginefficient facilities and increasing the amount of products sourced fromlow-cost manufacturing regions of the world.

*InterestExpense and Amortization of Debt Issue Costs and Premium.**  *Interest expense declined to$30.5 million in fiscal 2006 from $35.2 million in fiscal 2005. Thedecline in interest expense is due to lower interest rates and debt levels.During fiscal 2006, the Company retired $30.1 million of the 87¤8% seniorsubordinated notes. In connection with the retirement of the notes, the Companyincurred costs of $2.7 million which were charged to other expense for marketpremiums of $2.1 million and the write-off of $0.6 million of deferredfinancing costs. Interest expense includes $2.5 million of amortization ofdebt issuance costs in fiscal 2006 and $2.4 million in fiscal 2005. Duringthe second quarter of fiscal 2005 the Company completed a refinancing of theCompany’s senior subordinated notes. To refinance the 103¤4% notes and topay the tender and redemption premiums of $13.7 million, the Companyissued €100 millionof senior floating rate notes due in 2010 and $205.0 million of 87¤8%senior subordinated notes due in 2011. A total of $8.0 million of deferredfinancing costs were incurred in connection with the issuance of the floatingrate senior notes and the 87¤8%senior subordinated notes. In connection with the refinancing, costs of$17.8 million were charged to other expense for redemption premiums of$13.7 million and the write-off of $4.1 million of deferred financingcosts.

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*Other Income(Expense)—Net.**  *Thefollowing is a comparative analysis of the components of Other Income(Expense)—Net.

| ** **                                                                  | ** ** | **Year ended  January 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                  | ** ** | **2006**                              | ** ** | **2005** | ** ** |
| ** **                                                                  | ** ** | **(in millions)**                | ** ** |
| Net gain (loss)  from foreign currency forward delivery contracts           |       | $                                     | 1.2        |   | 0.4 |   |
| Gain (loss) on  disposition of fixed assets, net                            |       | (0.1                                  | )          | 0.8 |   |
| Foreign currency  transaction gains (losses)                                |       | (0.5                                  | )          | 0.6 |   |
| Pension expense                                                             |       | (2.8                                  | )          | (2.8 | ) |
| Redemption  premium and expenses on retirement of senior subordinated notes |       | (2.7                                  | )          | (17.8 | ) |
| Due diligence  costs                                                        |       | (2.8                                  | )          | (0.7 | ) |
| Other, net                                                                  |       | (2.2                                  | )          | (4.1 | ) |
|                                                                        |       | $                                     | (9.9       | ) | (23.6 | ) |

 

Net gain (loss) from forward foreign currency deliverycontracts represents the net of realized and unrealized gains and losses onhedges of the Company’s earnings from its European operations. These hedges donot qualify for hedge accounting treatment under SFAS 133 and are marked tomarket at the end of each accounting period. During fiscal years 2006 and 2005the Company had realized gains (losses) of $2.2 million and $(0.2) million andunrealized gains (losses) of $(1.0) million and $0.6 million, respectively.

Foreign currency transaction gains (losses) includedin other income (expense) represent the gain or loss on intercompany payablesand receivables denominated in currencies other than the functional currency.Foreign currency gains (losses) on settlement of accounts receivable or payablerelated to operational items are recorded in cost of sales.

Pension expense represents the actuarial determinedpension cost associated with the pension plans of two companies unrelated toour operations whose pension obligations were assumed by us as a result of a1993 agreement with the Pension Benefit Guaranty Corporation. The plans werepart of a controlled group of corporations of which we were a part prior to1993. For a further discussion of pension plan expense, see “Pension Plans”under Critical Accounting Policies.

As noted under “Interest Expense”, the Companyincurred redemption premiums of $2.1 million and wrote-off deferred financingexpenses of $0.6 million in fiscal 2006 related to the retirement of$30.1 million of subordinated notes. In fiscal 2005, the Company charged$17.8 million to other income (expense) related to the refinancing of itsoutstanding subordinated notes.

Due diligence costs in fiscal 2006 and 2005 relate toaccounting and legal costs incurred to perform due diligence on two potentialacquisitions, neither of which were completed.

Other, net expense decreased to $2.2 million infiscal 2006 from $4.1 million in fiscal 2005 due to costs in the prioryear associated with the initial investment in the Japan joint venture of $1.0million and expenses of $0.7 million incurred to settle a claim for anenvironmental matter related to the manufacturing and office building siteoccupied by the Company until the late 1960s in Denver, Colorado.

*IncomeTax Expense.**  *Incometax expense increased to $16.5 million in fiscal 2006 from$13.7 million in fiscal 2005. The increase in income tax expense is due tohigher income before taxes in Asia and Latin America and a higher effective taxrate in Europe. The difference between expected income tax expense, computed byapplying the U.S. statutory rate to income from continuing operations, andincome tax expense recognized results primarily because of (i) the taxrate differential on foreign earnings, (ii) permanent differences forstock compensation, (iii) state income taxes, (iv) the change in thevaluation 

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allowance primarilyattributable to U.S. net operating losses that do not provide a benefit, and(v) U.S. taxes on foreign dividends and deemed dividends.

*PreferredStock Dividends.**  *Thisitem represents the accrual of dividends on the outstanding 8% convertiblepreferred stock issued in the 2003 recapitalization. Dividends have accrued onthe preferred stock since July 31, 2003 and compound quarterly. Theincrease in dividends of $1.1 million in fiscal 2006 compared to fiscal2005 is due to the compounding effect of accrued dividends.

*Net Loss to CommonStockholders.**  *Thenet loss to common stockholders decreased to $1.5 million in fiscal 2006from $23.4 million in fiscal 2005, and the net loss per common sharedeclined to $0.01 in fiscal year 2006 from $0.10 per share in fiscal year 2005.The weighted average number of shares of common stock outstanding used tocompute loss per share in fiscal years 2006 and 2005 was 226,587,304 and224,764,006, respectively. The Company had 227,159,626 shares of common stockoutstanding as of January 31, 2006.

**Liquidity andCapital Resources**

At January 31, 2007, the Company had aconsolidated cash balance of $78.5 million and net working capital(accounts receivable plus inventory less accounts payable) of$165.5 million. The Company believes its cash and working capital levelsare adequate to meet the operating requirements of the Company for at least thenext twelve months.

The Company’s primary sources of liquidity are itscash flow from operations and cash availability under its senior creditfacility. During fiscal 2007, the Company’s cash flow from operations was$31.1 million compared to $71.6 million in fiscal 2006. The declinein cash flow from operations is due primarily to $22.5 million in redemptionpremium and expenses on retirement of senior subordinated notes and floating ratenotes and an increase in inventory balances. Inventories increased primarilybecause of higher sales levels and additional inventory for the increase inproducts sold under the Timberland and Lacoste brand names. During fiscal 2006and 2007, the Company intensified efforts to collect receivables according toestablished terms, and extended vendor payment terms to align with the termsoffered to customers. During fiscal 2007, the Company’s cash flow fromoperations together with amounts available under its credit facilities wassufficient to fund fiscal 2007 operations, scheduled payments of principal andinterest on indebtedness, and capital expenditures.

Duringfiscal 2007, the Company made a special cash distribution to stockholders of$175.0 million and entered into a new senior credit agreement as describedunder “Executive Overview.” The Company’s new senior credit facility consistsof a term loan arrangement with $450.0 million borrowed as of January 31,2007 and an $80.0 million revolving credit facility. The revolving creditfacility consists of $50.0 million which may be borrowed by the Company and €22.7million (equivalent to $28.6 million at January 31, 2007) which may beborrowed by the Company’s European subsidiary. There was $23.3 millionavailable under the Company’s revolving credit facility as of January 31,2007, taking into account the $8.7 million in outstanding letters of credit,which reduce borrowing availability. The full amount of the European portion ofthe revolving credit facility was available as of January 31, 2007. The seniorcredit facility contains financial and other covenants that, among otherthings, limit the Company’s ability to engage in transactions with itsaffiliates, incur any additional debt outside of the senior credit facility,create new liens on any property, make acquisitions, participate in certainmergers, consolidations, acquisitions, liquidations, asset sales, investments,or make distributions or cash dividend payments to its equity holders. TheCompany was in compliance with such covenants as of January 31, 2007.

The Company incurred capital expenditures of $32.1million during fiscal 2007 compared to $23.1 million in fiscal 2006. Theincrease in capital expenditures resulted primarily from costs related to theCompany’s global expansion of its Company operated retail stores of $12.8million, an increase of $9.8 

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million over the prioryear. During fiscal 2007, the Company also incurred capital costs totaling $6.1million in connection with the global SAP implementation, $10.3 million inconnection with equipment purchases and other capital costs related to themanufacture of new products and factory upgrades and $2.9 million capital costsrelated to various other projects.

The Company’s results ofoperations and cash flow are particularly sensitive to any events that affectthe travel industry, such as terrorist attacks, armed conflicts anywhere in theworld, epidemic threats such as SARS, or any other event that reduces orrestricts travel. Any event that would have the effect of depressing results ofoperations or cash flows could also restrict amounts the Company and itsEuropean subsidiary would have available to borrow under the senior creditfacility.

**Off-Balance SheetFinancing and Other Matters**

The Company’s most significant off-balance sheet financingarrangements as of January 31, 2007 are non-cancelable operating leaseagreements, primarily for retail floor space and warehouse rental. The Companydoes not participate in any off-balance sheet arrangements involvingunconsolidated subsidiaries that provide financing or potentially expose theCompany to unrecorded financial obligations.

The Company’s lenders have issued letters of credit inthe United States totaling $8.7 million.

Thefollowing summarizes the Company’s contractual cash obligations under long-termdebt and capital lease obligations, operating lease agreements and purchasecommitments and other long-term liabilities as of January 31, 2007:

| ** **                                    | ** ** | **Payments due by January 31** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                    | ** ** | **2008**                                           | ** ** | **2009-2010** | ** ** | **2011-2012** | ** ** | **Beyond** | ** ** | **Total** | ** ** |
| ** **                                    | ** ** | **(In thousands)**                            | ** ** |
| Long-term  debt and capital lease obligations |       | $                                                  | 25,512     |   |   | 9,444 |   |   |   | 9,361 |   |   | 445,502 |   | 489,819 |   |
| Estimated  interest payments(a)               |       | 37,283                                             |       |   | 70,609 |   |   |   | 69,205 |   |   | 67,887 |   | 244,984 |   |
| Operating leases                              |       | 33,833                                             |       |   | 46,731 |   |   |   | 30,668 |   |   | 24,592 |   | 135,824 |   |
| Purchase  commitments(b)                      |       | 69,742                                             |       |   | 2,250 |   |   |   | — |   |   | — |   | 71,992 |   |
| Total contractual cash  obligations           |       | $                                                  | 166,370    |   |   | 129,034 |   |   |   | 109,234 |   |   | 537,981 |   | 942,619 |   |

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(a)           Estimated interestpayments were calculated as follows: (i) interest on the senior creditfacility term loan and revolver were based on interest rates on this debt as ofJanuary 31, 2007 of 7.62% and 7.57%, respectively, (ii) interest onthe senior subordinated notes was based on the fixed interest rate of 87¤8%,(iii) interest on short-term debt and other long-term debt was basedon amounts outstanding and interest rates in effect at January 31, 2007,and (vi) interest on the senior floating rate notes was excluded becausethey were paid off on February 1, 2007.

(b)          Purchase commitmentsinclude contractual arrangements with suppliers. The total of purchasecommitments and other long-term liabilities in the table above includesindividual obligations over $50 thousand.

Other non-current liabilities of $85.2 million areexcluded from this summary table. These liabilities consist of pension andpost-retirement benefit liabilities of $72.9 million, stock compensationliabilities of $4.8 million, and miscellaneous other long-term liabilities of$7.5 million. Pension and post-retirement benefits are excluded from the tablebecause of the difficulty of estimating the timing of future settlement ofthese types of obligations. The Company estimates that it could be required tomake payments for pension and post-retirement benefits of $16.7 million infiscal 2008, and from $6.0 million to $27.0 million per year in fiscal 2009-2012.Actual cash payments could vary significantly from these estimates based onactual future returns on pension assets, future interest rates, changes inERISA funding regulations, and changes in health care costs, all of which arehighly unpredictable.

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The Company’s principalforeign operations are located in Western Europe, the economies of which arenot considered to be highly inflationary. From time to time, the Company entersinto foreign exchange contracts in order to reduce its exposure on certainforeign operations through the use of forward delivery commitments. Noassurance can be given that the Company will be able to offset losses in salesand operating income from negative exchange rate fluctuations through foreigncurrency forward exchange contracts, options, or other instruments which may beavailable to reduce economic exposure to currency fluctuations. Geographicconcentrations of credit risk with respect to trade receivables are notsignificant as a result of the diverse geographic areas covered by the Company’soperations.

**Critical AccountingPolicies**

The Company’s financial statements are prepared inaccordance with accounting principles generally accepted in the United Statesof America (“GAAP”) and our significant accounting policies are summarized inNote 1 to the accompanying consolidated financial statements. Thepreparation of financial statements in conformity with GAAP requires managementto make estimates and assumptions that affect reported amounts of assets,liabilities, disclosure of contingent assets and liabilities at the date of thefinancial statements and reported amounts of revenues and expenses during thereporting period. Actual results could differ significantly from those estimates.

The Company’s accountingfor its deferred tax asset valuation allowance, for inventory at the lower ofcost or market value and for its U.S. defined benefit pension plan involve theaccounting policies that are most affected by management’s judgment and the useof estimates.

*Deferred Tax AssetValuation Allowance*

The Company hassignificant deferred tax assets amounting to approximately $98.6 million at January 31,2007 related to its U.S. operations resulting from net operating losscarryforwards, deductible temporary differences, and tax credit carryforwards,which are available to offset future taxable income. Generally acceptedaccounting principles require that a valuation allowance be established fordeferred tax assets when it is more likely than not that all or a portion of adeferred tax asset will not be realized. The Company has assessed thelikelihood that its U.S. deferred tax assets will be realized taking intoconsideration various factors including (i) the amount of taxable incomeexpected to be reported in the fiscal 2007 U.S. tax return, (ii) theamounts of net operating losses reported over the past two years in its U.S.tax returns, (iii) the limitations caused by Section 382 of theInternal Revenue Code on the amounts of its accumulated U.S. net operatinglosses which may be utilized to offset future taxable income, (iv) theamounts of accumulated net operating losses which may be utilized to offsetfuture taxable income under the built-in gain provisions of Section 382 ofthe Internal Revenue Code, (v) prudent and feasible tax planningstrategies which may be implemented to realize the benefit of deferred taxassets, (vi) deferred tax liabilities related to future taxable amountsthat may be realized within the carryforward periods of the U.S. net operatinglosses through prudent and feasible tax planning strategies, and (vii) theexpiration periods for the U.S. net operating losses which do not begin until2019. Based on these factors, the Company has determined that a valuation allowanceof $73.6 million for its U.S. deferred tax assets is sufficient at January 31,2007. In addition, the Company has recorded a valuation allowance ofapproximately $5.1 million at January 31, 2007 related to the full amountof deferred tax assets related to certain foreign subsidiaries with accumulatedlosses. Generally, no valuation allowance has been recorded for Europeandeferred tax assets as the Company believes that realization is more likelythan not.

*Inventories*

The Company writes downits inventory for estimated obsolescence or unmarketable inventory equal to thedifference between the cost of such inventory and estimated market value basedupon assumptions about future demand and market conditions for the products inour wholesale distribution channels and 

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retailoutlet stores. If actual demand or market conditions are less favorable thanthose projected by management, additional inventory write-downs may berequired.

*Pension Plans*

The Company has a qualified defined benefit plan thatcovers most of its U.S. employees and a nonqualified defined benefit plan thatcovers certain senior executives. The Company records pension expense orpension income in accordance with SFAS No. 87, *Employers’ Accounting for Pensions* (“SFAS 87”). TheCompany had charges to the results of operations from pension expense of $5.4million, $6.0 million and $2.7 million for the fiscal years ending January 31,2007, 2006 and 2005, respectively. Inherent in pension valuations are severalimportant assumptions, including discount rates, expected return on assets andrate of compensation increases, which are updated at the beginning of each planyear based on current market conditions. Significant changes in pension creditsor expense may occur in the future due to changes in assumptions caused bychanging market conditions.

The key assumptions used in developing the pensionexpense of $5.4 million related to these plans in fiscal 2007 were a 5.50%discount rate; an 8.25% expected return on plan assets, and a 3.50% rate ofcompensation increase. In the 2006 fiscal year assumptions used included a5.75% discount rate; an 8.25% expected return on plan assets, and a 3.50% rateof compensation increase. The pension expense related to the Plans decreased to$5.4 million in fiscal 2007 from an expense of $6.0 million in fiscal 2006and increased from expense of $2.7 million in fiscal 2005. Pension expenserelated to these plans is expected to be approximately $5.5 million infiscal 2008. The increase in the pension expense from fiscal 2005 to fiscal2006 and fiscal 2007 is a result of a decrease in plan assets caused by marketconditions in the early 2000’s and the resulting sharp increase in the amountof unrecognized losses being amortized since then and a result of a decrease inthe discount rate used to calculate benefit costs.

In selecting the discount rate of 5.50%, an analysisis performed in which the duration of projected cash flows from the pensionplans is matched with a yield curve based on an appropriate universe of highquality corporate bonds that are available. Management uses the results of theyield curve analysis to select the discount rate that matches the duration andpayment stream of the benefits in the plans. The rate is rounded to the nearestquarter of a percent. Holding all other assumptions constant, a one-halfpercentage point increase or decrease in the discount rate would have increasedor decreased the fiscal 2007 pre-tax expense by approximately$0.8 million.

The Plans’ investment allocations are targeted atapproximately 60%-70% large capitalization stocks and 30%-40% largecapitalization corporate bonds. The Company considered the historical returnsand future expectations for returns for each of these asset classes and thetarget allocation of the portfolio to develop the expected long-term rate ofreturn assumption of 8.25%. Holding all other assumptions constant, a one-halfpercentage point increase or decrease in the expected return on plan assetswould have increased or decreased the fiscal 2006 pre-tax expense by$0.8 million. The asset allocation and related assumed expected rate ofreturn used in fiscal 2008 is not expected to be significantly different fromfiscal 2007.

The Company’s actuaries calculate the Plans’obligations at the end of each plan year (December 31) and suchmeasurement date valuation is used to record pension obligations in the Company’sfiscal year-end financial statements in accordance with SFAS 87. Since fiscalyear end January 31, 2003, the estimated accumulated benefit obligation(the actuarial present value of benefits attributed to employee service andcompensation levels prior to the measurement date without considering futurecompensation levels), commonly referred to as the “ABO”, has exceeded the fairvalue of the Plans’ assets. This result is primarily due to the decline inequity markets in the early 2000’s and a decline in the discount rate used toestimate the pension liability because of lower U.S. interest rates since 2002.As of fiscal year end January 31, 2007, the ABO exceeded the fair value ofplan assets by $53.0 million. The decrease in the 

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excess of the ABO over thefair value of plan assets from the prior year resulted in a $6.4 millioncredit to stockholders’ equity (Other Comprehensive Income (Expense)). Additionally,as of January 31, 2007, the Company adopted a new accounting standard forrecognition of pension obligations, SFAS 158, *EmployersAccounting for Defined Benefit Pension and Other Postretirement Plans—anamendment to FASB Statements No. 87, 88, 106 and 132(R) *(“SFAS158”). Under SFAS 158, gains and losses, prior service costs and credits, andany remaining transition amounts that have not yet been recognized through netperiodic benefit cost are recognized in accumulated other comprehensive income,net of tax effects. Since the Company had already recorded a minimum pensionliability under SFAS 87, the adoption of SFAS 158 did not have a significanteffect on the Company’s recorded obligation for pension costs; the combinedeffect of SFAS 158 on pension and post-retirement liabilities was to increaseliabilities for pension and post-retirement plans by $1.3 million and decreaseintangible assets by $1.3 million. Future market conditions and interest ratessignificantly impact future assets and liabilities of the pension plan, andsimilar charges or credits to stockholders’ equity may be required in thefuture upon measurement of plan obligations at the end of each plan year.

The Company’s fundingpolicy is to make any contributions required by ERISA. In fiscal years 2007 and2006, the Company made contributions of zero and $2.5 million, respectively, tothe plan. Based on current stock market conditions, the interest rateenvironment and current ERISA funding regulations, the Company expects to make acontribution to the plan of $15.6 million in fiscal 2008. See also*Off-Balance Sheet Financing and Other Matters*included elsewhere herein.

**New AccountingStandards**

In July 2006, the Financial Accounting StandardsBoard (FASB) released FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes, aninterpretation of FASB Statement No. 109* (“FIN 48”). FIN48 clarifies the accounting and reporting for uncertainties in income tax law.FIN 48 prescribes a comprehensive model for the financial statementrecognition, measurement, presentation and disclosure of uncertain taxpositions taken or expected to be taken in income tax returns. FIN 48 shall beeffective for fiscal years beginning after December 15, 2006. Earlieradoption is permitted as of the beginning of an enterprise’s fiscal year,provided the enterprise has not yet issued financial statements, includingfinancial statements for any interim period for that fiscal year. Thecumulative effects, if any, of applying FIN 48 will be recorded as anadjustment to retained earnings as of the beginning of the period of adoption.The Company is currently evaluating the impact from this standard on theresults of operations and financial position.

In June 2006, the FASB ratified the consensus onEITF Issue No. 06-3, *How TaxesCollected from Customers and Remitted to Governmental Authorities Should BePresented in the Income Statement* (“EITF 06-3”). Thescope of EITF 06-3 includes any tax assessed by a governmental authoritythat is directly imposed on a revenue-producing transaction between a sellerand a customer and may include, but is not limited to, sales, use and valueadded taxes. The Task Force concluded that entities should present these taxesin the income statement on either a gross or a net basis, based on theiraccounting policy, which should be disclosed pursuant to APB Opinion No. 22,*Disclosure of Accounting Policies*.If such taxes are significant and are presented on a gross basis, the amountsof those taxes should be disclosed. The consensus on EITF 06-3 will beeffective for interim and annual reporting periods beginning after December 15,2006. The Company currently records sales, use, and value added taxes billed toits customers on a net basis in its consolidated statements of operations. Theadoption of EITF 06-3 is not expected to have a material effect on theCompany’s consolidated results of operations or financial condition.

In September 2006, the FASB issued SFAS 157, *Fair Value Measurements* (“SFAS 157”),which defines fair value, establishes a framework for measuring fair value inU.S. GAAP, and expands disclosures about fair value measurements. SFAS 157applies under other accounting pronouncements that require or 

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permit fair valuemeasurements, where fair value is the relevant measurement attribute. Thestandard does not require any new fair value measurements. SFAS 157 iseffective for financial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years. The Company expects thatthe adoption of SFAS 157 will not have a material effect on its consolidatedfinancial statements.

In September 2006, the FASB issued SFAS No. 158,*Employers’ Accounting for Defined Benefit Pensionand Other Postretirement Plans* (“SFAS 158”), which amends SFAS No. 87,*Employers’ Accounting for Pensions* (SFAS 87),SFAS No. 88, *Employers’ Accounting for Settlements andCurtailments of Defined Benefit Pension Plans and for Termination Benefits*(“SFAS 88”), SFAS No. 106, *Employers’ Accounting forPostretirements Benefits Other Than Pensions* (“SFAS 106”), and SFAS No. 132R,*Employers’ Disclosures about Pensions and OtherPostretirement Benefits**(revised 2003)*(“SFAS 132R”). This Statement requires companies to recognize an asset orliability for the overfunded or underfunded status of their benefit plans intheir financial statements. SFAS 158 also requires the measurement date forplan assets and liabilities to coincide with the sponsor’s year-end. Thestandard provides two transition alternatives related to the change inmeasurement date provisions. The recognition of an asset and liability relatedto the funded status provision is effective for fiscal years ending after December 15,2006 and the change in measurement date provisions is effective for fiscalyears ending after December 15, 2008. The adoption of SFAS 158 increasedthe Company’s long-term pension and other postretirement benefit liabilities by$1.3 million, decreased intangible assets by $1.3 million and increased theCompany’s accumulated other comprehensive loss by $2.6 million. The Companyexpects that the measurement-date provisions of SFAS 158 will be implementedeffective in fiscal 2009.

In September 2006,the SEC issued SAB No. 108 (“SAB 108”), which provides guidance on theprocess of quantifying financial statement misstatements. In SAB 108, the SECstaff establishes’ an approach that requires quantification of financialstatement errors, under both the iron-curtain and the roll-over methods, basedon the effects of the error on each of our financial statements and the relatedfinancial statement disclosures. SAB 108 is generally effective for annualfinancial statements in the first fiscal year ending after November 15,2006. The transition provisions of SAB 108 permit existing public companies torecord the cumulative effect, if any, of adopting SAB 108 in the first yearending after November 15, 2006 by recording correcting adjustments to thecarrying values of assets and liabilities as of the beginning of that year withthe offsetting adjustment recorded to the opening balance of retained earnings.The adoption of SAB 108 did not have a material effect on the Company’sconsolidated financial statements.

**ITEM 7A.**        QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

**Market Risk**

The Company’s primarymarket risks include changes in foreign currency exchange rates and interestrates. Market risk is the potential loss arising from adverse changes in marketrates and prices, such as foreign currency exchange and interest rates. TheCompany enters into forward financial instruments with major financialinstitutions to manage and reduce the impact of changes in foreign currencyrates. From time to time, the Company uses interest rate swaps to manageinterest rate risk. The Company does not use financial instruments to managefluctuations in commodity prices. The Company does not hold or issue financialinstruments for trading purposes.

**Foreign ExchangeContracts**

From time to time, the Company enters into forwardforeign exchange and option contracts to reduce its economic exposure totranslated earnings of foreign subsidiaries (primarily the translated earningsof European operations). Certain of the Company’s foreign subsidiaries enterinto forward exchange 

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contracts to reduceeconomic exposure to purchases of goods from Asia payable in U.S. dollars andcertain other contracts to reduce their economic exposure to receipts payablein currencies other than home country functional currencies.

Contracts entered into to reduce the Company’s exposureto translated earnings of foreign subsidiaries are marked to market at the endof each month, and gains or losses are included in Other Income (Expense)—Net.Gains or losses on foreign exchange contracts entered into to reduce theCompany’s exposure to payables and receivables related to product purchases andsales denominated in other than functional currencies are included in income orloss as the underlying hedged transactions are completed.

At January 31, 2007,the Company and its subsidiaries had forward foreign exchange contractsoutstanding having a total contract amount of approximately $93.9 millionwith a weighted average maturity of 195 days. If there were a ten percentadverse change in foreign currency exchange rates relative to the outstandingforward exchange contracts, the loss in earnings from the amount included inother comprehensive income for the year ended January 31, 2007 would beapproximately $9.4 million, before the effect of income taxes. Anyhypothetical loss in earnings would be offset by changes in the underlyingvalue of translated earnings, to the extent such earnings or income is equal tothe amount of currency exposed, or for product purchases by lower cost ofsales.

**Interest Rates**

At January 31, 2007,the Company had outstanding $468.0 million under its senior credit facility,consisting of a $450.0 million senior secured term loan and $18.0 million drawnunder its senior secured revolving credit facility. Borrowings under the termloan and revolving credit facility accrue interest at rates adjustedperiodically depending on the Company’s financial performance as measured eachfiscal quarter and interest rate market conditions. At January 31, 2007,the interest rate on the term loan facility was 7.62% and the interest rate onthe revolving credit facility was 7.57%. Subsequentto January 31, 2007, the Company entered into a variable to fixed interestrate swap agreement effective March 21, 2007 with a notional amount of$225,000, a pay rate of 5.192% and a receive rate based on the three monthLIBOR rate. The swap agreement dated February 1, 2007 has a five-yearterm. The rate the Company receives reprices every three months.

**ITEM 8.**                FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

The consolidated financialstatements and supplementary financial information required by this Item andincluded in this Report are listed in the Index to Consolidated FinancialStatements and Schedule appearing on page F-1.

**ITEM9.**                CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

**ITEM 9A.**        CONTROLSAND PROCEDURES

**Evaluation of Disclosure Controlsand Procedures.**

The Company’s management is responsible formaintaining adequate internal controls over financial reporting and for itsassessment of the effectiveness of internal controls over financial reporting.The Company’s Chief Executive Officer and Chief Financial Officer haveevaluated the effectiveness of the Company’s disclosure controls and procedures(as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of theend of 

45

----

the period covered by thisreport (the “Evaluation Date”). Based on that evaluation, management concludedthat as of January 31, 2007 the Company’s disclosure controls andprocedures are effective in alerting them on a timely basis to materialinformation relating to the Company (including its consolidated subsidiaries)required to be included in the Company’s reports filed or submitted under theExchange Act.

Except for theimplementation of changes to improve controls over accounting for anddisclosure of income taxes, there was no change in the Company’s internalcontrol over financial reporting that occurred during the Company’s most recentfiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting.

**ITEM 9B.**       OTHERINFORMATION

None.

46

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**PART III**

**ITEM 10.**         DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information requiredby Item 10 is incorporated by reference from the 2007 Proxy Statement to befiled with the Securities and Exchange Commission within 120 days of theend of the fiscal year covered by this Report. Alternatively, we may file anamendment to this Form 10-K to provide such information within 120days of the end of the fiscal year covered by this report.

**ITEM 11.**         EXECUTIVECOMPENSATION

The information requiredby Item 11 is incorporated by reference from the 2007 Proxy Statement to befiled with the Securities and Exchange Commission within 120 days of theend of the fiscal year covered by this Report. Alternatively, we may file anamendment to this Form 10-K to provide such information within 120days of the end of the fiscal year covered by this report.

**ITEM12.**         SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS

The information requiredby Item 12 is incorporated by reference from the 2007 Proxy Statement to befiled with the Securities and Exchange Commission within 120 days of theend of the fiscal year covered by this Report. Alternatively, we may file anamendment to this Form 10-K to provide such information within 120days of the end of the fiscal year covered by this report.

**ITEM13.**         CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information requiredby Item 13 is incorporated by reference from the 2007 Proxy Statement to befiled with the Securities and Exchange Commission within 120 days of theend of the fiscal year covered by this Report. Alternatively, we may file anamendment to this Form 10-K to provide such information within 120days of the end of the fiscal year covered by this report.

**ITEM 14.**         PRINCIPALACCOUNTANT FEES AND SERVICES

The information required by Item 14 is incorporated byreference from the 2007 Proxy Statement to be filed with the Securities andExchange Commission within 120 days of the end of the fiscal year coveredby this Report. Alternatively, we may file an amendment to this Form 10-Kto provide such information within 120 days of the end of the fiscal yearcovered by this report.

47

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**PART IV**

**ITEM 15.**         EXHIBITSAND FINANCIAL STATEMENT SCHEDULE

1.     FinancialStatements:

SeeIndex to Consolidated Financial Statements and Schedule on page F-1hereof.

2.     FinancialStatement Schedule:

SeeIndex to Consolidated Financial Statements and Schedule on page F-1hereof.

3.     Exhibits:

See Index to Exhibits on pages E-1through E-3 hereof.

48

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this Report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

|        | SAMSONITE  CORPORATION |
|--------|------------------------|
|   | By:                    | /s/ MARCELLO BOTTOLI |
|   | * *               | *President and Chief Executive Officer* |
|   | Date:                  | May 1, 2007 |

 

Each person whose signature appears below constitutesand appoints Marcello Bottoli and Richard H. Wiley, or either of them, hisor her attorneys-in-fact, with the power of substitution, for him or her in anyand all capacities, to sign any amendments to this report on Form 10-Kfor the year ended January 31, 2007, and to file the same, with exhibitsthereto and other documents in connection therewith, with the Securities andExchange Commission, hereby ratifying and confirming all that saidattorneys-in-fact, or their substitute or substitutes, may do or cause to bedone by virtue hereof.

Pursuant to therequirements of the Securities Exchange Act of 1934, this Report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.
|                                    | **Signature** | ** **                                     | ** ** | ** **       | **Title** | ** ** | ** ** | ** ** | **Date** | ** ** |
|------------------------------------|---------------|------------------------------------------------|------------|------------------|-----------|------------|------------|------------|----------|------------|
| /s/  RICHARD H. WILEY              |          | Chief Financial Officer,  Treasurer, Secretary |       | May 1, 2007 |
| Richard H. Wiley                   |          | and Principal  Accounting Officer              |       |             |
| /s/  MARCELLO BOTTOLI              |          | President and Chief  Executive Officer         |       | May 1, 2007 |
| Marcello Bottoli                   |          |                                           |       |             |
| /s/  JOHN  ALLAN                   |          | Director                                       |       | May 1, 2007 |
| John Allan                         |          |                                           |       |             |
| /s/  MELISSA WONG BETHELL          |          | Director                                       |       | May 1, 2007 |
| Melissa Wong  Bethell              |          |                                           |       |             |
| /s/  CHARLES J. PHILIPPIN          |          | Director                                       |       | May 1, 2007 |
| Charles J.  Philippin              |          |                                           |       |             |
| /s/  FERDINANDO GRIMALDI QUARTIERI |          | Director                                       |       | May 1, 2007 |
| Ferdinando  Grimaldi Quartieri     |          |                                           |       |             |
| /s/  ANTONY P. RESSLER             |          | Director                                       |       | May 1, 2007 |
| Antony P. Ressler                  |          |                                           |       |             |
| /s/  JEFFREY B. SCHWARTZ           |          | Director                                       |       | May 1, 2007 |
| Jeffrey B.  Schwartz               |          |                                           |       |             |
| /s/  LEE SIENNA                    |          | Director                                       |       | May 1, 2007 |
| Lee Sienna                         |          |                                           |       |             |
| /s/  DONALD L. TRIGGS              |          | Director                                       |       | May 1, 2007 |
| Donald L. Triggs                   |          |                                           |       |             |
| /s/  RICHARD T. WARNER             |          | Director                                       |       | May 1, 2007 |
| Richard T. Warner                  |          |                                           |       |             |

                                                                                                                                                                                                                                                   

49

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**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE**
|                                                                                                                                                                              | ** ** | **Page** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **Consolidated Financial  Statements:**                                                                                                                                      |       |     |       |
| Report of  Independent Registered Public Accounting Firm                                                                                                                     |       | F-2      |       |
| Consolidated Balance  Sheets as of January 31, 2007 and 2006                                                                                                            |       | F-3      |       |
| Consolidated  Statements of Operations for each of the years in the three-year period  ended January 31, 2007                                  |       | F-4      |       |
| Consolidated  Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss)  for each of the years in the three-year period ended January 31,  2007 |       | F-5      |       |
| Consolidated  Statements of Cash Flows for each of the years in the three-year period  ended January 31, 2007                                       |       | F-6      |       |
| Notes to  Consolidated Financial Statements                                                                                                                                  |       | F-7      |       |
| **Schedule:**                                                                                                                                                                |       |     |       |
| Schedule  II—Valuation and Qualifying Accounts                                                                                                                          |       | F-37     |       |

 

F-1

----

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

The Board of Directors and StockholdersSamsonite Corporation:

We have audited the consolidated financial statementsof Samsonite Corporation and subsidiaries as listed in the accompanying index.In connection with our audits of the consolidated financial statements, we alsohave audited the financial statement schedule listed in the accompanying index.These consolidated financial statements and financial statement schedule arethe responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements and financialstatement schedule based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of Samsonite Corporation and subsidiaries as of January 31, 2007and 2006, and the results of their operations and their cash flows for each ofthe years in the three-year period ended January 31, 2007, in conformitywith U.S. generally accepted accounting principles. Also in our opinion, therelated financial statement schedule, when considered in relation to the basicconsolidated financial statements taken as a whole, presents fairly, in allmaterial respects, the information set forth therein.

As discussed in note 13,the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R,*Share Based Payment*, effective February 1,2006. Also, as discussed in note 15, the Company adopted SFAS No. 158, *Employers’ Accounting for Defined Benefit Pension and Other Post-retirementPlans—an amendment of FASB Statements No. 87, 88, 106 and 132(R)*,effective January 31, 2007.

**KPMG LLP**

Denver, ColoradoApril 30, 2007

F-2

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**SAMSONITE CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJanuary 31, 2007 and 2006(Dollars in thousands, except per share amounts)**
|                                                                                                                                                                                                   | ** ** | **Year ended January 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                                                                                                        | ** ** | **2007**                                  | ** ** | **2006** | ** ** |
| **ASSETS**                                                                                                                                                                                        | ** ** | ** **                                | ** ** | ** ** | ** ** |
| Current assets:                                                                                                                                                                                   |       |                                      |       |   |   |
| Cash and cash equivalents                                                                                                                                                                         |       | $                                         | 78,548     |   | 85,448 |   |
| Trade accounts  receivable, net of allowances for doubtful accounts of $10,370 and  $7,213 (Note 11)                                                                                    |       | 133,086                                   |       | 113,528 |   |
| Other receivables                                                                                                                                                                                 |       | 1,976                                     |       | 2,056 |   |
| Inventories (Notes 5 and  11)                                                                                                                                                                     |       | 165,767                                   |       | 133,683 |   |
| Deferred income taxes  (Note 14)                                                                                                                                                                  |       | 10,292                                    |       | 8,652 |   |
| Assets held for sale  (Note 6)                                                                                                                                                                    |       | —                                    |       | 1,515 |   |
| Prepaid expenses and  other current assets                                                                                                                                                        |       | 36,438                                    |       | 28,212 |   |
| Total current assets                                                                                                                                                                              |       | 426,107                                   |       | 373,094 |   |
| Property, plant  and equipment, net (Notes 7 and 11)                                                                                                                                         |       | 103,999                                   |       | 89,100 |   |
| Intangible assets,  less accumulated amortization of $38,982 and $38,389 (Notes 8  and 11)                                                                     |       | 102,826                                   |       | 91,658 |   |
| Other assets and  long-term receivables (Note 9)                                                                                                                                             |       | 18,193                                    |       | 13,399 |   |
| Total assets                                                                                                                                                                                      |       | $                                         | 651,125    |   | 567,251 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**                                                                                                                                          | ** ** | ** **                                | ** ** | ** ** | ** ** |
| Current liabilities:                                                                                                                                                                              |       |                                      |       |   |   |
| Short-term debt  (Note 10)                                                                                                                                                                        |       | $                                         | 12,096     |   | 9,396 |   |
| Current installments of  long-term obligations (Note 11)                                                                                                                                     |       | 25,512                                    |       | 1,048 |   |
| Accounts payable                                                                                                                                                                                  |       | 135,340                                   |       | 101,893 |   |
| Accrued interest                                                                                                                                                                                  |       | 4,278                                     |       | 4,055 |   |
| Accrued compensation and  employee benefits                                                                                                                                                       |       | 27,854                                    |       | 25,539 |   |
| Accrued income taxes                                                                                                                                                                              |       | 17,086                                    |       | 10,192 |   |
| Other accrued liabilities                                                                                                                                                                         |       | 55,311                                    |       | 43,641 |   |
| Total current liabilities                                                                                                                                                                         |       | 277,477                                   |       | 195,764 |   |
| Long-term  obligations, less current installments (Note 11)                                                                                                                                  |       | 464,307                                   |       | 296,784 |   |
| Deferred income  taxes (Note 14)                                                                                                                                                             |       | 23,404                                    |       | 22,897 |   |
| Other non-current  liabilities (Notes 12 and 15)                                                                                                                                             |       | 85,188                                    |       | 86,962 |   |
| Total liabilities                                                                                                                                                                                 |       | 850,376                                   |       | 602,407 |   |
| Minority interests  in consolidated subsidiaries                                                                                                                                                  |       | 23,023                                    |       | 16,057 |   |
| Stockholders’ equity (deficit) (Notes 2, 11 and 13):                                                                                                                                         |       |                                      |       |   |   |
| Preferred stock ($0.01  par value; 2,000,000 shares authorized; 11 and 159,082 convertible shares  issued and outstanding at January 31, 2007 and 2006, respectively)                        |       | 11                                        |       | 193,981 |   |
| Common stock ($0.01 par  value; 1,000,000,000 shares authorized; 742,006,783 and 227,159,626 shares  issued and outstanding at January 31, 2007 and 2006, respectively)                      |       | 7,420                                     |       | 2,272 |   |
| Additional paid-in  capital                                                                                                                                                                       |       | 570,182                                   |       | 354,760 |   |
| Accumulated deficit                                                                                                                                                                               |       | (742,711                                  | )          | (539,420 | ) |
| Accumulated other  comprehensive loss                           |       | (57,176                                   | )          | (62,806 | ) |
| Total stockholders’  deficit                                                                                                                                                                 |       | (222,274                                  | )          | (51,213 | ) |
| Commitments and contingencies (Notes 1, 4, 10, 11,  14, 15, and 17)                                                                                                                               |       |                                      |       |   |   |
| Total liabilities and stockholders’ equity (deficit)                                                                                                                                         |       | $                                         | 651,125    |   | 567,251 |   |

 

See accompanying notes to consolidated financial statements.

F-3

----

**SAMSONITE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per share amounts)**

| ** **                                                                                    | ** ** | **Year ended January 31,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                    | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net sales                                                                                     |       | $                                         | 1,070,393  |   | 966,886 |   | 902,896 |   |
| Cost of goods  sold                                                                           |       | 524,451                                   |       | 496,505 |   | 485,882 |   |
| Gross profit                                                                                  |       | 545,942                                   |       | 470,381 |   | 417,014 |   |
| Selling, general and administrative expenses                                                  |       | 459,511                                   |       | 381,185 |   | 341,532 |   |
| Amortization and  impairment of intangible assets (Note 8)                                    |       | 1,193                                     |       | 862 |   | 3,214 |   |
| Asset impairment  charges (Note 4)                                                            |       | 1,623                                     |       | 5,450 |   | 671 |   |
| Provision for  restructuring operations (Note 4)                                              |       | 3,775                                     |       | 9,849 |   | 5,862 |   |
| Operating income                                                                              |       | 79,840                                    |       | 73,035 |   | 65,735 |   |
| Other income (expense):                                                                       |       |                                      |       |   |   |   |   |
| Interest income                                                                               |       | 2,570                                     |       | 2,052 |   | 549 |   |
| Interest expense and amortization of debt issue  costs and premium                            |       | (30,285                                   | )          | (30,496 | ) | (35,206 | ) |
| Other income (expense)—net (Note 18)                                                     |       | (23,506                                   | )          | (9,872 | ) | (23,603 | ) |
| Income before income taxes, minority interests and  cumulative effect of an accounting change |       | 28,619                                    |       | 34,719 |   | 7,475 |   |
| Income tax  expense (Note 14)                                                                 |       | (27,175                                   | )          | (16,516 | ) | (13,652 | ) |
| Minority  interests in earnings of subsidiaries                                               |       | (9,673                                    | )          | (4,882 | ) | (3,521 | ) |
| Net income (loss) before cumulative effect of an  accounting change                           |       | (8,229                                    | )          | 13,321 |   | (9,698 | ) |
| Cumulative effect of an accounting change (Note 13)                                           |       | 1,391                                     |       | — |   | — |   |
| Net income (loss)                                                                             |       | (6,838                                    | )          | 13,321 |   | (9,698 | ) |
| Preferred stock dividends (Note 2)                                                       |       | (138,386                                  | )          | (14,831 | ) | (13,683 | ) |
| Net loss to common stockholders                                                               |       | $                                         | (145,224   | ) | (1,510 | ) | (23,381 | ) |
| Net loss per  common share—basic and diluted:                                            |       |                                      |       |   |   |   |   |
| Weighted average common shares  outstanding—basic and diluted                            |       | 266,665                                   |       | 226,587 |   | 224,764 |   |
| Net loss per common share before cumulative effect  of an accounting change                   |       | $                                         | (0.55      | ) | (0.01 | ) | (0.10 | ) |
| Cumulative effect of an accounting change                                                     |       | 0.01                                      |       | — |   | — |   |
| Net loss per  common share                                                                    |       | $                                         | (0.54      | ) | (0.01 | ) | (0.10 | ) |

 

See accompanying notes to consolidated financial statements.

F-4

----

**SAMSONITECORPORATION AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(DEFICIT)**

**AND COMPREHENSIVEINCOME (LOSS)**

**(Dollars inthousands, except share amounts)**

| ** **                                                                                                  | ** ** | **Preferred  stock** | ** ** | **Common  stock** | ** ** | **Additional  paid-in  capital** | ** ** | **Accumulated  deficit** | ** ** | **Accumulated  other  comprehensive  income (loss)** | ** ** | **Comprehensive  income  (loss)** | ** ** | **Treasury  stock** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------------------------|------------|--------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------|------------|---------------------|------------|
| Balance, January 31,  2004                                                                             |       | $                    | 166,498    |              |       | 2,352                            |       |                     |       | 768,433                                                   |       |                              |       | (514,529            | )          |   |   | (32,140 | ) |   |   |   |   |   | (420,000 | ) |
| Net loss                                                                                                    |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | (9,698     | )                   |       |   | — |   |   |   | (9,698 | ) |   | — |   |
| Unrealized loss on cash  flow hedges (net of income tax effect of $918)                                |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | (1,693 | ) |   |   | (1,693 | ) |   | — |   |
| Reclassification of net  loss on cash flow hedges to net loss (net of income tax effect of  $445) |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | 549 |   |   |   | 549 |   |   | — |   |
| Foreign currency  translation adjustment                                                                    |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | 448 |   |   |   | 448 |   |   | — |   |
| Minimum pension liability  adjustment (Note 15)                                                        |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | (17,771 | ) |   |   | (17,771 | ) |   | — |   |
| Comprehensive loss                                                                                          |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   |   |   |   |   | (28,165 | ) |   | — |   |
| Stock compensation  expense (Note 13)                                                                  |       | —               |       |              | —     |                             |       |                     | 1,209      |                                                      |       |                              | —     |                |       |   | — |   |   |   |   |   |   |   |   |
| Conversion of 50 shares  of preferred stock to 129,384 shares of common stock                               |       | (54                  | )          |              | 1          |                             |       |                     | 53         |                                                      |       |                              | —     |                |       |   | — |   |   |   |   |   |   | — |   |
| Preferred stock dividends  (Note 2)                                                                    |       | 13,683               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | (13,683    | )                   |       |   | — |   |   |   |   |   |   | — |   |
| Balance, January 31,  2005                                                                             |       | 180,127              |       |              | 2,353      |                             |       |                     | 769,695    |                                                      |       |                              | (537,910   | )                   |       |   | (50,607 | ) |   |   |   |   |   | (420,000 | ) |
| Net income                                                                                                  |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | 13,321     |                |       |   | — |   |   |   | 13,321 |   |   | — |   |
| Unrealized gain on cash  flow hedges (net of income tax effect of $546)                                |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | 1,310 |   |   |   | 1,310 |   |   | — |   |
| Reclassification of net  loss on cash flow hedges to net income (net of income tax effect of $885)          |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | 1,426 |   |   |   | 1,426 |   |   | — |   |
| Foreign currency  translation adjustment                                                                    |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | (5,702 | ) |   |   | (5,702 | ) |   | — |   |
| Minimum pension liability  adjustment (Note 15)                                                        |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | (9,233 | ) |   |   | (9,233 | ) |   | — |   |
| Comprehensive income                                                                                        |       |                 |       |              |       |                             |       |                     |       |                                                      |       |                              |       |                |       |   |   |   |   |   | 1,122 |   |   |   |   |
| Stock compensation  expense (Note 13)                                                                  |       | —               |       |              | —     |                             |       |                     | 4,007      |                                                      |       |                              | —     |                |       |   | — |   |   |   |   |   |   | — |   |
| Conversion of 850 shares  of preferred stock to 2,324,918 shares of common stock                       |       | (977                 | )          |              | 24         |                             |       |                     | 953        |                                                      |       |                              | —     |                |       |   | — |   |   |   |   |   |   | — |   |
| Preferred stock dividends  (Note 2)                                                                    |       | 14,831               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | (14,831    | )                   |       |   | — |   |   |   |   |   |   | — |   |
| Retirement of 10,500,000  shares of treasury stock                                                          |       | —               |       |              | (105       | )                                |       |                     | (419,895   | )                                                         |       |                              | —     |                |       |   | — |   |   |   |   |   |   | 420,000 |   |
| Balance, January 31,  2006                                                                             |       | 193,981              |       |              | 2,272      |                             |       |                     | 354,760    |                                                      |       |                              | (539,420   | )                   |       |   | (62,806 | ) |   |   |   |   |   | — |   |
| Net loss                                                                                                    |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | (6,838     | )                   |       |   | — |   |   |   | (6,838 | ) |   | — |   |
| Unrealized loss on cash  flow hedges (net of income tax effect of $76)                                 |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | (63 | ) |   |   | (63 | ) |   | — |   |
| Reclassification of net  gains on cash flow hedges to net loss (net of income tax effect of $539)           |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | (1,037 | ) |   |   | (1,037 | ) |   | — |   |
| Foreign currency  translation adjustment                                                                    |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | 2,934 |   |   |   | 2,934 |   |   | — |   |
| Minimum pension liability  adjustment (Note 15)                                                        |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | 6,434 |   |   |   | 6,434 |   |   | — |   |
| Comprehensive income                                                                                        |       |                 |       |              |       |                             |       |                     |       |                                                      |       |                              |       |                |       |   |   |   |   |   | 1,430 |   |   |   |   |
| Adjustment to initially  apply SFAS 158 (Note 15)                                                      |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | —     |                |       |   | (2,638 | ) |   |   |   |   |   | — |   |
| Stock compensation  expense (Note 13)                                                                  |       | —               |       |              | —     |                             |       |                     | 4,331      |                                                      |       |                              | —     |                |       |   | — |   |   |   |   |   |   | — |   |
| Stock options exercised  for 15,000 shares                                                                  |       | —               |       |              | —     |                             |       |                     | 10         |                                                      |       |                              | —     |                |       |   | — |   |   |   |   |   |   | — |   |
| Common stock dividends  paid (Note 2)                                                                  |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | (53,307    | )                   |       |   | — |   |   |   |   |   |   | — |   |
| Preferred stock dividends  (Note 2)                                                                    |       | 22,259               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | (138,386   | )                   |       |   | — |   |   |   |   |   |   | — |   |
| Dividend distribution to  common stock option holders (Note 2)                                         |       | —               |       |              | —     |                             |       |                     | —     |                                                      |       |                              | (4,760     | )                   |       |   | — |   |   |   |   |   |   | — |   |
| Conversion of 159,071  shares of preferred stock to 514,832,157 shares of common stock (Note 2)   |       | (216,229             | )          |              | 5,148      |                             |       |                     | 211,081    |                                                      |       |                              | —     |                |       |   | — |   |   |   |   |   |   | — | ** ** |
| Balance, January 31, 2007                                                                              |       | $                    | 11         |              |       | 7,420                            |       |                     |       | 570,182                                                   |       |                              |       | (742,711            | )          |   |   | (57,176 | ) |   |   |   |   |   | — |   |

 

See accompanying notes to consolidated financial statements.

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**SAMSONITE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands)**

| ** **                                                                                                                                       | ** ** | **Year ended January 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                                                       | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| Cash flows from operating activities:                                                                                                            |       |                                      |       |   |   |   |   |
| Net income (loss) before  cumulative effect of an accounting change                                                                              |       | $                                         | (8,229     | ) | 13,321 |   | (9,698 | ) |
| Adjustments to reconcile net income (loss) before  cumulative effect of an accounting change to net cash provided by  operating activities: |       |                                      |       |   |   |   |   |
| Loss (gain) on  disposition of assets held for sale and fixed assets, net                                                                        |       | (3,285                                    | )          | 128 |   | (819 | ) |
| Depreciation and  amortization of property, plant and equipment                                                                                  |       | 19,830                                    |       | 17,057 |   | 18,971 |   |
| Amortization and write-off  of debt issue costs and premium                                                                                      |       | 7,482                                     |       | 3,068 |   | 6,500 |   |
| Amortization and  impairment of intangible assets                                                                                                |       | 1,193                                     |       | 862 |   | 3,214 |   |
| Deferred income tax  benefit                                                                                                                     |       | (4,670                                    | )          | (1,477 | ) | (226 | ) |
| Pension plan losses, net                                                                                                                         |       | 6,410                                     |       | 6,771 |   | 3,243 |   |
| Asset impairment charge                                                                                                                          |       | 1,623                                     |       | 5,450 |   | 671 |   |
| Provision for doubtful  accounts                                                                                                                 |       | 2,387                                     |       | 327 |   | 1,540 |   |
| Provision for  restructuring operations                                                                                                          |       | 3,775                                     |       | 9,849 |   | 5,862 |   |
| Non-cash stock  compensation expense                                                                                                             |       | 6,190                                     |       | 5,497 |   | 4,031 |   |
| Changes in operating  assets and liabilities, net of acquired amounts:                                                                           |       |                                      |       |   |   |   |   |
| Trade and other  receivables                                                                                                                     |       | (8,724                                    | )          | (8,220 | ) | (19,937 | ) |
| Inventories                                                                                                                                      |       | (19,794                                   | )          | (4,598 | ) | 2,027 |   |
| Other current assets                                                                                                                             |       | (4,722                                    | )          | (5,818 | ) | (1,002 | ) |
| Accounts payable and  accrued liabilities                                                                                                        |       | 32,150                                    |       | 35,724 |   | 19,499 |   |
| Contribution to U.S.  defined benefit pension plan                                                                                               |       | —                                    |       | (2,500 | ) | — |   |
| Other—net                                                                                                                                   |       | (471                                      | )          | (3,883 | ) | 850 |   |
| Net cash provided by  operating activities                                                                                                       |       | 31,145                                    |       | 71,558 |   | 34,726 |   |
| Cash flows provided by  (used in) investing activities:                                                                                          |       |                                      |       |   |   |   |   |
| Purchases of property,  plant and equipment:                                                                                                     |       |                                      |       |   |   |   |   |
| By Company and wholly-owned  subsidiaries                                                                                                        |       | (25,283                                   | )          | (18,878 | ) | (10,779 | ) |
| By less than 100% owned  subsidiaries                                                                                                            |       | (6,830                                    | )          | (4,266 | ) | (1,705 | ) |
| Proceeds from sale of  property and equipment and other assets                                                                                   |       | 9,752                                     |       | 14,424 |   | 4,094 |   |
| Acquisition of  businesses, net of cash acquired                                                                                                 |       | (12,230                                   | )          | — |   | — |   |
| Other                                                                                                                                            |       | (1,411                                    | )          | (369 | ) | (440 | ) |
| Net cash used in  investing activities                                                                                                           |       | (36,002                                   | )          | (9,089 | ) | (8,830 | ) |
| Cash flows provided by  (used in) financing activities:                                                                                          |       |                                      |       |   |   |   |   |
| Proceeds from (payments  of) short-term debt—net                                                                                            |       | (1,063                                    | )          | (5,672 | ) | 8,792 |   |
| Borrowings on new senior  credit facility                                                                                                        |       | 468,000                                   |       | — |   | — |   |
| Payments of other long-term  obligations—net                                                                                                |       | (1,249                                    | )          | (1,285 | ) | (918 | ) |
| Issuance costs of senior  credit facility and senior notes                                                                                       |       | (6,216                                    | )          | — |   | (8,055 | ) |
| Issuance of floating rate  senior and 87¤8% senior subordinated notes                                                                       |       | —                                    |       | — |   | 325,810 |   |
| Repurchase of  subordinated notes                                                                                                                |       | (287,208                                  | )          | (30,075 | ) | (323,393 | ) |
| Dividend distribution to  preferred and common stockholders and common stock option holders, net of  $806 charged to expense                     |       | (174,194                                  | )          | — |   | — |   |
| Other, net                                                                                                                                       |       | 4,977                                     |       | 3,230 |   | 960 |   |
| Net cash provided by  (used in) financing activities                                                                                             |       | 3,047                                     |       | (33,802 | ) | 3,196 |   |
| Effect of exchange rate  changes on cash and cash equivalents                                                                                    |       | (5,090                                    | )          | 403 |   | (2,238 | ) |
| Net increase (decrease)  in cash and cash equivalents                                                                                            |       | (6,900                                    | )          | 29,070 |   | 26,854 |   |
| Cash and cash  equivalents, beginning of year                                                                                                    |       | 85,448                                    |       | 56,378 |   | 29,524 |   |
| Cash and cash  equivalents, end of year                                                                                                          |       | $                                         | 78,548     |   | 85,448 |   | 56,378 |   |
| Supplemental disclosures  of cash flow information:                                                                                              |       |                                      |       |   |   |   |   |
| Cash paid during the year  for interest                                                                                                          |       | $                                         | 27,727     |   | 28,420 |   | 32,593 |   |
| Cash paid during the year  for income taxes, net                                                                                                 |       | $                                         | 27,271     |   | 16,280 |   | 11,016 |   |
| Non-cash  transactions:                                                                                                                          |       |                                      |       |   |   |   |   |
| Non-cash transactions are described in Notes 2,  13 and 15.                                                                                      |       |                                      |       |   |   |   |   |

 

See accompanying notes to consolidated financial statements.

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**SAMSONITE CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJanuary 31, 2007 and 2006Dollars and Euros in thousands, except per share amounts**

**(1)**   Summary of Significant AccountingPolicies

*(a)*   GeneralBusiness

The principal activity ofSamsonite Corporation and subsidiaries (the “Company”) is the design,manufacture and distribution of luggage, business and computer bags, outdoorand casual bags, and travel-related products throughout the world,primarily under the *Samsonite®, SamsoniteBlack Label®* and *AmericanTourister®* brand names and other owned and licensed brand names,such as *Lacoste®,**Timberland®* and *Lambertson Truex*. The principal luggage customers of theCompany are department/specialty retail stores, mass merchants, catalogshowrooms and warehouse clubs. The Company also sells its luggage, casual bags,business cases and other products through its Company-operated retailstores.

*(b)*   Principles of Consolidation

The consolidated financial statements include thefinancial statements of Samsonite Corporation and its wholly-owned and majority-ownedsubsidiaries. All significant intercompany balances and transactions have beeneliminated in consolidation. The Company’s foreign subsidiaries have fiscalyear ends of December 31 and the results are consolidated up to that date.

Minority interests consistof other stockholders’ ownership interests in majority-owned subsidiariesof the Company.

*(c)*   Use of Estimates

The preparation ofconsolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities, disclosure of contingent assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ significantlyfrom those estimates.

*(d)*   Cash Equivalents and Restricted Cash

The Company considers allhighly liquid instruments with original maturities of three months or less tobe cash equivalents. As of January 31, 2007 and 2006, the Company had norestricted cash.

*(e)*   Trade Accounts Receivable and Allowances forDoubtful Accounts

Trade accounts receivable are recorded at the invoicedamount and do not bear interest. The Company’s accounts receivable are net ofan allowance for doubtful accounts. The allowance for doubtful accounts is theCompany’s best estimate of the amount of potential credit losses. The allowancefor doubtful accounts is reviewed by management and is adjusted for factorssurrounding the credit risk of specific customers, historical trends andmacroeconomic considerations. The Company provides allowances againstreceivables from specific customers in addition to a general allowance foramounts related to unidentified losses. Returns and customer allowances areadjusted for estimates by management based upon an assessment of historicaltrends, relevant product life cycles, information from customers, 

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and specific promotionalactivities related to current sales activity. In the event that actual lossesdiffer from the Company’s estimates, or there is an increase in exposure relatingto sales to specific customers, results of future periods may be impacted.

With respect to tradereceivables, concentration of credit risk is limited due to the diversity inthe Company’s customer base and geographic areas covered by the Company’s operations.

*(f)*   Inventories

The Company valuesinventories at the lower of cost, generally using the first-in, first-out (“FIFO”)method, or market. The Company writes down the cost of excess, slow moving andobsolete inventory to estimated net realizable value. If actual demand ormarket conditions are less favorable than those projected by management,additional inventory write-downs may be required.

*(g)*   Impairment of Long-lived Assets and Assets to beDisposed Of

Property, plant and equipment and other long-livedassets, including amortizable intangible assets, capital leases, long-termprepaid assets and other long-lived assets held and used, are reviewed forimpairment whenever events or circumstances indicate that the carrying valuemay not be recoverable. Recoverability is tested by comparing expectedundiscounted cash flows from the long-lived asset or group of long-lived assetsto the carrying value of the asset(s); if the undiscounted cash flows are lessthan the carrying value, an impairment loss is recorded to write-down thecarrying value to estimated fair value. Fair value is estimated based on thebest information available: quoted market prices, estimated prices for similarassets, or valuation techniques such as discounted cash flow models.

Assets to be disposed ofare separately presented in the consolidated balance sheets and reported at thelower of the carrying amount or fair value, less costs to sell, and are nolonger depreciated.

*(h)*   Property, Plant and Equipment

Property plant and equipment are stated at cost.Assets under capital leases are stated at the present value of the futureminimum lease payments. Improvements which extend the life of an asset arecapitalized. Maintenance and repair costs are expensed as incurred.

Depreciationand amortization are provided on the straight-line method over the estimateduseful life of the asset or the lease term, if applicable, as follows:

| Buildings                       |   | 20 to 30 years |   |
|---------------------------------|--------|----------------|--------|
| Machinery,  equipment and other |   | 4 to 13 years  |   |
| Computer software               |   | 3 to 9 years   |   |
| Leasehold improvements          |   | 3 to 20 years  |   |

 

*(i)*   Intangible Assets

Intangible assets consist of goodwill, tradenames,licenses, patents, leasehold rights and other intangible assets. Intangibleassets which are considered to have an indefinite life are not amortized butare tested for impairment at least annually or more frequently if events orcircumstances indicate that the asset may be impaired. In connection with theadoption of fresh-start reporting at June 30, 1993, the Company wasrequired to adjust intangible assets to fair value.

Intangibleassets which have a finite life are amortized over their estimated useful livesas follows:

| Patents,  trademarks and other |   | 4 to 13 years |   |
|--------------------------------|--------|---------------|--------|
| Leasehold rights               |   | 5 years       |   |

 

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Intangible assets having afinite life are tested for impairment whenever events or circumstances indicatethat the asset may be impaired.

*(j)*   Debt Issuance Costs

Costs incurred inconnection with the issuance of new debt instruments are deferred and includedin other assets. Such costs are amortized as additional interest expense overthe term of the related debt obligation or charged to other expense on apro-rata basis as the related debt is retired.

*(k)*   Per Share Data

The Company computes both “basic” and “diluted”earnings per share information for inclusion in the consolidated financial statements.Basic earnings per share is computed by dividing net income (loss) to commonstockholders by the weighted average number of common shares outstanding. Forperiods that have income available to common stockholders, diluted earnings pershare is calculated by dividing net income before preferred stock dividends bythe weighted average number of common shares outstanding increased for thepotentially dilutive common shares issuable for stock options, warrants andconvertible preferred stock.

Loss per share—basic and diluted for the years ended January 31,2007, 2006 and 2005 is computed based on the weighted average number of sharesof common stock outstanding during the period of 266,664,942, 226,587,304 and224,764,006, respectively. Basic loss per share and loss per share-assumingdilution are the same for the years ended January 31, 2007, 2006 and 2005because the net loss to common stockholders causes potentially dilutive commonshares to be antidilutive.

Antidilutive common stockequivalents include: options to purchase 70,743,986, 69,975,758 and 55,242,713shares of common stock at January 31, 2007, 2006 and 2005, respectively;outstanding warrants to purchase approximately 15,515,892 shares of commonstock at an exercise price of $0.515 per share at January 31, 2007, and anexercise price of $0.75 per share at January 31, 2006 and 2005; warrantsto purchase 1,061,012 shares of common stock at an exercise price of $10.17 pershare at January 31, 2007, warrants to purchase 828,356 shares of commonstock at an exercise price of $13.02 per share at January 31, 2006 and2005; and preferred stock convertible into 26,191 common shares, 461,861,317common shares and 413,349,524 common shares at January 31, 2007, 2006 and2005, respectively.

*(l)*   Derivative Financial Instruments

The Company accounts for derivative financialinstruments in accordance with the provisions of Statement of FinancialAccounting Standards No. 133, *Accountingfor Derivative Instruments and Hedging Activities* (“SFAS 133”),and its corresponding amendments under SFAS No. 138, *Accounting for Certain Derivative Instruments andCertain Hedging Activities, an amendment to SFAS 133* (“SFAS 138”)and SFAS No. 149, *Amendment of SFAS No. 133on Derivative Instruments and Hedging Activities* (“SFAS 149”).SFAS 133 requires the Company to measure all derivatives at fair value andto recognize them in the consolidated balance sheet as an asset or liability,depending on the Company’s rights or obligations under the applicablederivative contract. For derivatives designated as fair value hedges, thechanges in the fair value of both the derivative instrument and the hedged itemare recorded in earnings. For derivatives designated as cash flow hedges, theeffective portions of changes in fair value of the derivative are reported inother comprehensive income (“OCI”) and are subsequently reclassified intoearnings when the hedged item affects earnings. Changes in fair value ofderivative instruments not designated as hedging instruments and ineffectiveportions of hedges are recognized in earnings in the current period.

The Company periodically enters into derivativetransactions to hedge interest rates on floating rate debt obligations andforecasted foreign currency transactions. These derivatives are classified ascash flow hedges. The Company also periodically enters into derivativetransactions to reduce exposure to the effect 

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of exchange rates on theearnings of foreign operations (primarily the effect of changes in the euroexchange rate on the results of the Company’s European operations). Thesederivative transactions to hedge the effect of exchange rates on foreignearnings are not allowed hedge accounting treatment; therefore, the Companyrecords these instruments at fair value and recognizes realized and unrealizedgains and losses in Other Income (Expense)—Net.

Net gains or losses oninterest rate hedges are recorded in interest expense when reclassified toearnings. Net gains or losses on hedges of forecasted foreign currencytransactions are reclassified to revenues or cost of sales depending on thetype of transaction being hedged and are reclassified from other comprehensiveincome as the underlying hedged transactions occur. At January 31, 2007,cash flow hedges for forecasted foreign currency transactions extended until December 2007.The estimated amount of net losses from foreign currency hedges expected to bereclassified into earnings within the next 12 months is $577. The amountultimately reclassified into earnings will be dependent on the effect ofchanges in interest rates and currency exchange rates as derivative agreementsmature. The Company did not enter into any interest rate hedges during theyears ended January 31, 2007, 2006 and 2005.

*(m)*   Foreign Currency Translation, Exchange Risk andFinancial Instruments

The accounts of the Company’s foreign subsidiaries andaffiliates are measured using the local currency as the functional currency.For those operations, assets and liabilities are translated intoU.S. dollars at period-end exchange rates. Income and expense accounts aretranslated at average monthly exchange rates. Net exchange gains or lossesresulting from such translation are excluded from results of operations andaccumulated as a separate component (foreign currency translation adjustment)of stockholders’ deficit. Accumulated other comprehensive income in the equitysection of the balance sheet includes debit balances in cumulative foreigncurrency translation adjustments of $9,066 and $12,000 as of January 2007and 2006, respectively. Gains and losses from foreign currency transactions asa result of operating activities are included in cost of sales and general andadministrative expenses; gains or losses from intercompany payables anddenominated in foreign currencies are included in Other Income (Expense)—Net.

As of January 31,2006, the Company had designated the principal balance of $121,520 of itseuro-denominated senior floating rate notes as a hedge of the foreign currencyexposure related to the investment in its European operations. As of January 31,2007, the principal balance of the senior floating rate notes was $19,120. Forthe years ended January 31, 2007 and 2006, an exchange gain (loss) of$(10,143) and $8,830 from the translation of these notes to U.S. dollars wasincluded in the foreign currency translation adjustment. On February 1,2007 the Company redeemed the remaining principal amount of the senior floatingrate notes.

*(n)*   Revenue Recognition

Revenues from wholesale product sales are recognizedwhen (i) evidence of a sales arrangement at a fixed and determinable priceexists (usually in the form of a sales order), (ii) collectibility isreasonably assured, and (iii) title transfers to the customer. Provisionsare made for estimates of markdown allowances, warranties, returns anddiscounts at the time product sales are recognized. Shipping terms arepredominately FOB shipping point (title transfers to the customer at our shippinglocation) except in certain Asian countries where title transfers upon deliveryto the customer. In all cases, sales are recognized upon transfer of title tocustomers. Revenues from retail sales are recognized at the point-of-sale toconsumers.

The Company licenses itsbrand names to certain unrelated third parties as well as certain foreignsubsidiaries and joint ventures. Net sales include royalties earned and salesof licenses to third parties of $14,007, $16,564 and $19,901, for the yearsended January 31, 2007, 2006 and 2005, respectively.

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*(o)*   Stock Based Compensation

In the first quarter offiscal 2007, the Company adopted Statement of Financial Accounting Standards No. 123(revised 2004), *Share-Based Payment,*(“SFAS 123R”). SFAS 123R requires all share-based payments to employees,including grants of employee stock options, to be recognized as compensationexpense in the financial statements based on their fair values. Prior to fiscal2007, the Company accounted for its stock-based employee compensationarrangements using the intrinsic value method in accordance with the provisionsof Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees*, and FASBInterpretation No. 44, *Accounting forCertain Transactions Involving Stock Compensation—An Interpretation of APB 25*,and disclosed the effect on net income (loss) and earnings (loss) per share asif the Company had applied the fair value recognition provisions of SFAS 123R.See Note 13.

*(p)*   Advertising Expense

Costs for producing mediaadvertising are deferred until the related advertising appears in print ortelevision media, at which time such costs are expensed. Other advertisingcosts are expensed as incurred. Cooperative advertising costs associated withcustomer support programs giving the Company an identifiable advertisingbenefit equal to at least the amount of the advertising allowance are accruedand charged to selling, general and administrative expenses when the relatedrevenues are recognized. Cooperative advertising expense was approximately$23,787, $24,779 and $21,149 during the years ended January 31, 2007, 2006and 2005, respectively. Advertising expense (including cooperative advertising)was approximately $67,500, $63,600 and $50,600 during the years ended January 31,2007, 2006 and 2005, respectively. Promotional expense (including catalogdevelopment, trade fairs, sales samples, brochure inserts and point of displaymaterials) was approximately $10,000, $7,100 and $6,700 during the years ended January 31,2007, 2006 and 2005, respectively. From time to time, the Company offersvarious types of incentive arrangements such as cash or payment discounts,rebates or free products. All such incentive arrangements are accrued andreduce reported revenues when incurred.

*(q)*   Reclassifications

Certain reclassificationswere made to the consolidated financial statements for prior periods to conformto the January 31, 2007 presentation.

*(r)*   Warranties

The Company’s warrantyreserves are recorded on the consolidated balance sheet to reflect contractualliabilities relating to warranty commitments to customers. Warranty coverage ofvarious lengths and terms is provided to customers depending on standardofferings. An estimate for warranty expense is recorded at the time of salebased on historical warranty return rates and repair costs. The Company’swarranty reserves are not significant in any given year.

*(s)*   Software Purchase and Development Costs

The Company capitalizesthe costs of purchased software and costs to configure, install and testsoftware. Software assessment and evaluation, process reengineering, dataconversion, training, maintenance and ongoing software support costs areexpensed.

Capitalized software isamortized over its estimated useful life, typically three to nine years.Amortization expense was $2,620, $2,107 and $1,514 in fiscal 2007, 2006 and2005, respectively, and is included in selling, general and administrativeexpense. The unamortized balance of capitalized software was $10,525 and $9,010at January 31, 2007 and 2006, respectively.

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*(t)*   Cost of Sales and Selling, General andAdministrative Expense

The Company includes thefollowing types of costs in cost of goods sold: direct product purchase andmanufacturing costs, duties, freight-in, receiving, inspection, internaltransfer costs, and procurement and manufacturing overhead. The Companyincludes the following types of costs in selling, general and administrativeexpenses (“SG&A”): warehousing, order entry, billing, credit, freight-out,warranty, salaries and benefits of administrative and sales personnel, rent,insurance, taxes, office supplies, professional fees, travel, communications,advertising, investor relations, public company expenses and other expenses ofa general and administrative nature not directly related to the cost ofacquiring or manufacturing its products. Other comparable companies may includewarehousing, freight-out and other types of costs that the Company includes inSG&A in cost of goods sold.

*(u)*   Income Taxes

The Company uses the asset and liability method fordetermining income taxes, under which current and deferred tax liabilities andassets are recorded in accordance with enacted tax laws and rates. Under thismethod, the amounts of deferred tax liabilities and assets at the end of eachperiod are determined using the tax rate expected to be in effect when taxesare actually paid or recovered.

Deferred income taxes are provided for the estimatedincome tax effect of temporary differences between financial and tax bases inassets and liabilities. Deferred tax assets are also provided for certain taxcredit carryforwards. A valuation allowance to reduce deferred tax assets isestablished when it is more likely than not that some portion or all of thedeferred tax assets will not be realized.

The Company intends to indefinitely reinvest certainearnings of our foreign subsidiaries in operations outside the U.S., andaccordingly, income taxes have not been provided on such earnings. The Companydoes provide U.S. and additional foreign taxes on earnings anticipated to berepatriated from foreign subsidiaries.

We are subject to the jurisdiction of numerousdomestic and foreign tax authorities, as well as to tax agreements and treatiesamong these governments. Operations in these different jurisdictions are taxedon various bases. Determination of taxable income in any jurisdiction requiresthe interpretation of the related tax laws and regulations and the use ofestimates and assumptions regarding significant future events, such as theamount, timing and character of deductions, permissible revenue recognitionmethods under the tax law and the sources and character of income and taxcredits. Changes in tax laws, regulations, agreements and treaties, foreigncurrency exchange restrictions or our level of operations or profitability ineach taxing jurisdiction could have an impact upon the amount of income taxesprovided during any given year. The Company calculates current anddeferred taxes based on the probable tax treatment of transactions under theprovisions of existing tax law and regulations.

Tax filings for variousperiods are subject to audit by tax authorities in most jurisdictions where theCompany conducts business. These audits may result in assessments of additionaltaxes that are resolved with the authorities or potentially through the courts.

**(2)**   Distributionto Stockholders and Refinancing

*(a)*   Fiscal 2007 Distribution

During fiscal 2007, theCompany made a special cash distribution to stockholders in an aggregate amountof $175,000, or approximately $0.23 per equivalent common share, (the “Distribution”),consisting of dividends of $53,307 on the Company’s common stock, dividends of$116,127 paid in respect of dividend participation rights of the Company’s thenoutstanding convertible preferred stock, and dilution adjustment payments of$5,566 to the holders of certain of the Company’s outstanding stock options. Inconnection with the Distribution, the Company entered into a new senior creditagreement, consisting of a 

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$450,000term loan facility and an $80,000 revolving credit facility, and completedtender offers (the “Tender Offers”), for its $164,970 outstanding 87¤8%Senior Subordinated Notes due 2011 (the “Senior Subordinated Notes”), and$131,663 outstanding Floating Rate Senior Notes due 2010 (the “Floating RateNotes”). The proceeds of the term loan facility, together with a portion of theproceeds of the revolving credit facility and cash on hand, were used tofinance the Distribution and to retire the $164,710 aggregate principal amountof Senior Subordinated Notes and $112,543 aggregate principal amount ofFloating Rate Notes that were purchased pursuant to the Tender Offers. OnFebruary 1, 2007, after the end of fiscal 2007, the Company redeemed andretired an additional $19,120 aggregate principal amount of the Floating RateNotes. Pursuant to the terms of the certificate of designation governing theconvertible preferred stock, the Distribution accelerated dividends on theconvertible preferred stock through June 15, 2007. During fiscal 2007, theCompany accrued additional dividends of $6,272 as a result of thisacceleration. In connection with the Distribution, holders of 159,071 shares ofthe convertible preferred stock converted their shares into 514,832,157 sharesof common stock effective as of January 4, 2007. As a result, at January 31,2007, there were 11,000 outstanding shares of convertible preferred stock.

*(b)  *Fiscal 2005 Refinancing

During fiscal 2005, theCompany retired $14,600 of its 103¤4% SeniorSubordinated Notes (the “103¤4%Notes”) through an open market purchase at a price of 103.50% of the principalamount, and on May 25, 2004, the Company commenced an offer to purchaseand consent solicitation for the purpose of retiring and refinancing theremaining principal balance of the 103¤4%Notes of $308,300. Holders of the 103¤4%notes who tendered their 103¤4%notes prior to June 8, 2004 received a total tender offer consideration of$1.04267 per $1.00 of principal amount plus accrued and unpaid interest. Notesthat remained outstanding following the expiration of the tender offer onJune 8, 2004 were redeemed on July 11, 2004 at a redemption price of$1.035833 per $1.00 of principal amount plus accrued and unpaid interest. Torefinance the 103¤4%Notes and to pay the tender and redemption premiums in connection with theretirement of the 103¤4%Notes, on June 9, 2004 the Company issued €100,000 ($121,520 at January 31,2006) senior floating rate notes due 2010 and $205,000 87¤8% seniorsubordinated notes due 2011. See Note 11 for a description of the seniornotes and the senior subordinated notes. A total of $17,767 of redemptionpremiums, tender and consent solicitation payments, dealer-manager feesand deferred financing costs were charged to Other Income (Expense)—Net inconnection with the repurchase and retirement of the 103¤4% notes.Additionally, a total of $8,055 of deferred financing costs were incurred inconnection with the issuance of the floating rate senior notes and the 87¤8%senior subordinated notes.

*(c)*   2003Recapitalization and Convertible Preferred Stock

The Company’s outstanding convertible preferred stockwas issued to three major investors and the holders of the then outstandingpreferred stock issuance as a result of a July 31, 2003 recapitalizationtransaction. The convertible preferred stock has a dividend rate of 8%, isconvertible into the Company’s common stock at $0.42 per share and had aliquidation preference of $11 and $193,981 at January 31, 2007 and 2006,respectively.

The terms of the convertible preferred stock providethat the 8% dividend rate may increase or decrease on or after July 31,2008 under certain conditions relating to whether accrued and owing dividendshave been paid, the percentage of our outstanding voting stock held by ourmajor stockholders and the number of non-independent members on our board ofdirectors. In the event of a liquidation, change of control, qualified publicoffering of common stock, or qualified recapitalization (all as defined in theCertificate of Designation and Powers governing the terms of the convertiblepreferred stock), the accrual and compounding of dividends for the period up toand including the June 15, 2007 dividend payment date are deemed to haveaccelerated and fully accrued as of the date immediately prior to theliquidation, change of control, qualified public offering of common stock, orqualified recapitalization. The 

F-13

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convertible preferredstock votes on an as-converted basis on all matters submitted to a vote ofcommon stockholders. If we distribute dividends to any class of securities thatare junior to our convertible preferred stock (including common stock), eachholder of convertible preferred stock has the option to elect, in lieu of anadjustment to the conversion price, to participate in such dividend ordistribution pro rata with the holders of the junior securities as if theirshares had been converted immediately before the record date for such dividendor distribution. The Company has the option to redeem the convertible preferredstock at any time after July 31, 2011 at a redemption price of $1,000 pershare plus all accrued and unpaid dividends.

The Company is a party toa stockholders agreement with the three major investors relating to theownership rights and corporate governance of the Company. Pursuant to the termsof this agreement, the major stockholders agreed to take all actions in theirpower to elect nominees selected by them to our board of directors. Inaddition, the Company’s ability to take certain actions, including amending itscharter, commencing bankruptcy proceedings, and taking certain corporateactions (including debt incurrences, stock issuances, acquisitions, asset salesand the like), is subject to the written consent of either all or two-thirds(depending on the action) of the major stockholders so long as the majorstockholders collectively continue to hold 25% or more of our outstanding votingstock. In connection with this agreement, the Company agreed to pay certainexpenses of the major stockholders in order to register their shares in thepublic markets.

**(3)**   JointVenture Acquisitions

The Company acquired majority interests in threeentities during the year ended January 31, 2007: Lambertson Truex, LLC (“LT”);Samsonite Australia PTY Limited (“SA”); and Samsonite (Thailand) CompanyLimited (“ST”).

On July 6, 2006, the Company acquired a 63%interest in LT, a newly formed joint venture between the Company and LambertsonTruex, Inc., designers and distributors of high-end purses, shoes andother accessories for $2,368 including costs of the acquisition. The Companyaccounted for the purchase as a business combination. The total purchase pricewas allocated to the Company’s proportionate share of assets acquired andliabilities assumed and resulted in the allocation of $3,563 to the LambertsonTruex trademark. The trademark value will be amortized on a straight-line basisover an estimated useful life of fifteen years.

On July 27, 2006, the Company acquired a 70%interest in SA, an Australian company which has been the Company’s long-timedistributor of Samsonite products in Australia for approximately $10,057,including costs of the acquisition. The Company accounted for the purchase as abusiness combination. The purchase price has been allocated to the Company’sproportionate share of assets acquired and liabilities assumed and resulted inthe allocation of approximately $8,733 to intangible assets, including $8,096to goodwill.

On July 1, 2006, ST,a newly formed corporation, commenced distributing Samsonite products inThailand. The Company subscribed to 60% of the shares in ST for a price of $321and the former distributor of Samsonite products in Thailand subscribed to theremaining 40% of the shares for a price of approximately $210. The Company andthe minority interest shareholders in LT, SA and ST have entered intoagreements governing the operation of the joint ventures. These agreementsinclude certain requirements for the Company to buy a portion or all of theminority interests at future dates. The value of conditional purchaserequirements is currently de minimus and the value of unconditional purchaserequirements is not significant and is classified as a long-term liability.

F-14

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**(4)**   AssetImpairment and Provision for Restructuring Operations

*Fiscal 2007*

During fiscal 2007, the Company recorded restructuringcharges in its European and U.S. operations totaling $3,775, asset impairmentcharges of $1,623, and $1,704 of restructuring related expenses that areincluded in cost of goods sold (inventory writedowns, consulting expenses andother).

The fiscal 2007 European restructuring charge relatesto the closure on June 30, 2006 of the Company’s softside manufacturingplant in Samorin, Slovakia. The closure was the result of the Company’scontinuing consolidation of its softside manufacturing capacities and itstransition from sourcing manufactured products from Company-owned and operatedfacilities to sourcing manufactured products from third-party manufacturers.The Company recorded a provision for restructuring operations of $1,277 foremployee severance costs, which relates to the approximately 360 employees whoworked at the plant, and an asset impairment charge of $1,623, which relates tothe writedown of real estate, machinery and equipment associated with theplant. The Company also incurred restructuring costs related to the Slovakianplant closure of approximately $1,045 for inventory writedowns, consulting andother expenses that were charged to cost of sales during the year ended January 31,2007.

The fiscal 2007 U.S.restructuring charge relates to the planned closure of the Company’s Denver,Colorado facilities, consolidation of its corporate functions in its Mansfield,Massachusetts office and planned relocation of distribution functions to thesoutheast region of the U.S. The Company expects the consolidation andrelocation to be completed by approximately April 30, 2008. In connectionwith the consolidation and relocation, the Company expects to incur severanceand retention costs of approximately $3,700 relating to approximately 210employees who will be affected by the relocation and consolidation. Theseverance and retention costs are being accrued monthly over the expected periodemployees must remain employed to receive severance and retention benefitsuntil December 31, 2007. During fiscal 2007, severance and retentionbenefits of $2,498 were accrued. The Company also expects that it will incurapproximately $3,000 of costs for new employee training, employee relocationand recruiting and expenses of moving inventory and distribution systems whichwill be expensed as incurred.

*Fiscal 2006*

A restructuring charge was incurred in the Europeansegment in connection with the August 31, 2005 sale of the Henin-Beaumont,France facility (the “H-B site”). The Company made cash payments to thepurchaser of $9,923 and assumed an additional liability of $1,421, which was tobe paid over a 24-month period representing the assumption by thepurchaser of the Company’s liability and responsibility for pension and socialcosts for the 206 employees at the H-B site. A restructuring charge of $8,666was recorded which represents the amount of cash payment obligations lessamounts previously accrued for pension and other benefit liabilities for theH-B site employees. The Company also incurred legal and consulting costs ofapproximately $1,171 related to the sale of the H-B site that are included incost of sales for the year ended January 31, 2006. An asset impairmentcharge of $5,450 was also recorded upon the decision to sell the H-B site forthe write-off of the net book value of the H-B site property, plant andequipment sold to the purchaser (See Note 17).

The Company also relocated its softside developmentcenter from Torhout, Belgium to its Oudenaarde, Belgium facility and eliminatedthe remaining positions at its Tres Cantos, Spain manufacturing facility. Eachfacility had been significantly downsized and restructured over the past severalyears. A restructuring charge of $1,389 was recorded related to severanceobligations for 18 employees terminated as a result of these actions.

F-15

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Previously accruedrestructuring charges of $207 related to North American and Latin Americanrestructuring were reversed and recorded as a credit to restructuring chargesbecause it was determined the original restructuring was over-accrued.

*Fiscal 2005*

The Company recorded a restructuring provision of$3,390 for the closure of the Tres Cantos, Spain manufacturing plant andseverance costs associated with approximately 40 positions that wereeliminated. An asset impairment provision of $671 was also recorded towrite-down costs related to a project to convert an idle U.S. factory to awarehouse. The Company also recorded a charge of $685 for lease terminationcosts related to the closure of the Nogales, Mexico production facility.Production at this facility ceased during July 2004 and the facilitieswere vacated during the third quarter. The Company recorded a restructuringprovision of $1,788 related to severance for the elimination of approximately96 positions in the Company’s Americas operations. At January 31,2007, these restructurings had been completed and no restructuring accrualsremain.

Thefollowing is a summary of restructuring accruals by segment for the three yearsended January 31, 2007:

| ** **                                                        | ** ** | **Balance at  Beginning of  Year** | ** ** | **Additions  (Reversals)  Net** | ** ** | **Payments** | ** ** | **Exchange  Rate and  Other** | ** ** | **Balance at  End of Year** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------|------------|--------------|------------|------------------------------------|------------|--------------------------------------------|------------|
| **Year ended January 31,  2007**                             | ** ** |                                         | ** ** | ** **                      |       |         | ** ** | ** **                         |       |                                       | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| North America                                                     |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Severance and termination benefits                                |       |                                         | $          | 132                             | ** ** |         |       | 2,498                              |       |                                       |       | (256 | ) |   |   | 113 |   |   |   | 2,487 | ** ** |   |
| Europe                                                            |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Manufacturing restructuring, severance and other                  |       |                                         | 1,668      | ** **                      |       |         | 1,277      |                               |       |                                       | (1,543     | ) |   |   | 111 |   |   |   | 1,513 | ** ** |   |
|                                                              |       |                                         | $          | 1,800                           | ** ** |         |       | 3,775                              |       |                                       |       | (1,799 | ) |   |   | 224 |   |   |   | 4,000 | ** ** |   |
| **Year ended January 31,  2006**                             | ** ** |                                         | ** ** | ** **                      |       |         | ** ** | ** **                         |       |                                       | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| North America                                                     |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Severance and termination benefits                                |       |                                         | $          | 872                             | ** ** |         |       | (183                               | )          |                                       |       | (513 | ) |   |   | (44 | ) |   |   | 132 | ** ** |   |
| Europe                                                            |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Manufacturing restructuring, severance and other                  |       |                                         | 88         | ** **                      |       |         | 10,056     |                               |       |                                       | (8,458     | ) |   |   | (18 | ) |   |   | 1,668 | ** ** |   |
| Latin America                                                     |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Severance and other                                               |       |                                         | 660        | ** **                      |       |         | (24        | )                                  |       |                                       | (652       | ) |   |   | 16 |   |   |   | — | ** ** |   |
|                                                              |       |                                         | $          | 1,620                           | ** ** |         |       | 9,849                              |       |                                       |       | (9,623 | ) |   |   | (46 | ) |   |   | 1,800 | ** ** |   |
| **Year ended January 31,  2005**                             | ** ** |                                         | ** ** | ** **                      |       |         | ** ** | ** **                         |       |                                       | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| North America                                                     |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Severance and termination benefits                                |       |                                         | $          | —                          | ** ** |         |       | 1,130                              |       |                                       |       | (254 | ) |   |   | (4 | ) |   |   | 872 | ** ** |   |
| Europe                                                            |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Manufacturing restructuring, severance and other                  |       |                                         | 25         | ** **                      |       |         | 3,390      |                               |       |                                       | (3,334     | ) |   |   | 7 |   |   |   | 88 | ** ** |   |
| Latin America                                                     |       |                                         |       | ** **                      |       |         |       |                               |       |                                       |       |   |   |   |   |   |   |   |   | ** ** |   |
| Nogales, Mexico manufacturing restructuring,  severance and other |       |                                         | 1,768      | ** **                      |       |         | 658        |                               |       |                                       | (1,768     | ) |   |   | 2 |   |   |   | 660 | ** ** |   |
| Lease termination                                                 |       |                                         | —     | ** **                      |       |         | 685        |                               |       |                                       | (685       | ) |   |   | — |   |   |   | — | ** ** |   |
|                                                              |       |                                         | $          | 1,793                           | ** ** |         |       | 5,863                              |       |                                       |       | (6,041 | ) |   |   | 5 |   |   |   | 1,620 | ** ** |   |

 

F-16

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**(5)**   Inventories

Inventoriesconsisted of the following at January 31, 2007 and 2006:

| ** **      | ** ** | **January 31,** | ** ** |
|-----------------|------------|----------------------|------------|
| ** **      | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Raw materials   |       | $                    | 11,312     |   | 12,494 |   |
| Work in process |       | 2,384                |       | 2,877 |   |
| Finished goods  |       | 152,071              |       | 118,312 |   |
|            |       | $                    | 165,767    |   | 133,683 |   |

 

**(6)**   AssetsHeld for Sale

Assetsheld for sale consisted of the following at January 31, 2007 and 2006:

| ** **            | ** ** | **January 31,** | ** ** |
|-----------------------|------------|----------------------|------------|
| ** **            | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Stratford,  Canada(a) |       |                 | $          | — |   |   | 1,515 |   |
|                       |            |                      |            |  |  |  |  |  |

----

(a)           TheCompany sold its facility in Stratford, Canada and leased back part of thefacility in April 2006. The sales price was approximately $6,300.

**(7)**   Property,Plant and Equipment

Property,plant and equipment consisted of the following at January 31, 2007 and2006:

| ** **                                              | ** ** | **January 31,** | ** ** |
|---------------------------------------------------------|------------|----------------------|------------|
| ** **                                              | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Land                                                    |       | $                    | 6,596      |   | 6,114 |   |
| Buildings                                               |       | 58,870               |       | 56,963 |   |
| Machinery,  equipment, leasehold improvements and other |       | 140,229              |       | 118,689 |   |
| Computer software                                       |       | 23,587               |       | 19,910 |   |
|                                                    |       | 229,282              |       | 201,676 |   |
| Less accumulated  depreciation and amortization         |       | (125,283             | )          | (112,576 | ) |
|                                                    |       | $                    | 103,999    |   | 89,100 |   |

 

Property,plant and equipment includes property and equipment under capital leases asfollows at January 31, 2007 and 2006:

| ** **                                              | ** ** | **January 31,** | ** ** |
|---------------------------------------------------------|------------|----------------------|------------|
| ** **                                              | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Buildings                                               |       | $                    | 96         |   |   | — |   |   |
| Machinery,  equipment, leasehold improvements and other |       | 668                  |       |   | 104 |   |   |
|                                                    |       | 764                  |       |   | 104 |   |   |
| Less accumulated  amortization                          |       | (300                 | )          |   | (73 | ) |   |
|                                                    |       | $                    | 464        |   |   | 31 |   |   |

 

F-17

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**(8)**   IntangibleAssets

Intangibleassets consisted of the following at January 31, 2007 and 2006:

| ** **                                   | ** ** | **2007**  | ** ** | **2006**                      | ** ** |
|----------------------------------------------|------------|-----------|------------|-------------------------------|------------|
| ** **                                   | ** ** | **Gross** | ** ** | **Accumulated  Amortization** | ** ** | **Net** | ** ** | **Gross** | ** ** | **Accumulated  Amortization** | ** ** | **Net** | ** ** |
| **Intangibles  subject to amortization**     |       |      |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Licenses                                     |       | $         | 8,131      |                          |       | (7,854 | ) |   | 277 |   | 7,762 |   |   | (7,762 | ) |   | — |   |
| Patents,  trademarks and other               |       | 9,839     |       |                          | (4,135     | ) |   | 5,704 |   | 4,949 |   |   | (3,274 | ) |   | 1,675 |   |
| Leasehold rights                             |       | 1,370     |       |                          | (981       | ) |   | 389 |   | 2,030 |   |   | (1,482 | ) |   | 548 |   |
| Unamortized prior  service cost              |       | —    |       |                          | —     |   |   | — |   | 1,609 |   |   | — |   |   | 1,609 |   |
|                                         |       | $         | 19,340     |                          |       | (12,970 | ) |   | 6,370 |   | 16,350 |   |   | (12,518 | ) |   | 3,832 |   |
| **Intangibles  not subject to amortization** |       |      |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Tradenames                                   |       |      |       |                          |       |   |   | 84,143 |   |   |   |   |   |   |   | 84,143 |   |
| Goodwill                                     |       |      |       |                          |       |   |   | 12,313 |   |   |   |   |   |   |   | 3,683 |   |
|                                         |       |      |       |                          |       |   |   | 96,456 |   |   |   |   |   |   |   | 87,826 |   |
| Total                                        |       |      |       |                          |       |   |   | $ | 102,826 |   |   |   |   |   |   |   | 91,658 |   |
|                                              |            |           |            |                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

As described in Note 3, the Company allocated $3,563to trademark rights as a result of the Lambertson Truex transaction and theacquisition of a majority interest in the Company’s Australian distributorresulted in the allocation of $8,096 to goodwill and $637 to licenses andtrademarks. During fiscal 2007, the Company recorded a decrease in intangibleassets of $1,609 in connection with the adoption of SFAS 158 (seeNote 15).

There were no significant acquisitions of intangibleassets for the fiscal year 2006. Changes in the exchange rate between the U.S.dollar and other foreign currencies, primarily the euro, affect the reportedgross and net book value of the Company’s intangible assets.

Amortization expense (notincluding impairment provisions) for intangible assets for the years endedJanuary 31, 2007, 2006 and 2005 was $1,193, $862 and $2,358, respectively.Future amortization expense for the net carrying amount of intangible assets atJanuary 31, 2007 is estimated to be $1,668 in fiscal 2008, $1,154 infiscal 2009, $494 in fiscal 2010, $454 in fiscal 2011, $303 in fiscal 2012 and$2,297 beyond 2012.

**(9)**   OtherAssets and Long-term Receivables

Otherassets and long-term receivables consisted of the following at January 31,2007 and 2006:

| ** **                                           | ** ** | **Year ended  January 31,** | ** ** |
|------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                           | ** ** | **2007**                              | ** ** | **2006** | ** ** |
| Deferred bank and  subordinated note financing costs |       | $                                     | 6,105      |   | 7,372 |   |
| Deposits                                             |       | 6,808                                 |       | 3,181 |   |
| Long-term  deferred taxes                            |       | 4,038                                 |       | 263 |   |
| Long-term  receivables                               |       | 559                                   |       | 2,522 |   |
| Other                                                |       | 683                                   |       | 61 |   |
|                                                 |       | $                                     | 18,193     |   | 13,399 |   |

 

**(10)**   Short-termDebt

As of January 31,2007 and 2006, the Company had $12,096 and $9,396, respectively, of short-termdebt outstanding under unsecured foreign lines of credit. As ofJanuary 31, 2007, the weighted average interest rate on foreign short-termborrowings was 9.6%. Certain foreign subsidiaries had unused available 

F-18

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lines ofcredit for working capital, discounting trade acceptances and issuing bankguaranties of approximately $115,307 as of January 31, 2007; however, theterms of the Company’s senior credit facility and senior subordinated noteslimit additional amounts which could be borrowed under such foreign creditfacilities.

**(11)**   Long-termObligations

Long-termobligations represent long-term debt and capital lease obligations as followsat January 31, 2007 and 2006:

| ** **                                  | ** ** | **January 31,** | ** ** |
|---------------------------------------------|------------|----------------------|------------|
| ** **                                  | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Senior credit  facility(a)                  |       | $                    | 468,000    |   | — |   |
| Floating rate  senior notes(a)(b)           |       | 19,120               |       | 121,520 |   |
| 87¤8%  senior subordinated notes(a)(b) |       | 260                  |       | 174,925 |   |
| Other  obligations(c)                       |       | 1,811                |       | 1,348 |   |
| Capital lease  obligations(d)               |       | 628                  |       | 39 |   |
|                                        |       | 489,819              |       | 297,832 |   |
| Less current  installments                  |       | (25,512              | )          | (1,048 | ) |
|                                        |       | $                    | 464,307    |   | 296,784 |   |

 

*(a)*   Senior Credit Facility

During fiscal 2007, the Company closed a series oftransactions discussed in Note 2. As part of these transactions, the Companyretired its Floating Rate Notes and Senior Subordinated Notes and replaced thethen existing senior credit facility with a new senior credit facility (the“Senior Credit Facility”) consisting of a $450,000 senior secured term loanfacility (“Term Loan Facility”) and an $80,000 senior secured revolving creditfacility (“Revolving Credit Facility”), including a letter of creditsub-facility. The Company incurred costs related to the origination of the newcredit facility of $6,216 that were deferred and will be amortized to interestexpense over the term of the new credit facility.

The Term Loan Facility consists of a $450,000 loan,which expires on December 20, 2013. In certain circumstances, the Companymay elect to request an additional term loan commitment under the Senior CreditFacility of up to $200,000. The Term Loan Facility requires principalrepayments in the amount of $1,125 on March 31, June 30, September 30and December 31 of each year with such payments ending on September 30,2013, and $419,625 due on December 20, 2013.

The Revolving Credit Facility consists of a portionwhich may be borrowed by the Company in U.S. dollars, euros or sterlingtotaling the U.S. dollar equivalent of $50,000 and a portion which may beborrowed by the Company’s European subsidiary in euros or sterling totaling theeuro equivalent of €22,700 (equivalent to$30,000 on January 31, 2007). The Revolving Credit Facility expires on December 20,2012. As of January 31, 2007, there was $18,000 borrowed by the Companyunder the Revolving Credit Facility and $8,700 of letters of credit issued.

Borrowings under the Term Loan Facility and RevolvingCredit Facility accrue interest at rates adjusted periodically depending on theCompany’s financial performance as measured each fiscal quarter and interestrate market conditions. At January 31, 2007, the interest rate on the TermLoan Facility was 7.62% and the interest rate on the Revolving Credit Facilitywas 7.57%. In addition, the Company is required to pay a commitment fee of..375% or .50% (depending on the Company’s financial performance) on the unusedportion of the Revolving Credit Facility. The obligations under the SeniorCredit Facility are secured by substantially all of the Company’s domesticassets and certain foreign assets.

F-19

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Subsequent to January 31, 2007, the Companyentered into a variable to fixed interest rate swap agreement effective March 21,2007 with a notional amount of $225,000, a pay rate of 5.192% and a receiverate based on the three month LIBOR rate. The swap agreement dated February 1,2007 has a five-year term and can be canceled after one year at the option ofthe other party to the swap agreement. The rate the Company receives repricesevery three months.

TheSenior Credit Facility contains financial and other covenants that, among otherthings, limit the Company’s ability to engage in transactions with itsaffiliates, incur any additional debt outside of the Senior Credit Facility,create new liens on any property, make acquisitions, participate in certainmergers, consolidations, acquisitions, liquidations, asset sales, investments,or make distributions or cash dividend payments to its equity holders. TheCompany was in compliance with such covenants as of January 31, 2007.

(b)*   Senior Notes and Senior Subordinated Notes*

The floating rate senior notes have a principal amountof $19,120 at January 31, 2007. Interest is payable quarterly on March 1,June 1, September 1 and December 1 of each year at Euribor plus4.375%. At January 31, 2007, interest was payable on the floating seniorrate notes at 8.0%. During the year ended January 31, 2007, the Companyretired $112,543 of its outstanding Floating Rate Senior Notes. In connectionwith the retirement of the Notes, the Company paid premiums of $2,251 andcharged to Other expense $1,695 of deferred financing costs. On February 1,2007 the Company retired the remaining $19,120 of Floating Rate Senior Notes.

The 87¤8%senior subordinated notes are due June 1, 2011. Interest is payablesemi-annually on June 1 and December 1 of each year. During the yearended January 31, 2007, the Company retired $174,664 outstanding 87¤8%Senior Subordinated Notes due 2011. In connection with the retirement of theNotes, the Company paid premiums of $15,035 and charged to Other expense $2,746of deferred financing costs.

(c)*   Other Obligations*

As of January 31,2007, other obligations consist of various notes payable to banks by foreignsubsidiaries. The obligations bear interest at varying rates and mature in2007.

F-20

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(d)*   Leases and Debt Maturities*

Future minimum paymentsunder non-cancelable capital leases, which relate primarily to property andequipment, and non-cancelable operating leases, primarily for retail floorspace rental, at January 31, 2007 were as follows:

| ** **                                                                  | ** ** | **Capital  Leases** | ** ** | **Operating  Leases** | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------|------------|-----------------------|------------|
| Year ending  January 31:                                               |       |                |       |                  |       |   |   |   |   |
| 2008                                                                        |       |                | $          | 165                   |       |   |   | 33,833 |   |   |
| 2009                                                                        |       |                | 172        |                  |       |   | 26,053 |   |   |
| 2010                                                                        |       |                | 211        |                  |       |   | 20,678 |   |   |
| 2011                                                                        |       |                | 96         |                  |       |   | 15,933 |   |   |
| 2012                                                                        |       |                | 5          |                  |       |   | 14,735 |   |   |
| Thereafter                                                                  |       |                | 1          |                  |       |   | 24,592 |   |   |
| Total minimum lease payments                                                |       |                | 650        |                  |       |   | 135,824 |   |   |
| Less amount  representing interest                                          |       |                | (22        | )                     |       |   |   |   |   |
| Present value of  minimum capital lease payments                            |       |                | 628        |                  |       |   |   |   |   |
| Less current  installments of minimum capital lease payments                |       |                | (49        | )                     |       |   |   |   |   |
| Long-term  obligations under capital leases, excluding current installments |       |                | $          | 579                   |       |   |   |   |   |   |

 

Rentalexpense under cancelable and non-cancelable operating leases consisted of thefollowing:

| ** **          | ** ** | **Year ended January 31,** | ** ** |
|---------------------|------------|-------------------------------------------|------------|
| ** **          | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| Minimum rentals     |       | $                                         | 35,170     |   | 27,402 |   | 25,727 |   |
| Contingent  rentals |       | 1,178                                     |       | 839 |   | 767 |   |
|                |       | $                                         | 36,348     |   | 28,241 |   | 26,494 |   |

 

The Company’s lease obligations primarily consist ofnon-cancelable leases of office, warehouse and retail store space andequipment. Certain of the leases are renewable at the Company’s option. Certainof the leases provide for additional rent payments based on a percentage ofsales. Certain of the leases also contain rent escalation clauses that requireadditional rents in later years of the lease term, which are recognized on astraight-line basis over the lease term.

Aggregatematurities of long-term obligations, including capital leases, at January 31,2007 were as follows:

| **Year  ending January 31:** |   |    |    |
|-----------------------------------|--------|---------|---------|
| 2008                              |   | $       | 25,512  |   |
| 2009                              |   | 4,733   |    |
| 2010                              |   | 4,711   |    |
| 2011                              |   | 4,596   |    |
| 2012                              |   | 4,765   |    |
| Beyond                            |   | 445,502 |    |
| Total                             |   | $       | 489,819 |   |

 

F-21

----

**(12)   OtherLong-Term Liabilities**

Otherlong-term liabilities consisted of the following at January 31, 2007 and2006:

| ** **                                    | ** ** | **January 31,** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|
| ** **                                    | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Pension benefits  under defined benefit plans |       | $                    | 57,445     |   | 54,646 |   |
| U.S.  post-retirement health plan             |       | 15,450               |       | 19,567 |   |
| Accrued stock  compensation                   |       | 4,780                |       | 4,312 |   |
| Other                                         |       | 7,513                |       | 8,437 |   |
|                                          |       | $                    | 85,188     |   | 86,962 |   |

 

**(13)**   StockOptions and Stock Purchase Warrants

The Company has adoptedSFAS 123R, on February 1, 2006, using the modified prospective method.Among other things SFAS 123R requires expensing the fair value of stockoptions, a previously optional accounting method. Under the modifiedprospective method, compensation cost for stock options not vested as of February 1,2006 is recognized based on the grant-date fair value calculated for pro formadisclosure under the previously issued Statement of Financial AccountingStandards No. 123. In accordance with SFAS 123R, the cumulative effect ofthe $1,391 difference between the fair value of liability classified stockawards for deferred compensation agreements under SFAS 123R and the intrinsicvalue method previously used for the awards was recorded as a cumulative effectof a change in accounting principle at February 1, 2006 by reducing theliability for such agreements by $1,391.

*1995 and 1999 StockOption and Incentive Award Plans*

The 1995 Stock Option and Incentive Award Plan (asAmended in 1996) (“the 1995 Plan”) reserves 2,550,000 shares for the issuanceof options as determined by the compensation committee of the Board ofDirectors, but pursuant to its terms no further options may be granted undersuch plan after October 18, 2005. The 1995 Plan provides for the issuanceof a variety of awards, including tax qualified incentive stock options,nonqualified stock options, stock appreciation rights, restricted stock awardsor other forms of awards consistent with the purposes of the 1995 Plan.Incentive stock options must be issued at exercise prices no less than themarket value of the common stock at the date of the grant. Nonqualified stockoptions may be granted at option prices at or below the market value, but notat less than 50% of the market value of the common stock at the date of thegrant. Options granted under the 1995 Plan may vest over a period of not morethan ten years as determined by the compensation committee. At January 31,2007, all awards under the 1995 Plan were nonqualified stock options.

The FY 1999 Stock Option and Incentive Award Plan (the“1999 Plan”) reserves 95,000,000 shares for the issuance of a variety ofawards, including tax qualified incentive stock options, nonqualified stockoptions and shares issued under deferred compensation plans, stock appreciationrights, restricted stock awards or other forms of awards consistent with thepurposes of the 1999 Plan. As of January 31, 2007, awards under the 1999Plan were for either nonqualified stock options or for deferred compensationarrangements. The Company’s Board of Directors has delegated to the AuditCommittee responsibility for administering the 1999 Plan.

The Company has issued different types of stock-basedcompensation awards including in-the-money options, at-the-money options, anddeferred compensation awards payable in shares of common stock or cash at theCompany’s discretion. The vesting of certain of the options was subject toperformance criteria, all of which have been satisfied. All stock option grantsmust be approved by the Audit Committee of the Company’s Board of Directors.Compensation expense related to stock options and deferred compensation awardsof $6,996, $5,497 and $4,031 was recognized for the year ended January 31,2007, 

F-22

----

2006 and 2005,respectively. Amounts credited to additional paid-in capital for equityclassified awards and to accrued liabilities for liability classified awardswere $4,331 and $1,859, $4,007 and $1,490, and $1,209 and $2,822, respectively,during the years ended January 31, 2007, 2006 and 2005. At January 31,2007, the Company has unrecognized fixed compensation expense related to stockbased awards of $11,465 which is expected to be recognized over approximatelytwo years.

Acomparison of reported net income (loss) for the year ended January 31,2007, 2006 and 2005, and pro-forma net income (loss) for the years ended January 31,2006 and 2005, including effects of expensing the fair value of stock options,follows:

| ** **                                                                        | ** ** | **Year ended January 31,** | ** ** |
|-----------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                        | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income (loss)  before cumulative effect of an accounting change, as reported  |       | $                                         | (8,229     | ) | 13,321 |   | (9,698 | ) |
| Net loss to  common stockholders, as reported                                     |       | (145,224                                  | )          | (1,510 | ) | (23,381 | ) |
| Net loss per common share—basic and diluted, as  reported:                   |       |                                      |       |   |   |   |   |
| Net loss to common stockholders before cumulative  effect of an accounting change |       | $                                         | (0.55      | ) | (0.01 | ) | (0.10 | ) |
| Cumulative effect of an accounting change                                         |       | 0.01                                      |       | — |   | — |   |
| Net loss to common stockholders                                                   |       | $                                         | (0.54      | ) | (0.01 | ) | (0.10 | ) |
| Share based compensation expense included in net  income (loss)                   |       | $                                         | 6,996      |   | 5,497 |   | 4,031 |   |
| Pro-forma effects (a):                                                            |       |                                      |       |   |   |   |   |
| Share based  compensation expense, on a pro-forma basis                           |       |                                      |       | $ | 7,523 |   | 4,746 |   |
| Net loss to  common stockholders, on a pro-forma basis                            |       |                                      |       | $ | (3,536 | ) | (24,096 | ) |
| Net loss per common share, on a pro-forma basis:                                  |       |                                      |       |   |   |   |   |
| Basic and diluted                                                                 |       |                                      |       | $ | (0.02 | ) | (0.11 | ) |

----

(a)           Asif the Company applied the fair value based method to expense stock options forthe years ended January 31, 2006 and 2005.

F-23

----

*Stock Option Summary:*

Asummary of stock option award activity follows:

| ** **                            | ** ** | **Shares**  | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term  (in years)** | ** ** | **Aggregate  Intrinsic  Value  (in thousands)** | ** ** |
|---------------------------------------|------------|-------------|------------|-----------------------------------------|------------|-----------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| Outstanding at  February 1, 2004 |       | 1,738,300   |       |                                    | $          | 6.35                                                                  |       |                                                 |       |   |   |   |   |   |   |   |
| Granted                               |       | 54,000,000  |       |                                    | 0.53       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Exercised                             |       | —      |       |                                    | —     |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Forfeited/Expired                     |       | (495,587    | )          |                                    | 6.36       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Outstanding at  January 31, 2005 |       | 55,242,713  |       |                                    | 0.66       |                                                                  |       |                                                 | 9.3        |   |   |   | * |   |   |
| Granted                               |       | 39,600,000  |       |                                    | 0.57       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Exercised                             |       | —      |       |                                    | —     |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Forfeited/Expired/Canceled            |       | (24,866,955 | )          |                                    | 0.60       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Outstanding at  January 31, 2006 |       | 69,975,758  |       |                                    | 0.69       |                                                                  |       |                                                 | 8.6        |   |   |   | * |   |   |
| Granted                               |       | 1,950,000   |       |                                    | 0.73       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Exercised                             |       | (15,000     | )          |                                    | 0.67       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Expired                               |       | (458,022    | )          |                                    | 4.32       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Forfeited                             |       | (708,750    | )          |                                    | 0.57       |                                                                  |       |                                                 |       |   |   |   |   |   |   |
| Outstanding at  January 31, 2007 |       | 70,743,986  |       |                                    | $          | 0.53                                                                  |       |                                                 |       | 7.6 |   |   |   | $ | 43,793 |   |   |
| Exercisable at  January 31, 2007 |       | 24,337,736  |       |                                    | $          | 0.75                                                                  |       |                                                 |       | 7.4 |   |   |   | $ | 11,218 |   |   |

----

*                    The Companyadopted SFAS 123R effective February 1, 2006.

The fair value of eachstock option grant is measured at the date of grant or modification using aBlack-Scholes option-pricing model. The weighted-average grant-date fair valueof options granted or modified during the year ended January 31, 2007,2006 and 2005 was $0.54, $0.36 and $0.23, respectively. The followingassumptions were used in arriving at the fair value of options and stock-baseddeferred compensation awards granted during the year ended January 31,2007, 2006 and 2005: risk-free interest rates of 3.24% to 5.09%; no dividendyield; expected volatility factor of 50% to 61%; and expected lives of 4-5years. The risk free interest rate is based on the rate for a U.S. TreasuryStrip with a term comparable to the expected term of the option. Expectedvolatility is based on historical volatility of the Company’s stock. Theexpected option life is based on historical experience with employee exercisebehavior.

*Stock WarrantsOutstanding*

As of January 31,2007 the Company has warrants outstanding (issued in connection with therecapitalization described in Note 2(c)) to purchase 15,515,892 shares ofcommon stock at an exercise price of $0.515 per share and which are exercisableuntil July 31, 2013. Also outstanding are warrants to purchase 1,061,012shares of common stock at an exercise price of $10.17 per share, which areexercisable until June 2010.

**(14)**   IncomeTaxes

The Company has operations in numerous countries andits tax provision involves many complex variables, including differing taxstructures from country to country and the effect of international earnings onU.S. taxation.

F-24

----

Incometax expense (benefit) attributable to income (loss) from operations consistsof:

| ** **                         | ** ** | **Current** | ** ** | **Deferred** | ** ** | **Total** | ** ** |
|------------------------------------|------------|-------------|------------|--------------|------------|-----------|------------|
| Year ended  January 31, 2007  |       |        |       |         |       |      |       |   |   |
| U.S. federal                       |       | $           | (297       | )            |       | 577       |       |   | 280 |   |
| Foreign                            |       | 32,284      |       |         | (5,402     | )         |       | 26,882 |   |
| U.S. state and local               |       | (143        | )          |         | 156        |      |       | 13 |   |
|                               |       | $           | 31,844     |         |       | (4,669    | )          |   | 27,175 |   |
| Year ended  January 31, 2006: |       |        |       |         |       |      |       |   |   |
| U.S. federal                       |       | $           | 634        |         |       | (1,118    | )          |   | (484 | ) |
| Foreign                            |       | 18,002      |       |         | (641       | )         |       | 17,361 |   |
| U.S. state and local               |       | (643        | )          |         | 282        |      |       | (361 | ) |
|                               |       | $           | 17,993     |         |       | (1,477    | )          |   | 16,516 |   |
| Year ended  January 31, 2005: |       |        |       |         |       |      |       |   |   |
| U.S. federal                       |       | $           | —     |         |       | 629       |       |   | 629 |   |
| Foreign                            |       | 13,869      |       |         | (875       | )         |       | 12,994 |   |
| U.S. state and local               |       | 9           |       |         | 20         |      |       | 29 |   |
|                               |       | $           | 13,878     |         |       | (226      | )          |   | 13,652 |   |

 

Componentsof income (loss) from operations before income taxes and minority interest areas follows:

| ** **      | ** ** | **Year ended January 31,** | ** ** |
|-----------------|------------|-------------------------------------------|------------|
| ** **      | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| United States   |       | $                                         | (43,820    | ) | (3,869 | ) | (28,671 | ) |
| Other countries |       | 72,439                                    |       | 38,588 |   | 36,146 |   |
| Total           |       | $                                         | 28,619     |   | 34,719 |   | 7,475 |   |

 

 

Incometax expense (benefit) attributable to income (loss) before income taxes andminority interest differed from the amounts computed by applying the U.S.federal income tax rate of 35% for fiscal 2007, 2006 and 2005 as a result ofthe following:

| ** **                                                         | ** ** | **Year ended January 31,** | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                         | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| Computed  “expected” tax expense                         |       | $                                         | 10,017     |   | 12,152 |   | 2,616 |   |
| Increase (decrease) in  taxes resulting from:                      |       |                                      |       |   |   |   |   |
| Tax rate differential on foreign earnings                          |       | 5,109                                     |       | (3,485 | ) | 3,956 |   |
| Tax effect of foreign dividends                                    |       | 1,368                                     |       | 301 |   | — |   |
| Tax effect of subpart F income                                     |       | 3,713                                     |       | 6,872 |   | 4,482 |   |
| Foreign tax on US income                                           |       | (531                                      | )          | (410 | ) | (534 | ) |
| Change in valuation allowance                                      |       | 8,423                                     |       | 188 |   | 3,081 |   |
| State taxes                                                        |       | (1,093                                    | )          | 693 |   | (493 | ) |
| Adjustment of reserves related to prior years’ tax  provision |       | (440                                      | )          | (652 | ) | — |   |
| Non-deductible stock compensation                                  |       | 740                                       |       | 1,058 |   | 265 |   |
| Other, net                                                         |       | (131                                      | )          | (201 | ) | 279 |   |
| Income tax expense                                                 |       | $                                         | 27,175     |   | 16,516 |   | 13,652 |   |

 

F-25

----

Thetax effects of temporary differences that give rise to significant portions ofthe net deferred tax liability are presented below:

| ** **                                                       | ** ** | **January 31,** | ** ** |
|------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                       | ** ** | **2007**             | ** ** | **2006** | ** ** | **2005** | ** ** |
| Deferred tax assets:                                             |       |                 |       |   |   |   |   |
| Allowance for doubtful accounts                                  |       | $                    | 2,471      |   | 2,083 |   | 2,503 |   |
| Inventory                                                        |       | 2,756                |       | 2,251 |   | 2,985 |   |
| Other accruals and reserves                                      |       | 18,274               |       | 14,552 |   | 12,338 |   |
| Plant, equipment and intangibles                                 |       | 9,173                |       | 8,204 |   | 8,161 |   |
| Post-retirement benefits                                         |       | 6,422                |       | 7,539 |   | 7,530 |   |
| Pension                                                          |       | 22,059               |       | 20,061 |   | 15,070 |   |
| Net operating loss and minimum tax credit  carryforwards         |       | 54,971               |       | 64,097 |   | 68,420 |   |
| Total gross deferred tax assets                                  |       | 116,126              |       | 118,787 |   | 117,007 |   |
| Less valuation allowance                                         |       | (78,728              | )          | (86,170 | ) | (82,337 | ) |
| Deferred tax assets, net of valuation allowance                  |       | 37,398               |       | 32,617 |   | 34,670 |   |
| Deferred tax  liabilities:                                       |       |                 |       |   |   |   |   |
| Plant, equipment and intangibles due to fresh start  accounting  |       | 28,224               |       | 28,060 |   | 32,039 |   |
| Plant and equipment, due to differences in  depreciation methods |       | 7,457                |       | 7,883 |   | 9,264 |   |
| Intangible assets                                                |       | 7,099                |       | 6,366 |   | 5,620 |   |
| Other                                                            |       | 3,693                |       | 4,290 |   | 3,500 |   |
| Total gross deferred tax liabilities                             |       | 46,473               |       | 46,599 |   | 50,423 |   |
| Net deferred tax  liability                                      |       | $                    | (9,075     | ) | (13,982 | ) | (15,753 | ) |

 

Thecomponents of the net current deferred tax asset, net non-current deferred taxasset and net non-current deferred tax liability were as follows:

| ** **                              | ** ** | **January 31,** | ** ** |
|-----------------------------------------|------------|----------------------|------------|
| ** **                              | ** ** | **2007**             | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net current deferred tax asset:         |       |                 |       |   |   |   |   |
| U.S. federal                            |       | $                    | 3,130      |   | 2,345 |   | 2,091 |   |
| Foreign                                 |       | 6,518                |       | 5,892 |   | 7,740 |   |
| U.S. state and local                    |       | 644                  |       | 415 |   | 209 |   |
|                                    |       | 10,292               |       | 8,652 |   | 10,040 |   |
| Net non-current deferred tax asset:     |       |                 |       |   |   |   |   |
| U.S. federal                            |       | —               |       | — |   | — |   |
| Foreign                                 |       | 4,038                |       | 263 |   | 174 |   |
| U.S. state and local                    |       | —               |       | — |   | — |   |
|                                    |       | 4,038                |       | 263 |   | 174 |   |
| Net non-current deferred tax asset:     |       |                 |       |   |   |   |   |
| U.S. federal                            |       | —               |       | — |   | — |   |
| Foreign                                 |       | —               |       | — |   | — |   |
| U.S. state and local                    |       | —               |       | — |   | — |   |
|                                    |       | —               |       | — |   | — |   |
| Net non-current deferred tax liability: |       |                 |       |   |   |   |   |
| U.S. federal                            |       | (9,136               | )          | (7,774 | ) | (8,639 | ) |
| Foreign                                 |       | (12,531              | )          | (13,771 | ) | (16,464 | ) |
| U.S. state and local                    |       | (1,738               | )          | (1,352 | ) | (864 | ) |
|                                    |       | (23,405              | )          | (22,897 | ) | (25,967 | ) |
| Net deferred tax  liability             |       | $                    | (9,075     | ) | (13,982 | ) | (15,753 | ) |

 

F-26

----

*Valuationallowance.*   Thevaluation allowance decreased by a total of $7,442 during the year ended January 31,2007. Foreign valuation allowances decreased by $3,496, and U.S. valuationallowances decreased by $3,946. In assessing the realizability of deferred taxassets, the Company considers whether it is more likely than not that someportion or all of the deferred tax assets will be realized. The ultimaterealization of deferred tax assets is dependent upon the generation of futuretaxable income during the periods in which those temporary differences becomedeductible. The Company considers the scheduled reversal of deferred taxliabilities, projected future taxable income, and tax planning strategies inmaking this assessment.

At January 31,2007, the Company had net operating loss carryforwards of approximately $20,940for foreign subsidiaries and approximately $117,601 for U.S. income taxpurposes. U.S. net operating loss carryforwards expire at various dates through2027 in accordance with the table below. In fiscal 2000 and in fiscal 2004, theCompany experienced a change in ownership as defined by Section 382 of theInternal Revenue Code. Consequently, utilization of the net operating losscarryforwards is generally subject to an annual limitation of approximately$13,889, as adjusted for unused annual limitations. The U.S. net operating losscarryforwards expire as follows:

| **Expiring January 31,** | ** ** | ** ** | ** ** | **Amount** | ** ** |
|------------------------------------|------------|------------|------------|------------|------------|
| 2019                               |       | $          | 19,872     |       |
| 2020                               |       | 32,918     |       |
| 2022                               |       | 38,183     |       |
| 2023                               |       | 4,704      |       |
| 2024                               |       | 10,171     |       |
| 2025                               |       | 3,087      |       |
| 2027                               |       | 8,666      |       |
|                               |       | $          | 117,601    |       |

 

Deferred income taxes havebeen provided on undistributed earnings of foreign subsidiaries to the extentthat management plans to remit these earnings in the future. Undistributedearnings of foreign subsidiaries and affiliates that are permanently invested,and for which no deferred taxes have been provided, amounted to approximately$58,200 and $16,700 as of January 31, 2007 and 2006, respectively.Determination of the amount of unrecognized deferred U.S. income tax liabilityis not practicable; however, net operating losses or tax credits may beavailable to reduce a portion of the U.S. liability.

**(15)**   Pensionand Other Employee Benefits

TheCompany and certain subsidiaries have pension plans and post retirement healthbenefit plans which provide retirement benefits for eligible employees,generally measured by length of service, compensation and other factors. On January 31,2007, the Company adopted the recognition and disclosure provisions of SFAS No. 158,*Employers Accounting for Defined BenefitPension and Other Postretirement Plans—an amendment of FASB Statements No. 87,88, 106 and 132(R) *(“SFAS 158”). Under SFAS 158,gains and losses, prior service costs and credits, and any remaining transitionamounts under SFAS No. 87, *Employers’Accounting for Pensions* and SFAS No. 106, *Employers Accounting for Postretirement BenefitsOther Than Pensions* that have not yet been recognized through netperiodic benefit cost are recognized in accumulated other comprehensive income,net of tax effects. The measurement date—the date at which the benefitobligation and plan assets are measured—is required to be the Company’s fiscalyear end. The Company currently utilizes a calendar year-end measurement date. SFAS 158is effective for fiscal years ending after December 15, 2006, except forthe measurement date provisions, which are effective for fiscal years endingafter December 15, 2008. The Company adopted SFAS 158 as of January 31,2007. The initial adoption was reflected as a decrease to the January 31,2007 balance of accumulated other comprehensive income (loss), a component ofstockholders’ equity (deficit), 

F-27

----

and included the elimination of the additional minimumliability, which is no longer required. The following table summarizes theeffect of the required changes in the additional minimum liability as of January 31,2007 prior to the adoptions of SFAS 158 as well as the impact of theinitial adoption of SFAS 158 on the Company’s consolidated balance sheet:

| ** **                            | ** ** | **January 31, 2007**                                                  | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **Before  Additional  Minimum  Liability and  SFAS 158  Adjustments** | ** ** | **Additional  Minimum  Liability  Adjustments** | ** ** | **SFAS 158  Adjustments** | ** ** | **After  Application of  SFAS 158** | ** ** |
| Intangible assets                     |       |                                                                            | $          | 104,435 |   |   |   | (258 | ) |   |   | (1,351 | ) |   |   | 102,826 |   |   |
| Other accrued  liabilities            |       |                                                                            | $          | 54,145 |   |   |   | — |   |   |   | 1,166 |   |   |   | 55,311 |   |   |
| Other non-current  liabilities        |       |                                                                            | $          | 91,759 |   |   |   | (6,692 | ) |   |   | 121 |   |   |   | 85,188 |   |   |
| Accumulated other  comprehensive loss |       |                                                                            | $          | (60,772 | ) |   |   | 6,434 |   |   |   | (2,638 | ) |   |   | (57,176 | ) |   |

 

Thefollowing tables provide combined information relevant to the Company’s pensionand other employee benefit plans:

| ** **                              | ** ** | **Pension Benefits**                 | ** ** | **Post Retirement Benefits** | ** ** |
|-----------------------------------------|------------|-------------------------------------------|------------|----------------------------------------|------------|
| ** **                              | ** ** | **Year Ended January 31,** | ** ** |
| ** **                              | ** ** | **2007**                                  | ** ** | **2006**                               | ** ** | **2005** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Change in Benefit Obligation**        | ** ** | ** **                                |       | ** **                             |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Benefit obligation at beginning of year |       | $                                         | 229,484    |                                   | 224,522    |   | 206,024 |   | 16,875 |   | 15,367 |   | 14,905 |   |
| Service cost                            |       | 1,664                                     |       | 1,769                                  |       | 1,572 |   | 543 |   | 470 |   | 404 |   |
| Interest cost                           |       | 12,210                                    |       | 12,482                                 |       | 12,389 |   | 897 |   | 853 |   | 853 |   |
| Plan participants’ contributions   |       | —                                    |       | —                                 |       | — |   | 1,185 |   | 1,141 |   | 1,030 |   |
| Amendments                              |       | —                                    |       | —                                 |       | — |   | — |   | — |   | 56 |   |
| Actuarial (gain)/loss                   |       | 2,424                                     |       | 7,590                                  |       | 21,349 |   | (902 | ) | 1,047 |   | (325 | ) |
| Benefits paid                           |       | (16,893                                   | )          | (16,946                                | )          | (16,814 | ) | (2,051 | ) | (2,011 | ) | (1,571 | ) |
| Translation adjustment                  |       | (34                                       | )          | 67                                     |       | 2 |   | 7 |   | 8 |   | 15 |   |
| Benefit obligations at end of year      |       | $                                         | 228,855    |                                   | 229,484    |   | 224,522 |   | 16,554 |   | 16,875 |   | 15,367 |   |

 

F-28

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| ** **                                                      | ** ** | **Pension Benefits**                 | ** ** | **Post Retirement Benefits** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                      | ** ** | **Year Ended January 31,** | ** ** |
| ** **                                                      | ** ** | **2007**                                  | ** ** | **2006**                               | ** ** | **2005** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Change in Plan Assets**                                       | ** ** | ** **                                |       | ** **                             |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Fair value of plan assets at beginning of year                  |       | $                                         | 167,091    |                                   | 177,061    |   | 178,875 |   | — |   | — |   | — |   |
| Actual return on plan assets                                    |       | 18,412                                    |       | 6,680                                  |       | 14,986 |   | — |   | — |   | — |   |
| Employer contributions                                          |       | 2,737                                     |       | 237                                    |       | 228 |   | 866 |   | 870 |   | 541 |   |
| Plan participants’ contributions                           |       | —                                    |       | —                                 |       | — |   | 1,185 |   | 1,141 |   | 1,030 |   |
| Mexican plan termination                                        |       | —                                    |       | —                                 |       | (215 | ) | — |   | — |   | — |   |
| Translation adjustment                                          |       | (31                                       | )          | 59                                     |       | 1 |   | — |   | — |   | — |   |
| Benefits paid                                                   |       | (16,893                                   | )          | (16,946                                | )          | (16,814 | ) | (2,051 | ) | (2,011 | ) | (1,571 | ) |
| Fair value of plan assets at end of year                        |       | 171,316                                   |       | 167,091                                |       | 177,061 |   | — |   | — |   | — |   |
| Funded status                                                   |       | (57,539                                   | )          | (62,393                                | )          | (47,461 | ) | (16,554 | ) | (16,875 | ) | (15,367 | ) |
| Unrecognized net obligation loss                                |       | —                                    |       | 72                                     |       | 73 |   | — |   | — |   | — |   |
| Unrecognized net actuarial (gain) loss                          |       | —                                    |       | 56,481                                 |       | 47,046 |   | — |   | (1,585 | ) | (2,902 | ) |
| Unrecognized prior service cost (credit)                        |       | —                                    |       | 1,632                                  |       | 1,897 |   | — |   | (1,107 | ) | (1,373 | ) |
| Contribution made between measurement date and  fiscal year end |       | —                                    |       | 2,500                                  |       | — |   | — |   | — |   | — |   |
| Prepaid (accrued) benefit cost                                  |       | (57,539                                   | )          | (1,708                                 | )          | 1,555 |   | (16,554 | ) | (19,567 | ) | (19,642 | ) |
| Minimum liability adjustments                                   |       | —                                    | *          | (52,938                                | )          | (43,969 | ) | — |   | — |   | — |   |
| Net amount recognized                                           |       | $                                         | (57,539    | )                                      | (54,646    | ) | (42,414 | ) | (16,554 | ) | (19,567 | ) | (19,642 | ) |

----

*                    Nolonger applicable after adoption of SFAS 158.

| ** **                                                                    | ** ** | **Pension Benefits**                 | ** ** | **Post Retirement Benefits** | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                    | ** ** | **Year Ended January 31,** | ** ** |
| ** **                                                                    | ** ** | **2007**                                  | ** ** | **2006**                               | ** ** | **2005** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Weighted average assumptions  used to determine benefit obligations**       | ** ** | ** **                                |       | ** **                             |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Discount rate                                                                 |       | 5.75                                      | %          | 5.50                                   | %          | 5.75 | % | 5.75 | % | 5.50 | % | 5.75 | % |
| Rate of compensation increase                                                 |       | 3.50                                      | %          | 3.50                                   | %          | 3.50 | % | N/A |   | N/A |   | N/A |   |
| **Weighted average assumptions  used to determine net periodic benefit cost** | ** ** | ** **                                |       | ** **                             |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Discount rate                                                                 |       | 5.50                                      | %          | 5.75                                   | %          | 6.25 | % | 5.50 | % | 5.75 | % | 6.25 | % |
| Expected long-term rate of return on assets                                   |       | 8.25                                      | %          | 8.25                                   | %          | 8.25 | % | N/A |   | N/A |   | N/A |   |
| Rate of  compensation increase                                                |       | 3.50                                      | %          | 3.50                                   | %          | 3.50 | % | N/A |   | N/A |   | N/A |   |

 

F-29

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Forpost-retirement benefit measurement purposes, a 10.0% annual rate of increasein the per capita cost of covered health care benefits was assumed for fiscal2007. The rate was assumed to decrease gradually to 5.0% for fiscal 2011 andremain at that level thereafter.

| ** **                                | ** ** | **Pension  Benefits**            | ** ** | **Post  Retirement Benefits** | ** ** |
|-------------------------------------------|------------|----------------------------------|------------|-------------------------------|------------|
| ** **                                | ** ** | **Year  Ended January 31,** | ** ** |
| ** **                                | ** ** | **2007**                         | ** ** | **2006**                      | ** ** | **2005** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Components of net  periodic benefit costs |       |                             |       |                          |       |   |   |   |   |   |   |   |   |
| Service cost                              |       | $                                | 1,664      |                          | 1,769      |   | 1,572 |   | 543 |   | 470 |   | 404 |   |
| Interest cost                             |       | 12,210                           |       | 12,482                        |       | 12,389 |   | 897 |   | 853 |   | 853 |   |
| Expected return on plan assets            |       | (13,476                          | )          | (13,395                       | )          | (14,081 | ) | — |   | — |   | — |   |
| Amortization of prior service cost        |       | 261                              |       | 267                           |       | 270 |   | (263 | ) | (270 | ) | (270 | ) |
| Recognized net actual (gain) loss         |       | 4,795                            |       | 4,866                         |       | 2,567 |   | (205 | ) | (273 | ) | (318 | ) |
| Total net  periodic benefit cost          |       | $                                | 5,454      |                          | 5,989      |   | 2,717 |   | 972 |   | 780 |   | 669 |   |

 

Assumedhealth care cost trend rates have a significant effect on the amounts reportedfor the post-retirement health care plans. A one-percentage point change inassumed health care cost trend rates would have the following effects on January 31,2007 amounts:

| ** **                                               | ** ** | **1% Point  Increase** | ** ** | **1% Point  Decrease** | ** ** |
|----------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Effect on total  of service and interest cost components |       |                        | $          | 175                         |       |   |   | (144 | ) |   |
| Effect on post-retirement  benefit obligation            |       |                        | $          | 1,958                       |       |   |   | (1,617 | ) |   |

 

The estimated accumulated benefit obligation (theactuarial present value of benefits attributed to employee service andcompensation levels prior to the measurement date without considering futurecompensation levels), commonly referred to as the “ABO”, exceeded the fairvalue of plan assets at December 31, 2006, 2005 and 2004 by $52,565,$56,907 and $42,170, respectively.

For pension plans with accumulated obligations inexcess of plan assets at January 31, 2007, the projected benefit obligation,accumulated benefit obligation and fair value of plan assets were $227,425,$222,924 and $169,953 and $228,058, $222,770 and $165,840, as of January 31,2007 and 2006, respectively.

For pension plans with assets in excess of accumulatedobligations at January 31, 2007, the projected benefit obligation,accumulated benefit obligation and fair value of plan assets were $1,430, $956and $1,363, and $1,426, $1,227 and $1,250, as of January 31, 2007 and2006, respectively.

Theplan assets were invested in the following major asset categories:

| ** **        | ** ** | **Percentage of  Plan Assets at  December 31, 2006** | ** ** | **Percentage of  Plan Assets at  December 31, 2005** | ** ** | **Target Allocation  for fiscal year 2008** | ** ** |
|-------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| Equity Securities |       |                                                                          | 73         | %                                                                             |       |                                                            | 67         | % |   |   | 60 - 70 | % |   |
| Fixed Income      |       |                                                                          | 27         | %                                                                             |       |                                                            | 33         | % |   |   | 30 - 40 | % |   |
| Total             |       |                                                                          | 100        | %                                                                             |       |                                                            | 100        | % |   |   | 100 | % |   |

 

The asset allocation targets are set with theexpectation that the plan’s assets will fund the plan’s expected liabilitieswith an appropriate level of risk. Expected returns, risk and correlation amongasset classes are based on historical data and investment advisor input.

The Company expects to make $15,600 in contributionsto its funded pension plans in fiscal 2008. The Company expects to makeapproximately $900 of benefit payments attributable to its unfundedpost-retirement benefit plans during fiscal year 2008.

F-30

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The Company sponsors defined contribution plans,qualified under Section 401(k) of the Internal Revenue Code, whichare offered to certain groups of U.S. employees. Expense related to operations ofthese plans was $574, $484 and $589 for the years ended January 31, 2007,2006 and 2005, respectively. The plans do not have significant liabilitiesother than benefit obligations.

The pension andpost-retirement benefits expected to be paid in each year from fiscal2008 - 2012 are $17,756, $17,628, $17,597, $17,597 and $17,778,respectively. The aggregate benefits expected to be paid in the five years from2013-2017 are $90,097. The expected benefits to be paid are based on thesame assumptions used to measure the Company’s benefit obligation at December 31,2006 and include estimated future employee service.

**(16)   DisclosuresAbout Fair Value of Financial Instruments**

The following methods andassumptions were used to estimate the fair value of each class of financialinstruments for which it is practicable to estimate that value:

*Cash and CashEquivalents, Trade Receivables, Accounts Payable, Short-term Debt, and AccruedExpenses*

The carrying amountapproximates fair value because of the short maturity or duration of theseinstruments.

*Senior SubordinatedNotes*

The Company estimates thatthe fair value of the 8 7/8% Notes at January 31, 2006 approximates$184,983 based on inter-dealer translations which were priced at approximately$105.75 per $100.00 of principal.

*Senior Notes,Senior Credit Facility and Other Long-term Obligations*

The carrying valueapproximates the fair value of these instruments, which primarily have floatinginterest rates that are fixed for periods not exceeding six months. The Companyestimates that the fair value of the senior credit facility approximates thebook value at January 31, 2007 of $468,000.

*Foreign CurrencyForward Delivery Contracts*

The fair value of foreigncurrency forward delivery contracts is estimated by reference to marketquotations received from banks. At January 31, 2007 and 2006, the contractvalue of foreign currency forward delivery agreements outstanding wasapproximately $93,861 and $34,155, respectively. The settlement value of theseinstruments at that date was approximately $92, 554 and $35,122, respectively.

*Limitations*

Fair value estimates aremade at a specific point in time, based on relevant market information andinformation about the financial instrument. These estimates are subjective innature and involve uncertainties and matters of significant judgment andtherefore cannot be determined with precision. Changes in assumptions couldsignificantly affect the estimates.

**(17)   Litigation,Commitments and Contingencies**

*Litigation*

Samsonite Europe N.V. and one of its subsidiaries wasthe subject of a lawsuit filed in France in November 2006 related to the August 31,2005 sale of the H-B site (see Note 4 for a more detailed description of theH-B site sale). The plaintiff in the lawsuit, Workers Council Energyplast (“Workers

F-31

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Council”), seeks tooverturn the****sale of the H-B siteand the related transfer of the Company’s liability and responsibility foremployee pension and social costs for the 202 employees at the H-B site. On March 13,2007, the Tribunal de Grande Instance in Paris (the “Court”) dismissed theclaim on procedural grounds. Counsel for the Workers Council initiated appealon April 11, 2007 and announced that in appeal the 202 workers will join inthe lawsuit. Samsonite was notified of the filing of the appeal on April 16,2007. The Company believes that the appeal of the Court’s decision is withoutmerit and intends to vigorously defend its position; however, an unfavorableresolution of this matter could have a material adverse effect on the Company’sfinancial position and results of operations, which the Company is unable toestimate at this time.

The Company is also aparty to various other legal proceedings and claims in the ordinary course ofits business. The Company believes that the outcome of these other matters willnot have a material adverse effect on its consolidated financial position,results of operations or liquidity.

*Union Agreements*

Union membership in theCompany’s European manufacturing plants varies from country to country and isnot officially known. However, it is probable that most of the workers areaffiliated with a union. Most European union contracts have a one-year term. Inthe United States, approximately 100 employees are unionized under a contractrenewed every three years and which was last renewed April 2005.

*Agreement withPension Benefit Guaranty Corporation (“PBGC”)*

The Company has entered into an agreement with thePBGC granting them an equal and ratable lien in the pledged assets under itssenior credit facility along with the lender under the facility in the amountof $66,562. If the Company were to refinance its senior credit facility in thefuture and increase the size of the facility, the agreement requires that thePBGC lien be increased by an amount determined under a formula considering theamount of the Company’s unfunded pension liability under the Plan and theamount of the increase in the size of the facility. Other provisions of theagreement restrict the transfers of assets outside of the ordinary course ofbusiness and the maintenance of certain funding amounts of the Plan; theCompany is in compliance with these requirements at January 31, 2007.

The agreement will expireupon (a) the Company obtaining investment grade status on its seniorunsecured debt, (b) the date the Plan has no unfunded benefit liabilitiesfor two consecutive plan years, (c) the date on which the Company becomespart of a controlled group whose debt has investment grade status, or (d) thedate the Plan is successfully terminated, but in the case of (a) or (b),no earlier than December 31, 2008.

F-32

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**(18)   OtherIncome (Expense)—Net**

Other income (expense)—netconsisted of the following:

| ** **                                                                                                       | ** ** | **Year ended January 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                       | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net gain (loss) from  foreign currency forward delivery contracts                                                |       | $                                         | (152       | ) | 1,239 |   | 387 |   |
| Gain (loss) on  disposition of fixed assets, net                                                                 |       | 3,285                                     |       | (128 | ) | 819 |   |
| Foreign currency  transaction gains (losses)(a)                                                                  |       | 1,102                                     |       | (507 | ) | 525 |   |
| Pension expense(b)                                                                                               |       | (3,162                                    | )          | (2,813 | ) | (2,780 | ) |
| Redemption premium and  expenses on retirement of senior subordinated notes and floating rate  senior notes |       | (22,498                                   | )          | (2,670 | ) | (17,767 | ) |
| Due diligence costs for  uncompleted potential acquisitions                                                      |       | —                                    |       | (2,821 | ) | (671 | ) |
| Other, net                                                                                                       |       | (2,081                                    | )          | (2,172 | ) | (4,116 | ) |
|                                                                                                             |       | $                                         | (23,506    | ) | (9,872 | ) | (23,603 | ) |

----

(a)           Foreign currencytransaction gains (losses) include gains or losses on intercompany advances.Foreign currency gains (losses) incurred on operational transactions arerecorded in cost of sales or general and administrative expense.

(b)          Pension expense includedin other income and expense relates to the actuarial determined pension expenseassociated with the pension plans of two companies unrelated to the Company’soperations whose pension obligations were assumed by the Company as a result ofa 1993 agreement with the Pension Benefit Guaranty Corporation. The plans werepart of a controlled group of corporations of which the Company was a partprior to 1993.

F-33

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**(19)**   QuarterlyFinancial Information (Unaudited)

Thefollowing is a summary of the unaudited quarterly financial information:
|                                                                                                                                                    | ** ** | **Three months ended** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                                                         | ** ** | **April 30, 2006**     | ** ** | **July 31, 2006** | ** ** | **October 31, 2006** | ** ** | **January 31, 2007** | ** ** |
| Net sales                                                                                                                                          |       |                             | $          | 240,977 |   |   |   | 257,506 |   |   |   | 285,898 |   |   |   | 286,012 |   |   |
| Gross profit                                                                                                                                       |       |                             | $          | 123,231 |   |   |   | 129,292 |   |   |   | 144,854 |   |   |   | 148,565 |   |   |
| Operating income                                                                                                                                   |       |                             | $          | 19,129 |   |   |   | 13,932 |   |   |   | 25,650 |   |   |   | 21,129 |   |   |
| Net income (loss)  before cumulative effect of an accounting change                                                                                |       |                             | $          | 3,501 |   |   |   | (2,073 | ) |   |   | 8,857 |   |   |   | (18,514 | ) |   |
| Net income (loss)                                                                                                                                  |       |                             | $          | 4,892 |   |   |   | (2,073 | ) |   |   | 8,857 |   |   |   | (18,514 | ) |   |
| Net income (loss)  to common stockholders                                                                                                          |       |                             | $          | 1,012 |   |   |   | (6,030 | ) |   |   | 4,821 |   |   |   | (145,027 | ) |   |
| Income (loss) per  share to common stockholders before cumulative effect of an accounting  change—basic                                       |       |                             | $          | — | * |   |   | (0.03 | ) |   |   | 0.02 |   |   |   | (0.38 | ) |   |
| Net income (loss)  per share to common stockholders—basic                                                                                     |       |                             | $          | 0.01 |   |   |   | (0.03 | ) |   |   | 0.02 |   |   |   | (0.38 | ) |   |
| Income (loss) per  share to common stockholders before cumulative effect of an accounting  change—diluted       |       |                             | $          | — | * |   |   | (0.03 | ) |   |   | 0.01 |   |   |   | (0.38 | ) |   |
| Net income (loss) per  share to common stockholders—diluted                                                                                   |       |                             | $          | 0.01 |   |   |   | (0.03 | ) |   |   | 0.01 |   |   |   | (0.38 | ) |   |

----

*                    Lessthan $0.01 per share
|                                                                               | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                    | ** ** | **April 30, 2005**     | ** ** | **July 31, 2005** | ** ** | **October 31, 2005** | ** ** | **January 31, 2006** | ** ** |
| Net sales                                                                     |       |                             | $          | 232,358 |   |   |   | 236,540 |   |   |   | 248,686 |   |   |   | 249,302 |   |   |
| Gross profit                                                                  |       |                             | $          | 111,044 |   |   |   | 115,500 |   |   |   | 120,614 |   |   |   | 123,223 |   |   |
| Operating income                                                              |       |                             | $          | 22,158 |   |   |   | 18,042 |   |   |   | 6,919 |   |   |   | 25,916 |   |   |
| Net income (loss)                                                             |       |                             | $          | 7,502 |   |   |   | 2,324 |   |   |   | (3,041 | ) |   |   | 6,536 |   |   |
| Net income (loss)  to common stockholders                                     |       |                             | $          | 3,900 |   |   |   | (1,343 | ) |   |   | (6,613 | ) |   |   | 2,546 |   |   |
| Net income (loss)  per share attributable to common stockholders—basic   |       |                             | $          | 0.02 |   |   |   | (0.01 | ) |   |   | (0.03 | ) |   |   | 0.01 |   |   |
| Net income (loss) per  share attributable to common stockholders—diluted |       |                             | $          | 0.01 |   |   |   | (0.01 | ) |   |   | (0.03 | ) |   |   | — | * |   |

----

*                    Lessthan $0.01 per share

**(20)**   InformationConcerning Business Segments

The Company’s operations consist of the manufactureand distribution of luggage, business and computer cases, outdoor casual bags,and travel-related products and licensing of the Company’s brand names.Management of the business and evaluation of operating results is organizedprimarily along geographic lines dividing responsibility for the Company’soperations as follows: (i) “Europe” which includes operations in Westernand Eastern European countries; (ii) “North America”, which includesoperations in the United States and Canada; (iii) “Latin America”, whichincludes operations in Mexico, Brazil, Argentina and Uruguay; (iv) “Asia”,which includes operations in India, China, Singapore, South 

F-34

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Korea, Taiwan, Malaysia,Japan, Hong Kong, Thailand and Australia; and (v) “Other” which primarilyincludes certain licensing activities from luggage and non-luggage brand namesowned by the Company and Corporate headquarters overhead.

The Company evaluates the performance of its segmentsbased on operating income of the respective business units. Intersegment salesprices are market based. Certain reclassifications were made to the priorperiods to conform to the January 31, 2007 presentation.

Segmentinformation for the years ended January 31, 2007, 2006 and 2005 is asfollows:
|                                                                 | ** **   | **Europe**   | ** **   | **North  America** | ** **   | **Latin  America** | ** **   | **Asia**     | ** **   | **Corporate  and  Other(b)** | ** **   | **Eliminations** | ** **   | **Totals**   | ** ** |
|-----------------------------------------------------------------|--------------|--------------|--------------|--------------------|--------------|--------------------|--------------|--------------|--------------|------------------------------|--------------|------------------|--------------|--------------|------------|
| ***2007***                                                      | *** *** | *** *** | *** *** | *** ***       | *** *** |               | *** *** | *** *** |         | *** ***                 | *** *** |             | *** *** | *** *** |       |   | *** *** | *** *** |   | *** *** | *** *** |
| Revenues from external customers                                |         | $            | 448,426      |               | 377,461      |               |         | 48,221       | *** *** |                         | 182,841      |             |         | 13,444       |       |   |   | — |   |   | 1,070,393 |   |
| Intersegment revenues                                           |         | $            | 4,993        |               | 291          |               |         | —       | *** *** |                         | 21,346       |             |         | —       |       |   |   | (26,630 | ) |   | — |   |
| Operating income (loss)(a)                                      |         | $            | 59,386       |               | 22,062       |               |         | 6,795        | *** *** |                         | 38,796       |             |         | (46,169      | )          |   |   | (1,030 | ) |   | 79,840 |   |
| Total assets                                                    |         | $            | 270,459      |               | 115,822      |               |         | 40,971       | *** *** |                         | 119,855      |             |         | 263,316      |       |   |   | (159,298 | ) |   | 651,125 |   |
| Capital expenditures                                            |         | $            | 11,350       |               | 5,815        |               |         | 672          | *** *** |                         | 8,932        |             |         | 5,344        |       |   |   | — |   |   | 32,113 |   |
| Additions to goodwill and intangibles                           |         | $            | 1,395        |               | 3,639        |               |         | 280          | *** *** |                         | 9,213        |             |         | —       |       |   |   | — |   |   | 14,527 |   |
| Depreciation and amortization                                   |         | $            | 9,691        |               | 5,576        |               |         | 501          | *** *** |                         | 4,037        |             |         | 962          |       |   |   | 256 |   |   | 21,023 |   |
| ***2006***                                                      | *** *** | *** *** | *** *** | *** ***       | *** *** |               | *** *** | *** *** |         | *** ***                 | *** *** |             | *** *** | *** *** |       |   | *** *** | *** *** |   | *** *** | *** *** |
| Revenues from external customers                                |         | $            | 417,434      |               | 363,922      |               |         | 41,829       | *** *** |                         | 127,708      |             |         | 15,993       |       |   |   | — |   |   | 966,886 |   |
| Intersegment revenues                                           |         | $            | 2,805        |               | 97           |               |         | —       | *** *** |                         | 15,857       |             |         | —       |       |   |   | (18,759 | ) |   | — |   |
| Operating income (loss)(a)                                      |         | $            | 43,176       |               | 28,725       |               |         | 4,502        | *** *** |                         | 18,377       |             |         | (21,646      | )          |   |   | (99 | ) |   | 73,035 |   |
| Total assets                                                    |         | $            | 246,461      |               | 99,706       |               |         | 32,464       | *** *** |                         | 65,105       |             |         | 279,972      |       |   |   | (156,457 | ) |   | 567,251 |   |
| Capital expenditures                                            |         | $            | 7,743        |               | 4,456        |               |         | 330          | *** *** |                         | 4,769        |             |         | 5,846        |       |   |   | — |   |   | 23,144 |   |
| Additions to goodwill and intangibles                           |         | $            | —       |               | —       |               |         | —       | *** *** |                         | —       |             |         | —       |       |   |   | — |   |   | — |   |
| Depreciation and amortization                                   |         | $            | 10,584       |               | 3,846        |               |         | 340          | *** *** |                         | 2,382        |             |         | 767          |       |   |   | — |   |   | 17,919 |   |
| ***2005***                                                      | *** *** | *** *** | *** *** | *** ***       | *** *** |               | *** *** | *** *** |         | *** ***                 | *** *** |             | *** *** | *** *** |       |   | *** *** | *** *** |   | *** *** | *** *** |
| Revenues from external customers                                |         | $            | 406,032      |               | 342,985      |               |         | 36,092       | *** *** |                         | 99,015       |             |         | 18,772       |       |   |   | — |   |   | 902,896 |   |
| Intersegment revenues                                           |         | $            | 2,398        |               | 204          |               |         | —       | *** *** |                         | 8,867        |             |         | —       |       |   |   | (11,469 | ) |   | — |   |
| Operating income (loss)(a)                                      |         | $            | 42,991       |               | 16,874       |               |         | 2,001        | *** *** |                         | 16,290       |             |         | (12,643      | )          |   |   | 222 |   |   | 65,735 |   |
| Total assets                                                    |         | $            | 264,795      |               | 107,739      |               |         | 30,842       | *** *** |                         | 46,444       |             |         | 268,720      |       |   |   | (155,457 | ) |   | 563,083 |   |
| Capital expenditures                                            |         | $            | 6,848        |               | 2,735        |               |         | 329          | *** *** |                         | 2,572        |             |         | —       |       |   |   | — |   |   | 12,484 |   |
| Additions to goodwill and intangibles                           |         | $            | 62           |               | —       |               |         | —       | *** *** |                         | 378          |             |         | —       |       |   |   | — |   |   | 440 |   |
| Depreciation,  amortization and impairment of intangible assets |         | $            | 12,485       |               | 3,584        |               |         | 271          | *** *** |                         | 1,900        |             |         | 3,945        |       |   |   | — |   |   | 22,185 |   |

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(a)           Operating income (loss) represents net sales lessoperating expenses. In computing operating income (loss) none of the followingitems have been added or deducted: interest income, interest expense, otherincome (expense)—net, income taxes and minority interest.

(b)           Includes general corporate expenses.

F-35

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Long-livedassets relating to the Company’s operations by geographic area is as follows:

| ** **                                                       | ** ** | **January 31,** | ** ** |
|------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                       | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Property, plant and  equipment, net of accumulated depreciation: |       |                 |       |   |   |
| North America                                                    |       | $                    | 11,458     |   | 17,085 |   |
| Europe                                                           |       | 51,068               |       | 48,127 |   |
| Asia                                                             |       | 17,688               |       | 12,097 |   |
| Latin America                                                    |       | 3,580                |       | 3,411 |   |
| Corporate and  Other                                             |       | 20,205               |       | 8,380 |   |
|                                                             |       | $                    | 103,999    |   | 89,100 |   |

 

| ** **                                                                | ** ** | **January 31,** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                | ** ** | **2007**             | ** ** | **2006** | ** ** |
| Tradenames and other  intangible assets, net of accumulated amortization: |       |                 |       |   |   |
| Corporate and  Other                                                      |       | $                    | 87,431     |   | 89,573 |   |
| Asia                                                                      |       | 10,236               |       | 1,159 |   |
| Europe                                                                    |       | 1,034                |       | 405 |   |
| North America                                                             |       | 3,872                |       | 357 |   |
| Latin America                                                             |       | 253                  |       | 164 |   |
|                                                                      |       | $                    | 102,826    |   | 91,658 |   |

 

Included in Corporate andOther are the amounts recorded for goodwill, patents and trademarks related toSamsonite, American Tourister, and various apparel tradenames owned by theCompany.

**(21)**   RelatedParty Transactions

The Company has entered into advisory agreements withits major stockholders, Ares Corporate Opportunities Fund, L.P., BainCapital, Ltd., and an affiliate of Ontario Teacher’s Pension Plan Board.The agreements provide that the Company pay each of these three parties anadvisory fee of $500 per year for five years beginning July 31, 2003.

The Company’s Indian subsidiary, Samsonite South AsiaPvt. Ltd., purchases raw materials from and sells certain raw materials toTainwala Chemicals and Plastics India Ltd. (“Tainwala”), AbhishriPolycontainers Pvt. Ltd. and Abhishri Packagers Pvt. Ltd. Tainwala, AbhishriPolycontainers and Abhishri Packagers is managed and controlled by the familyof Dr. Ramesh Tainwala, the Chief Operating Officer of Samsonite SouthAsia. Dr. Tainwala and his family own a minority interest in the Company’sIndian and United Arab Emirates subsidiaries. The Company purchased rawmaterials and capital goods from Tainwala and Abhishri in the amounts of$2,174, $2,086 and $454 during the years ended January 31, 2007, 2006 and2005 respectively. The Company sold raw materials to Tainwala and Abhishri inthe amounts of $823, $932 and $145 during the fiscal years ended January 31,2007, 2006 and 2005 respectively. In addition, approximately $303, $82 and $80was paid to entities owned by Dr. Tainwala and his family, for officespace rent during the years ended January 31, 2007, 2006 and 2005respectively.

F-36

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**SAMSONITE CORPORATION AND SUBSIDIARIESSCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS(In thousands)**

| **Column A**                     | ** ** | ** ** | ** ** | **Column B**                              | ** ** | **Column C** | ** ** | **Column D** | ** ** | **Column E** | ** ** | **Column F**                            | ** ** |
|---------------------------------------|------------|------------|------------|------------------------------------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|----------------------------------------------|------------|
| Description                           | ** ** | ** ** | ** ** | **Balance at  Beginning of  Period** | ** ** | **Additions(a)**  | ** ** | **Transfers**     | ** ** | **Deductions(b)** | ** ** | **Balance at  End of Period** | ** ** |
| **Year Ended January 31,  2007** | ** ** |       | ** ** | ** **                                     |       |              | ** ** | ** **        |       |              | ** ** | ** **                                   |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Allowance for  Trade Receivables      |       |       | $          | 7,213                                          | ** ** |              |       | 3,702             | ** ** |              |       | —                                       | ** ** |   |   | (545 | ) |   |   | 10,370 | ** ** |   |
| Allowance for  Long-Term Receivables  |       |       | —     | ** **                                     |       |              | —     | ** **        |       |              | —     | ** **                                   |       |   | — |   |   |   | — | ** ** |   |
| Allowance for  Sales Returns(c)       |       |       | 1,630      | ** **                                     |       |              | 200        | ** **        |       |              | —     | ** **                                   |       |   | — |   |   |   | 1,830 | ** ** |   |
| Total                                 |       |       | $          | 8,843                                          | ** ** |              |       | 3,902             | ** ** |              |       | —                                       | ** ** |   |   | (545 | ) |   |   | 12,200 | ** ** |   |
| **Year Ended January 31,  2006** | ** ** |       | ** ** | ** **                                     |       |              | ** ** | ** **        |       |              | ** ** | ** **                                   |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Allowance for  Trade Receivables      |       |       | $          | 8,476                                          | ** ** |              |       | 327               | ** ** |              |       | —                                       | ** ** |   |   | (1,590 | ) |   |   | 7,213 | ** ** |   |
| Allowance for  Long-Term Receivables  |       |       | 66         | ** **                                     |       |              | —     | ** **        |       |              | —     | ** **                                   |       |   | (66 | ) |   |   | — | ** ** |   |
| Allowance for  Sales Returns(c)       |       |       | 1,021      | ** **                                     |       |              | 609        | ** **        |       |              | —     | ** **                                   |       |   | — |   |   |   | 1,630 | ** ** |   |
| Total                                 |       |       | $          | 9,563                                          | ** ** |              |       | 936               | ** ** |              |       | —                                       | ** ** |   |   | (1,656 | ) |   |   | 8,843 | ** ** |   |
| **Year Ended January 31,  2005** | ** ** |       | ** ** | ** **                                     |       |              | ** ** | ** **        |       |              | ** ** | ** **                                   |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Allowance for  Trade Receivables      |       |       | $          | 7,809                                          | ** ** |              |       | 1,540             | ** ** |              |       | —                                       | ** ** |   |   | (873 | ) |   |   | 8,476 | ** ** |   |
| Allowance for  Long-Term Receivables  |       |       | 521        | ** **                                     |       |              | —     | ** **        |       |              | —     | ** **                                   |       |   | (455 | ) |   |   | 66 | ** ** |   |
| Allowance for  Sales Returns(c)       |       |       | 1,290      | ** **                                     |       |              | —     | ** **        |       |              | —     | ** **                                   |       |   | (269 | ) |   |   | 1,021 | ** ** |   |
| Total                                 |       |       | $          | 9,620                                          | ** ** |              |       | 1,540             | ** ** |              |       | —                                       | ** ** |   |   | (1,597 | ) |   |   | 9,563 | ** ** |   |
|                                       |            |            |            |                                                |            |                   |            |                   |            |                   |            |                                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

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*Notes:*

(a)           Amounts charged tocosts and expenses.

(b)          Bad debt write-offs andcharges to allowances, net of other adjustments, reclassifications and exchangerate changes.

(c)           Because of the mannerin which the Company’s systems process sales returns, the Company is not able toquantify additions and deductions, and such amounts are shown on a net basis.

F-37

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**INDEX TO EXHIBITS**

| Exhibit | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                       | ** ** |
|---------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| 3.1     |       | Restated  Certificate of Incorporation. (Incorporated by reference from the Company’s  Form 8-K, filed December 22, 2006).                                                                                                                                                                                                                                                                             |       |
| 3.2     |       | Certificate of  Ownership and Merger dated July 14, 1995 (Incorporated by reference from  the Registrant’s Form S-4 Registration Statement No. 33-95642).                                                                                                                                                                                                                                         |       |
| 3.3     |       | By-laws of the  Company (Incorporated by reference from the Company’s Annual Report on  Form 10-K for the fiscal year ended January 31, 1996).                                                                                                                                                                                                                                                         |       |
| 4.1     |       | Description of  the Company’s common stock, par value $.01 per share (Incorporated by  reference from the Company’s Registration Statement on Form 8-A  filed June 14, 1994 under the Exchange Act).                                                                                                                                                                                              |       |
| 4.2     |       | Indentures dated  June 9, 2004 for 100,000 Euro Floating Rate Senior Notes due 2010 and  $205,000 8 7¤8% Senior Subordinated Notes  due 2011(Incorporated by reference from the Registrant’s Form S-4  Registration Statement No. 333-118014).                                                                                                                                               |       |
| 4.3     |       | Supplemental  Indenture, dated as of December 6, 2006, to the Indenture dated as of  June 9, 2004, between Samsonite Corporation and The Bank of New York  Trust Company, N.A., as successor to The Bank of New York, as trustee  (Incorporated by reference from the Company’s Form 8-K, filed  December 6, 2006).                                                                          |       |
| 4.4     |       | Supplemental  Indenture, dated as of December 6, 2006, to the Indenture dated as of  June 9, 2004, between Samsonite Corporation and The Bank of New York, as  trustee (Incorporated by reference from the Company’s Form 8-K,  filed December 6, 2006).                                                                                                                                     |       |
| 10.1    |       | Form of  Indemnification Agreement entered into or to be entered into by the Company  with each of R. Theodore Ammon, Leon D. Black, Robert H. Falk,  Thomas J. Leonard, Marc J. Rowan, Stephen J. Solarz, Gregory Wm. Hunt, Carl  C. Ichan, Mark H. Rachesky, and Robert L. Rosen (Incorporated by  reference to the Registrant’s Form S-1 Registration Statement  No. 33-71224). |       |
| 10.2    |       | Samsonite  Corporation 1995 Stock Option and Incentive Award Plan (as amended in 1996)  (Incorporated by reference from Proxy Statement filed May 23, 1996).                                                                                                                                                                                                                                                     |       |
| 10.2.1  |       | Samsonite  Corporation 1995 Stock Option and Award Plan, Second Amendment (Incorporated  by reference from the Registrant’s Form S-8 File No. 333-20775,  filed January 30, 1997).                                                                                                                                                                                                                |       |
| 10.3    |       | Form of  Stock Option Agreement for Awards under the 1995 Stock Option and Incentive  Award Plan (as amended in 1996) (Incorporated by reference to the Registrant’s  Form S-8 File No. 333-05467, filed June 7, 1996).                                                                                                                                                                      |       |
| 10.4    |       | Samsonite  Corporation Directors Stock Plan as amended (Incorporated by reference from  the Company’s Proxy Statement filed May 9, 2001).                                                                                                                                                                                                                                                                   |       |
| 10.5    |       | Warrant  Agreement, dated as of June 24, 1998, between the Company and  BankBoston, N.A. (Incorporated by reference from the Company’s Quarterly  Report on Form 10-Q for the three months ended July 31,  1998).                                                                                                                                                                                 |       |
| 10.5.1  |       | First Amendment  to Warrant Agreement dated as of August 17, 1998, between the Company  and BankBoston, N.A. (Incorporated by reference from the Company’s Quarterly  Report on Form 10-Q for the three months ended July 31,  1998).                                                                                                                                                             |       |

E-1

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| 10.6    |   | Amended and  restated FY 1999 Stock Option and Incentive Award Plan (Incorporated by  reference from Proxy Statement filed May 11, 2004).                                                                                                                                                                                                                  |   |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 10.7*   |   | Employment  Agreement, dated as of June 15, 2001, between the Company and Richard H.  Wiley (Incorporated by reference from the Company’s Quarterly Report on  Form 10-Q for the three months ended October 31, 2001).                                                                                                                      |   |
| 10.8*   |   | Employment  Agreement, dated as of October 1, 2000, between the Company and Marc  Matton (Incorporated by reference from the Company’s Annual Report on  Form 10-K for the year ended January 31, 2002).                                                                                                                                    |   |
| 10.9    |   | Recapitalization  Agreement by and among Samsonite Corporation, Ares Corporate Opportunities  Fund, L.P., Bain Capital (Europe) LLC and Ontario Teachers Pension Plan  Board, dated as of May 1, 2003 (including various exhibits thereto)  (Incorporated by reference from the Company’s current report on Form 8-K  dated May 1, 2003).   |   |
| 10.10   |   | Amendment and  Restatement of Term Sheet Between Pension Benefit Guaranty Corporation and  Samsonite Corporation (Incorporated by reference from the Company’s Quarterly  Report on Form 10-Q for the three months ended July 31,  2003).                                                                                                        |   |
| 10.11   |   | Agreement dated  July 23, 2003 by and between the Company and the Pension Benefit  Guaranty Corporation, a United States Government Corporation (Incorporated by  reference from the Company’s Quarterly Report on Form 10-Q for the  three months ended July 31, 2003).                                                                    |   |
| 10.12   |   | Form of  Executive Stockholders Agreement dated September 25, 2003 among the  Company, ACOF Management, L.P., Bain Capital (Europe) LLC, Ontario Teachers’  Pension Plan Board and certain executives (Incorporated by reference from the  Company’s Quarterly Report on Form 10-Q for the three months ended  October 31, 2003). |   |
| 10.12.1 |   | Amendment  No. 1 to the Executive Stockholders Agreement dated as of March 17,  2005 (Incorporated by reference from the Company’s Quarterly Report on  Form 10-Q for the three months ended April 20, 2005).                                                                                                                          |   |
| 10.12.2 |   | Amendment  No. 2 to the Executive Stockholders Agreement dated as of  January 26, 2007 (Incorporated by reference from the Company’s  Form 8-K, filed February 1, 2007).                                                                                                                                                               |   |
| 10.13*  |   | Letter Agreement,  dated January 21, 2005, by and between the Company and Thomas Korbas  (Incorporated by reference from the Company’s current report on Form 8-K  filed April 15, 2005).                                                                                                                                                   |   |
| 10.14   |   | Form of  Executive Stock Option Agreement dated February 14, 2005 (Incorporated  by reference from the Company’s current report on Form 8-K/A filed  February 18, 2005).                                                                                                                                                               |   |
| 10.15*  |   | Consulting  Agreement dated April 1, 1995 by and among Samsonite Finanziaria S.R.L.,  Giuseppe Fremder and Samsonite Italia S.R.L. (now Samsonite S.p.A.)  (Incorporated by reference from the Company’s Annual Report on Form 10-K  for the fiscal year ended January 31, 2005).                                                           |   |
| 10.16*  |   | Amended and  Restated Employment Agreement between Samsonite Corporation and Marcello  Bottoli, dated as of May 11, 2005 (Incorporated by reference from the  Company’s current report on Form 8-K filed May 17, 2005).                                                                                                                     |   |

E-2

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| 10.17*   |   | Management  Agreement between Samsonite Corporation and Marcello Bottoli, dated as of  May 11, 2005 (Incorporated by reference from the Company’s current  report on Form 8-K filed May 17, 2005).                                                                                                                                                                                                                                  |   |
|----------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 10.18*   |   | Letter Agreement  regarding Employment and Management Agreements between Samsonite Corporation  and Marcello Bottoli dated as of May 12, 2005 (Incorporated by reference  from the Company’s current report on Form 8-K filed May 17,  2005).                                                                                                                                                                                       |   |
| 10.19*   |   | Chief Executive  Officer Stockholders Agreement, dated as of March 2, 2004, by and among  Samsonite Corporation, ACOF Management, L.P., Bain Capital (Europe) LLC,  Ontario Teachers’ Pension Plan Board, Marcello Bottoli, Stonebridge  Development Limited and the Bottoli Trust (Incorporated by reference from the  Company’s Quarterly Report on Form 10-Q for the three months ended  July 31, 2005).                    |   |
| 10.19.1* |   | Amendment 1 to  Chief Executive Officer Stockholders Agreement, dated as of March 17,  2005, by and among Samsonite Corporation, ACOF Management, L.P., Bain  Capital (Europe) LLC, Ontario Teachers’ Pension Plan Board, Marcello  Bottoli, Stonebridge Development Limited and the Carry Trust (Incorporated by  reference from the Company’s Quarterly Report on Form 10-Q for the  three months ended July 31, 2005). |   |
| 10.19.2* |   | Amendment  No. 2 to the Chief Executive Officer Stockholders Agreement dated as of  January 26, 2007 (Incorporated by reference from the Company’s  Form 8-K, filed February 1, 2007).                                                                                                                                                                                                                                         |   |
| 10.20*   |   | Stock Option  Agreement dated as of April 19, 2004, among Samsonite Corporation,  Marcello Bottoli, and Stonebridge Development Limited (Incorporated by  reference from the Proxy Statement filed May 11, 2004).                                                                                                                                                                                                                             |   |
| 10.20.1* |   | Amendment 1 to  Stock Option Agreement dated as of March 17, 2005, among Samsonite  Corporation, Marcello Bottoli, and Stonebridge Development Limited  (Incorporated by reference from the Company’s current report on Form 8-K  filed May 17, 2005).                                                                                                                                                                              |   |
| 10.21    |   | Stockholders  Agreement, dated as of July 31, 2003 by and among Samsonite Corporation,  Ares Corporate Opportunities Fund, L.P., Bain Capital (Europe) LLC, Ontario  Teachers’ Pension Plan Board and Ares Leveraged Investment Fund, L.P.  (Incorporated by reference from the Proxy Statement filed June 30, 2003).                                                                                                                    |   |
| 10.22    |   | Advisory  Agreement between the Company and ACOF Management, Bain Capital (Europe) LLC  and Ontario Teacher’s Pension Plan Board entered into as of April 1,  2004 (Incorporated by reference from the Company’s Quarterly Report on  Form 10-Q for the three months ended April 30, 2004).                                                                                                                                    |   |
| 10.23    |   | Amended and  Restated Warrant Agreement between Ares Leveraged Investment Fund, L.P. and  Samsonite Corporation. (Incorporated by reference from the Company’s  Form 8-K, filed February 1, 2007).                                                                                                                                                                                                                                       |   |
| 10.24    |   | Credit Agreement,  dated as of December 20, 2006 among the Company, Samsonite Europe N.V.,  Merrill Lynch Capital Corporation, KBC Bank N.V. and others (Incorporated by  reference from the Company’s Form 8-K, filed December 22,  2006).                                                                                                                                                                                         |   |
| 10.25    |   | Amendment  No. 1 dated as of April 5, 2007 to the Credit Agreement dated as of  December 20, 2006 among the Company, Samsonite Europe N.V., Merrill  Lynch Capital Corporation, KBC Bank N.V. and others.                                                                                                                                                                                                                                |   |

E-3

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| 14.1 |   | Code of Ethical  Conduct for Chief Executive Officer (Incorporated by reference from the Company’s  Form 10-K filed May 16, 2006).                  |   |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 14.2 |   | Code of Ethical  Conduct for Senior Financial Officers (Incorporated by reference from the  Company’s Form 10-K filed May 16, 2006).                |   |
| 21   |   | Subsidiaries of  the Company                                                                                                                                       |   |
| 23   |   | Consent of KPMG  LLP                                                                                                                                               |   |
| 31.1 |   | Certification by  Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                     |   |
| 31.2 |   | Certification by  Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                     |   |
| 32.1 |   | Certification by  Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |   |
| 32.2 |   | Certification by  Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |   |

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*                    These exhibitsconstitute management contracts, compensatory plans and arrangements requiredto be filed as an exhibit to this form.

E-4

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