SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended:
September 30, 1997
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from: ____ to _____
Commission file number: 33-64142
United States Leather, Inc
(Exact name of registrant as specified in its charter)
Wisconsin 13-3503310
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1403 West Bruce Street, Milwaukee, WI 53204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 383-6030
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares Outstanding
Class at September 30, 1997
Common Stock, 100
$.01 par value
As of September 30, 1997, there was no public market for the Company's
common stock.
<PAGE>
UNITED STATES LEATHER, INC.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Consolidated Condensed Statements of Operations . . . . 3
Consolidated Condensed Balance Sheets . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows . . . . 5-6
Notes to Consolidated Condensed Financial Statements . 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 10
PART II - OTHER INFORMATION AND SIGNATURES
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
UNITED STATES LEATHER, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in Thousands, Except Share and Per Share Data)
3 Months Ended 9 Months Ended
September 30, September 30,
1997 1996 1997 1996
Net sales $70,158 $75,325 $242,365 $235,407
Cost of sales 65,364 68,370 226,955 213,791
--------- -------- --------- ---------
Gross profit 4,794 6,955 15,410 21,616
Selling, general and
administrative expenses 5,780 5,702 17,480 17,967
Asset valuation loss 7,000 - 7,000 -
Restructuring expense - - - 2,468
Amortization of intangible
assets 987 925 2,950 3,085
--------- -------- --------- ---------
Income (loss) from operations (8,973) 328 (12,020) (1,904)
Other expense 162 - 162 159
Interest expense 4,826 4,177 14,208 12,790
--------- -------- --------- ---------
Loss before taxes (13,961) (3,849) (26,390) (14,853)
Income tax expense (benefit) 91 (1,147) (2,383) (4,553)
--------- -------- --------- ---------
Net loss $(14,052) $(2,702) $(24,007) $(10,300)
========= ======== ========= =========
Net loss per share $(140,520) $(27,020) $(240,070) $(103,000)
========= ======== ========= =========
Weighted average shares
outstanding 100 100 100 100
========= ======== ========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
UNITED STATES LEATHER, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amounts in Thousands, Except Share and Per Share Data)
As of As of
September 30, December 31,
Current Assets: 1997 1996
Cash $443 $2,894
Accounts receivable, less allowances
of $2,439 and $2,892 48,959 35,819
Inventories 46,779 64,749
Prepaid expenses and other 1,154 1,228
Refundable income tax - 2,700
-------- --------
Total current assets 97,335 107,390
Property, plant and equipment, net 39,644 47,601
Goodwill, net of amortization of
$27,988 and $25,612 93,995 101,371
Other 10,486 8,460
-------- --------
Total assets $241,460 $264,822
======== ========
Current Liabilities:
Current maturities of long-term debt $208 $210
Revolving credit facility 45,852 31,795
Payable to bank 3,996 5,358
Accounts payable 7,314 7,898
Accrued liabilities 9,563 17,457
Deferred income taxes 534 555
-------- --------
Total current liabilities 67,467 63,273
Long-term debt, less current maturities 129,970 130,047
Deferred income taxes - 794
Other long-term liabilities 6,957 9,635
Stockholder's Equity:
Preferred Stock, $.01 par value - 5,000,000
shares authorized, no shares issued - -
Common Shares:
Common Stock, voting, $.01 par value -
35,000,000 shares authorized,
100 shares issued 1 1
Additional paid-in-capital 92,344 92,344
Cumulative translation adjustment (112) (112)
Accumulated deficit (55,167) (31,160)
-------- --------
Total stockholder's equity 37,066 61,073
-------- --------
Total liabilities and stockholder's equity $241,460 $264,822
======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
UNITED STATES LEATHER, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in Thousands, Except Share and Per Share Data)
For The Nine Months Ended
September 30,
1997 1996
Cash Flows from Operating Activities:
Net loss $(24,007) $(10,300)
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 8,476 8,617
Noncash interest expense 731 857
Deferred income taxes (815) (3,509)
Asset valuation loss 7,000 -
Change in assets and liabilities:
Accounts receivable (13,140) (1,045)
Inventories 17,970 15,902
Prepaid expenses and other 2,441 135
Accounts payable (584) 1,008
Accrued liabilities (7,789) (1,100)
Income taxes payable (105) (727)
Other long-term liabilities (2,678) (851)
--------- --------
Net cash (used) provided by
operating activities (12,500) 8,987
--------- --------
Cash Flows from Investing Activities
Capital expenditures (2,232) (4,431)
Proceeds from sales of fixed assets 424 -
Purchase of software license (838) (679)
--------- --------
Net cash used in investing activities (2,646) (5,110)
--------- --------
Cash Flows from Financing Activities:
Payments of revolving credit facility (107,506) (65,750)
Borrowings under revolving credit facility 121,563 60,596
Net change in payable to bank (1,362) (16)
Payment of long-term debt - (94)
Payment of common stock dividend - (50)
--------- --------
Net cash provided (used) by
financing activities 12,695 (5,314)
--------- --------
Effect of Exchange Rate Changes on Cash - (20)
--------- --------
Net decrease in cash (2,451) (1,457)
Cash, beginning of period 2,894 4,614
--------- --------
Cash, end of period $443 $3,157
========= ========
Supplemental cash flow disclosures:
Interest paid $16,909 $15,429
Income taxes refunded (net) $(962) $(188)
The accompanying notes are an integral part of these statements.
<PAGE>
UNITED STATES LEATHER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Amounts in Thousands, Except Share and Per Share Data)
(Unaudited)
(1) Basis of Presentation:
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
required disclosures have been presented and all necessary adjustments
(consisting only of normal recurring adjustments) have been included to
fairly present the results of operations, financial position and cash
flows of United States Leather, Inc. (the "Company"). These consolidated
condensed financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
(2) Net Loss Per Share:
Net loss per share is calculated by dividing the loss by the weighted
average number of the Company's shares of Common Stock, $.01 par value,
outstanding during the period.
(3) Inventories:
Inventories consist of the following:
September 30, December 31,
1997 1996
At lower of cost, using the first-in,
first-out (FIFO) cost method or market:
Raw materials and supplies $14,088 $18,556
Work in process 21,193 29,655
Finished goods 18,355 25,253
------- -------
Total FIFO inventories 53,636 73,464
Difference between FIFO and LIFO cost
of inventories (6,857) (8,715)
------- -------
Total LIFO inventories $46,779 $64,749
======= =======
(4) Revolving Credit Agreement:
In September 1997 the New Revolving Credit Facility was amended to (a)
modify FIFO EBITDA related covenants for August and September 1997, (b)
increase the availability reserves for the remainder of 1997, and (c)
reduce the maximum amount of the credit facility to $65,000 from $80,000.
The New Revolving Credit Facility was again amended in November 1997 to
modify FIFO EBITDA related covenants for October and November 1997.
Letters of credit of $3,706 as of September 30, 1997, reduced available
capacity under revolving credit facilities to $5,500.
(5) 1996 Restructuring:
During 1996, the Company began a series of initiatives to strengthen the
Company's financial position and return it to profitability. Among these
initiatives were (1) the reorganization of the management of the Company,
which included the elimination of division presidents and a general
reduction of salaried workforce, (2) comprehensive reviews of the
Company's products and inventories, (3) closing two operations which had
not been profitable and were not strategically critical to the Company,
(4) replacing critical talent which had been lost in prior years, and (5)
vacating the Company's corporate offices and moving such offices into one
of the Company's operating facilities. During 1996, the Company also
continued efforts to grow the business of its Automotive Group. The
Company recorded a series of charges during 1996 pertaining to these
initiatives which management believes were unusual or non-recurring items.
Such charges during the second quarter of 1996 aggregated $9.4 million,
increased cost of goods sold by $ 6.6 million, resulted in a charge for
restructuring expenses of $2.5 million, and increased amortization of
goodwill by $0.3 million. In addition, the Company incurred operating
losses during the first nine months of 1996 aggregating $0.8 million in
connection with the activities of USL Trading Operation and German
operations prior to their being discontinued.
(6) Asset Valuation Loss:
During the third quarter of 1997 the Company approved a plan to sell two
of its operations; Caldwell Moser Leather Co. and Berlin Leather. Both
operations are part of the Company's Footwear and Specialty Leather Group.
These operations are being sold to enable the Company to continue to focus
its resources on its core businesses and are expected to be consummated by
the second quarter of 1998. The Company recorded a pretax charge of $7.0
million in the third quarter to reduce the book value of the long-lived
assets (property, plant, equipment and goodwill) of these operations to
their estimated aggregated fair market value. The Company believes that
the book value of inventories and receivables for these operations
approximates market value. The assets and sales of these two operations
do not represent a material portion of the Company's total assets or
sales.
(7) Long-Lived Assets:
The Company has continued to incur substantial losses in 1997. As part of
the Company's efforts to evaluate its future liquidity and cash flows, it
is in the process of preparing a long-term strategic business plan.
Although the Company does not have reason to believe its long-lived assets
are currently impaired, it will re-evaluate the realizability of such
assets, including goodwill, when the business plan is completed in the
fourth quarter of 1997.
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
Certain matters discussed herein are "forward-looking statements" within
the meaning of section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements
can generally be identified as such because the context of the statement
will include words such as Company "believes," "anticipates," "expects" or
words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are forward-looking
statements. Such forward-looking statements are subject to certain risks
and uncertainties which are described in close proximity to such
statements and which could cause actual results to differ materially from
those currently anticipated. Readers are urged to consider these factors
carefully in evaluating the forward-looking statements and are cautioned
not to place undue reliance on such forward-looking statements. The
forward-looking statements made herein are only made as of the date of
this report and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or
circumstances.
Selected Financial Data
The following table sets forth certain consolidated income statement data
of the Company as a percentage of net sales for the periods indicated.
Percentage of Net Sales
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 93.2 90.8 93.6 90.8
----- ----- ----- -----
Gross profit 6.8 9.2 6.4 9.2
Selling, general & administrative 8.2 7.6 7.2 7.6
Asset valuation loss 10.0 - 3.0 -
Restructuring expenses - - - 1.0
Amortization of intangible assets 1.4 1.2 1.2 1.4
----- ----- ----- -----
Income (loss) from operations (12.8) 0.4 (5.0) (0.8)
Other (income) expense 0.2 - 0.1 0.1
Interest expense 6.9 5.5 5.9 5.4
----- ----- ----- -----
Loss before taxes (19.9) (5.1) (11.0) (6.3)
Income tax expense (benefit) 0.1 (1.5) (1.0) (1.9)
----- ----- ----- -----
Net loss (20.0)% (3.6)% (10.0)% (4.4)%
===== ===== ===== =====
Results of Operations - Nine Month Period
Ended September 30, 1997
Sales
The Company's finished leather operations are divided into three principal
lines of business. The following chart summarizes the Company's sales by
line of business:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 %change 1997 1996 %change
Furniture Group $15.2 $19.7 (22.8)% $55.2 $71.2 (22.5)%
Automotive Group 12.8 9.0 42.2 39.1 16.8 132.7
Footwear & Specialty
Leather Group 42.2 45.8 (7.9) 148.1 136.4 8.6
----- ----- ------ ------
Continuing Sales 70.2 74.5 (5.8) 242.4 224.4 8.0
Discontinued Operations - 0.8 100.0 - 11.0 100.0
----- ----- ------ ------
Total Sales $70.2 $75.3 (6.8)% $242.4 $235.4 3.0%
===== ===== ====== ======
During the second quarter of 1996, the Company announced the
discontinuation of its USL Trading Division and the German operations of
its Furniture Group. Sales for these two operations during the third
quarter and the first nine months of 1996, prior to their discontinuance,
were $0.8 million and $11.0 million respectively.
Results of Operations
General. The Company experienced a loss of $14.1 million in the
third quarter of 1997, compared with a loss of $2.7 million during the
same period in the prior year. For the nine month year-to-date period,
the Company recorded a loss of $24.0 million versus a loss of $10.3
million the prior year. Excluding the effects of non-recurring items
recorded in the third quarter of 1997 (see Note 6) and the second quarter
of 1996 (see Note 5), net loss for the first nine months of 1997 increased
by $12.5 million, compared to the first nine months of 1996. The effect
of significantly higher cattlehide costs during the first half of 1997 was
the principal reason for these increased losses as hide cost increases
incurred during this period could not be recovered through increased
finished leather selling prices. A weak retail market in the Furniture
Group and Footwear & Specialty Leather Group led to lower than expected
sales volumes during the third quarter of 1997 which negatively impacted
operating results, more than offsetting the favorable effects of hide
prices which had declined during the third quarter of 1997.
Net Sales. The Company's net sales in the third quarter of 1997 were
$70.2 million, a decrease of $5.1 million or 6.8% from the same period one
year ago. Sales from continuing operations decreased $4.3 million or
5.8%. Year-to-date sales were $242.4 million, an increase of $7.0 million
or 3.0% over the prior year nine month period. Year-to-date, sales from
continuing operations increased $18.0 million, or 8.0%. Sales of by-
products, principally splits and wet blues, and products tanned on a
contract basis for other tanneries, principally deerhides, accounted for
1.6% of the quarter and 1.3% of the year-to-date increase. Square footage
of finished leather shipped decreased 6.3% for the quarter and increased
5.3% year-to-date. The decrease in the third quarter was principally due
to a weak retail market in the Furniture Group and Footwear and Specialty
Leather Group. The increase in net sales year-to-date was due primarily
to an increase in the Automotive cut-to-pattern volume.
Furniture Group. Furniture Group sales during the third quarter were
$15.2 million, a decrease of $4.5 million or 22.8% from the third quarter
of 1996. Year-to-date sales were $55.2 million, a decrease of $16.0
million or 22.5% from the prior year period. Contributing to the decline
was a downturn in retail furniture sales and market share loss in some of
the Group's product lines because of lower-priced foreign competition.
Automotive Group. Automotive Group sales increased significantly
from the comparable periods in 1996. Third quarter sales were $12.8
million or $3.8 million higher than the prior year quarter. Year-to date
sales were $39.1 million or $22.3 million higher than the prior year
period. The increase is primarily attributable to increased volume in the
Group's cut-to-pattern business.
Footwear and Specialty Leather Group. Footwear and Specialty Leather
Group sales were $42.2 million during the third quarter of 1997, a
decrease of $3.6 million or 7.9% from the third quarter of 1996. Year-to-
date sales were $148.1 million, an increase of $11.7 million, or 8.6% over
the comparable 1996 period. Square feet of finished leather shipped
decreased 7.2% for the quarter, and increased 8.9% year-to-date. Weakened
retail footwear demand was the principal reason for the decrease from the
third quarter of 1997, while strong demand for the water-proof family of
products, and increased finished split sales were the principal drivers of
the increased year-to-date sales.
Gross Profit. Gross profit for the third quarter of 1997 was $4.8
million, a decrease of $2.2 million or 31.1% from the third quarter of
1996. Year-to-date gross profit was $15.4 million, a decrease of $6.2
million or 28.7% from the comparable prior year period. Excluding the
effects of non-recurring charges recorded during the second quarter of
1996, gross profits declined $12.8 million during the first nine months of
1997.
Gross margins were 6.8% for the three months ended September 30, 1997
compared to 9.2% for the same period in 1996. Several factors negatively
impacted gross margins for the third quarter of 1997, including low sales
volumes in the Furniture Group and Footwear & Specialty Leather Group and
lingering inefficiencies in the Automotive Group's cut-to-pattern plant.
The lower volume in the Furniture Group and Footwear & Specialty Leather
Group resulted in higher conversion costs at the facilities manufacturing
these products. Year to date gross margins were 6.4% and 9.2% for 1997 and
1996, respectively. Excluding the effects of non-recurring charges, gross
margins were 12.0% for the nine months ended September 30, 1996. The
primary factors affecting the decrease in gross margin for the nine month
period include decreased sales volume in the Furniture Group,
inefficiencies in the Automotive Group's cut-to-pattern plant, and
increased cattlehide prices. For the nine month period, average
cattlehide prices have increased approximately 10% over the same period in
1996. As a result of these increases in average cattlehide prices, the
cost of hides purchased during the first nine months of 1997 was
approximately $7.3 million higher than the same period a year earlier.
Although cattlehide prices have declined significantly during the third
quarter of 1997, increased hide prices during the first six months of the
year will continue to adversely impact gross margin into the fourth
quarter of 1997. Hide purchase commitments made during September 1997
were at prices approximately 25% below the year to date high points.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses during the first nine months of 1997 were $0.5
million lower than the same period of 1996, with the majority of this
decrease occurring in the second quarter of 1997. The principal reasons
were lower staffing and sales commission expenses.
Asset Valuation Loss. During the third quarter of 1997 the Company
approved a plan to sell two of its operations; Caldwell Moser Leather Co.
and Berlin Leather. Both operations are part of the Company's Footwear and
Specialty Leather Group. These operations are being sold to enable the
Company to continue to focus its resources on its core businesses and are
expected to be consummated by the second quarter of 1998. The Company
recorded a pretax charge of $7.0 million in the third quarter to reduce
the book value of the long-lived assets (property, plant, equipment and
goodwill) of these operations to their estimated aggregated fair market
value. The Company believes that the book value of inventories and
receivables for these operations approximates market value. The assets
and sales of these two operations do not represent a material portion of
the Company's total assets or sales.
Earnings before Interest, Taxes, Depreciation and Amortization.
Earnings before interest, taxes, depreciation and amortization (and
provisions for LIFO revaluations) ("FIFO EBITDA") during the third quarter
of 1997 was a $1.0 million loss compared to $4.1 million of income in the
third quarter of 1996. For the nine month period, FIFO EBITDA was $1.6
million for 1997 compared to $21.7 million for 1996, excluding the effects
of restructuring. FIFO EBITDA, which is the principal earnings measure in
the New Revolving Credit Facility, is not determined pursuant to generally
accepted accounting principles ("GAAP"), and should not be considered in
isolation or as an alternative to GAAP-derived measurements.
Amortization of Intangible Assets. Amortization of intangible assets
was $3.0 million in the first nine months of 1997 compared to $3.1 million
in the same period of 1996.
Interest Expense. Interest expense increased $1.4 million during the
first nine months of 1997 over the same period in 1996. Interest expense
increased $0.6 million for the three months ended September 30, 1997
compared to the same period in 1996. The increases were due to higher
outstanding borrowings during this period. The higher borrowings under
the New Revolving Credit Facility were required to fund greater working
capital requirements caused by higher cattlehide prices and sales volume
growth.
Loss Before Income Taxes. The Company incurred a loss before taxes
of $14.0 million in the third quarter of 1997, an increase of $10.2
million from a $3.8 million loss before taxes in the third quarter of
1996. The year to date loss before taxes for 1997 was $26.4 million, an
increase of $11.5 million from the same period of 1996. This increase was
principally the result of lower gross profits.
Income Tax Benefit. In accordance with SFAS No. 109, "Accounting for
Income Taxes", the Company recorded no tax benefit for the third quarter
of 1997 compared to a benefit of $2.4 million recorded during the same
period of 1996. The income tax benefit for the first nine months of 1997
was $2.4 million verses $4.6 in the same period of 1996. After adjusting
income before income taxes for nondeductible amortization of goodwill, the
effective tax rate was 10.2% during the first nine months of 1997,
compared to 38.7% for the same period in 1996.
Net Loss. Due to the factors previously discussed, the Company had a
net loss of $14.1 million in the third quarter of 1997, compared to a net
loss of $2.7 million during the third quarter of 1996. For the nine month
period ended September 1997, the net loss was $24.0 million compared to a
net loss of $10.3 million for the same period in 1996.
Liquidity and Capital Resources. The Company used $12.5 million of
cash for operations during the first nine months of 1997, compared with
$9.0 million of cash provided by operations during the same period of
1996. The principal reasons for change in cash flow were (1) a $12.1
million comparative increase in accounts receivable, (2) a $13.7 million
increase in net losses and (3) a $8.3 million comparative decrease in
accounts payable and accrued liabilities. Accounts receivable increased
by $13.1 million during the first nine months of 1997 principally because
of increased sales volume. Sales during November and December of 1996
were impacted by holiday-driven customer and factory shutdowns which, in
turn, generated lower accounts receivable balances as of December 31,
1996. Increased sales volume in the Company's Automotive Group was the
primary reason for the increase in accounts receivable as of September 30,
1997 compared to the same date in 1996. Days sales outstanding in
accounts receivable as of September 30, 1997 were 57 compared with 58 days
as of September 30, 1996. LIFO inventories decreased approximately $18.0
million during the first nine months of 1997. The decrease was due
principally to better asset management and improved quality.
Capital expenditures totaled $2.2 million during the first nine
months of 1997. This represents a decrease of approximately $2.2 million
from the same period in 1996.
On September 30, 1997, the Company's aggregate indebtedness was
$180.0 million. This consisted of $133.4 million of principal and accrued
interest on its 10-1/4% Senior Notes Due 2003 (the "Senior Debt") and $46.6
million due under the New Revolving Credit Facility. The New Revolving
Credit Facility is a $65 million facility (reduced during September form
$80 million), maturing on October 31, 2001. Borrowing availability is
based on accounts receivable and inventory balances, less certain
exclusions, amounts already borrowed under the facility and letters of
credit issued thereunder. Availability as of September 30, 1997 was $5.5
million. As of November 8, borrowing under the New Revolving Credit
Facility was $38.8 million, and availability was approximately
$3.0 million.
The Company incurred a substantial loss in 1996 and continued to
incur losses during the first nine months of 1997. Although management
has implemented measures which it believes will eventually improve the
financial performance of the Company, there can be no assurances that such
measures will be sufficient to permit the Company to reverse recent trends
and meet all of its obligations going forward. In March, July, September
and November 1997, the New Revolving Credit Facility was amended to, among
other things, amend or waive FIFO EBITDA covenants and, in the aggregate,
increase availability reserves. The most recent amendment modified the
FIFO EBITDA covenants for October and November of 1997, and the Company
currently projects that it will meet these amended covenants; however, the
Company anticipates that it will also need to amend the FIFO EBITDA
covenants for December 1997 and the 1998 covenants contained in the New
Revolving Credit Facility. The Company plans to meet with the lenders in
December to discuss the amendment of such FIFO EBITDA covenants. While
the Company has been successful previously in negotiating waivers and
amendments to the New Revolving Credit Facility, and believes it will
continue to be successful in such negotiations as needed in the future,
there can be no assurance that the Company will be able to obtain such
amendments or that the Company's operations will generate sufficient cash
flow, considered together with the amounts available under the New
Revolving Credit Facility to meet all of the Company's future liquidity
requirements. If the Company is unsuccessful in negotiating an amendment
or other arrangement with the lenders before the end of January, the
Company will be in default under the New Revolving Credit Facility, giving
the lenders the right to accelerate the maturity of all amounts due under
the New Revolving Credit Facility and declare all amounts borrowed under
such facility immediately due and payable. Such an acceleration would
cause a default under the Indenture governing the Senior Notes, permitting
the Trustee or the holders of at least 25% in aggregate principal amount
of the Senior Notes to declare the unpaid principal amount and all accrued
interest on the Senior Notes to be immediately due and payable. The
Company does not have the financial resources to repay the amounts that
would be owed under either the New Revolving Credit Facility or the Senior
Notes if the maturity of either of such amounts were accelerated as
described above, and unless the Company were able to secure an additional
source of liquidity, which cannot be assured under such circumstances, any
such acceleration would have a material adverse effect upon the Company.
In September, the Company conducted a special meeting of the holders of
its 10-1/4% Senior Notes due 2003 and announced its intention to seek a
deleveraging of its balance sheet. It is currently in the process of
facilitating negotiations to effect such a deleveraging.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
4.6 Amendment No. 4 dated as of September 29, 1997, to
Restated Revolving Credit Agreement dated as of
December 20, 1996, among United States Leather, Inc., A.R.
Clarke Limited, the First Bank of Boston and the other
banks which are parties thereto.
4.7 Amendment No. 5 dated as of November 12, 1997, to Restated
Revolving Credit Agreement dated as of December 20, 1996,
among United States Leather, Inc., A.R. Clarke Limited, the
First Bank of Boston and the other banks which are parties
thereto.
27 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated September 24, 1997 with
respect to the meeting held that day of the holders of 10-1/4%
Senior Notes Due 2003.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1997
UNITED STATES LEATHER, INC.
By /s/ Kinzie L Weimer
Kinzie L Weimer
Senior Vice President and Chief Financial Officer
(Signing on behalf of the Registrant
and as Chief Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.6 Amendment No. 4
4.7 Amendment No. 5
27 Data Financial Schedule
AMENDMENT NO. 4 TO RESTATED REVOLVING CREDIT AGREEMENT
This Amendment No. 4 to Restated Revolving Credit Agreement (the
"Fourth Amendment"), made as of this 29th day of September, 1997, among
the undersigned, amends that certain Restated Revolving Credit Agreement,
dated as of December 20, 1996, as amended previously by Amendments dated
February 14, 1997, as of March 28, 1997 and as of July 30, 1997 (as
amended thereby and hereby, the "Agreement"), among the Borrowers, the
Agent, individually and as agent for itself and each of the other Banks,
and the Banks (as such terms are defined in the Agreement).
Reference is made to the following facts:
A. The Borrowers, the Agent and the Banks have entered into the
Agreement pursuant to which the Banks have, on the terms and subject to
the conditions stated therein, made loans to the U.S. Borrower;
B. The Borrowers requested that the Banks waive an existing Event
of Default as more fully set forth herein and that the Agreement be
amended to modify, among other provisions, the financial covenants therein
to avoid the occurrence of an Event of Default; and
C. The Agent and the Banks have agreed to make the modifications
requested by the Borrowers solely in accordance with the terms and
conditions of this Fourth Amendment.
NOW, THEREFORE, in consideration of the premises and of good and
valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto agree as follows:
Section 1. Definitions. All capitalized terms used herein which are
defined in the Agreement shall have the meanings herein as therein, except
as otherwise specifically provided herein.
Section 2. Amendments to the Loan Documents. From and after the
date hereof, the Agreement is hereby amended as follows:
2.1 The definition of Availability is hereby amended to provide
in its entirety as follows:
"Availability. The sum of the U.S. Borrowing
Base, less the "Availability Reserve" (as defined below),
minus the Canadian Deficiency. For the periods described
below, the Availability Reserve shall equal the amount set
forth below:
Period Availability Reserve
September 16, 1997 through $7,000,000;
September 29, 1997
September 30, 1997 through $7,500,000;
October 30, 1997
October 31, 1997 through $8,000,000;
November 27, 1997
November 28, 1997 through $8,500,000; and
December 30, 1997
December 31, 1997 and $9,000,000.
thereafter
2.2 The definition of EBITDA is hereby amended to add the
following language, including a new clause (viii), as follows:
", excluding (viii) the effect of any write-down or
write-up in the value of any assets in connection with
any reclassification as 'assets held for sale' of
assets of the U.S. Borrower's Caldwell Moser Division
or assets of the U.S. Borrower located at the U.S.
Borrower's facilities in Berlin, Wisconsin."
2.3 The definition of Maximum Amount in Section 1.1 of the
Agreement is hereby amended to provide in its entirety as follows:
"Maximum Amount. $65,000,000, less the dollar
amount of any Voluntary Reduction or Mandatory
Reduction pursuant to Section 2.7 hereof."
2.4 The portion of the table in Section 6.9 of the Agreement
regarding the period from September 1, 1997 through September 30, 1997 is
hereby amended to provide as follows:
"Period Maximum Usual
Allowance Permitted
in Minimum EBITDA
September 1, 1997 ($542,000) $0*
through September 30,
1997
Section 3. Waiver of Event of Default. The Borrowers hereby
represent that for the period August 1, 1997 through August 31, 1997,
EBITDA equalled negative $500,000 ("August EBITDA"). In reliance upon
such representation, the Agent and the Banks hereby agree to waive the
occurrence of an Event of Default pursuant to Section 6.9 of the Agreement
on account of august EBITDA being less than Minimum EBITDA for such
period.
Section 4. Appraisal of Collateral. The Borrowers hereby
acknowledge that the Banks, through the Agent or the Agent's designees, at
any reasonable time within thirty days (30) days after the date hereof and
at the Borrowers' sole cost and expense, may visit and inspect the
properties and offices of the Borrowers for the purpose of conducting an
inspection and appraisal of the Collateral (the "Collateral Appraisal").
Borrowers further agree that the foregoing Collateral Appraisal shall be
in addition to the visits, inspections, examinations and appraisals
contemplated by, and shall not be subject to the limitations set forth in,
subsections (a) and (c) of Section 5.5.
Section 5. Conditions precedent to this Amendment. The agreements
of the Agent and the Banks set forth in this Fourth Amendment are subject
to the satisfaction of the following conditions precedent:
5.1 At the time of the execution of the Fourth Amendment, there
shall exist no Defaults or Events of Default under the terms of the
Agreement, as amended hereby, the Loan Documents and the ancillary
documents other than the Event of Default to be waived under Section 3
hereof;
5.2 The U.S. Borrower shall have reimbursed the Agent for all
of the reasonable fees and disbursements of counsel to the Agent, which
shall have been incurred by the Agent prior to or in connection with the
preparation, negotiation, execution and delivery of this Fourth Amendment
and the consummation of the transactions contemplated herein;
5.3 Since the date of the commencement of the Agent's most
recent commercial finance examination, other than for changes reflected in
the written information provided to the Agent and the Lenders in the so-
called "Business Update" dated September 18, 1997, there shall have been
no changes in the assets, liabilities, financial condition, business,
income, operations or prospects of any of the Borrowers, the effect of
which have had or will have, in the aggregate, a material adverse effect
on the assets, properties, business, prospects, income, operations or
financial condition of the Borrowers;
5.4 This Fourth Amendment shall have been duly and properly
authorized, executed and delivered to the Agent, and shall be in full
force and effect; and
5.5 The U.S. Borrowers shall have paid to the Agent, for the
benefit of the agent and the U.S. Banks in accordance with their
respective U.S. Commitment Percentages immediately following the execution
and delivery hereof, a non-refundable restructuring fee of $50,000.
Section 6. Representations and Warranties. In order to induce the
Agent and the Banks to enter into this Fourth Amendment, the Borrowers,
jointly and severally, represent and warrant to the Agent and each Bank
that:
6.1 Each of the Borrowers (a) is a corporation duly organized,
validly existing and in good standing under the laws of the state or
Province in which it is organized as listed on Exhibit D to the Agreement,
(b) has all requisite corporate power to own its property and conduct its
business as now conducted and as presently contemplated, and (c) is duly
qualified and in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction listed in Exhibit D to the
Agreement;
6.2 The execution, delivery and performance of this Fourth
Amendment and the transactions contemplated hereby are within the
corporate power and authority of each Borrower and have been authorized by
all necessary corporate proceedings, and do not (a) require any consent or
approval of any creditors, trustees for creditors or shareholders of any
of the Borrowers, including, without limitation, the Indenture Trustee or
any other party pursuant to the terms of the Indenture Agreement, (b)
contravene any provision of the charter documents or by-laws of any of the
Borrowers or any law, rule or regulation applicable to any of the
Borrowers, (c) contravene any provision of, or constitute an event of
default or events that, but for the requirement that time elapse or notice
be given, or both, would constitute an event of default, under, any other
agreement, instrument, order or undertaking binding on any of the
Borrowers, including, without limitation, the Indenture Agreement, or (d)
result in or require the imposition of any Encumbrance of any of the
properties, assets or rights of any of the Borrowers other than Permitted
Encumbrances; and
6.3 Each of the representations, warranties, covenants and
negative covenants set forth in this Fourth amendment, the Agreement, as
amended hereby, and the other Loan Documents is true and correct on the
date hereof in all material respects, and no event has occurred and no
condition exists which constitutes a Default or Event of Default under the
Agreement, as amended hereby, or any other Loan Documents or any Ancillary
Document.
Section 7. Indemnification. The Borrowers shall absolutely and
unconditionally indemnify and hold harmless the Agent and each of the
Banks against any and all claims, demands, suits, actions, causes of
action, damages, losses, settlement payments, obligations, costs, expenses
and all other liabilities whatsoever which shall at any time or times be
incurred or sustained by the Agent or any of the Banks, or by any of their
shareholders, directors, officers, employees, representatives,
subsidiaries, affiliates or agents (other than as a result of the gross
negligence or willful misconduct of the Agent or any of the Banks or such
officers, directors, shareholders, employees or agents thereof) on account
of, or in relation to, or in any way in connection with, any of the
arrangements or transactions contemplated by, associated with or ancillary
to either this Fourth Amendment, the Agreement or any of the other Loan
Documents or any of the Ancillary Documents, whether or not all or any of
the transactions contemplated by, associated with, or ancillary to this
Fourth Amendment, the Agreement, any of such Loan Documents or any of such
ancillary Documents, are ultimately consummated (other than those costs or
expenses incurred by the Banks other than the Agent in connection with the
syndication, and by the agent and the Banks in the day-to-day
administration of the transactions contemplated by the Agreement, as
amended hereby, and the other Loan Documents).
Section 8. Miscellaneous.
8.1 As of the date hereof, and after giving effect to the
consummation of any transactions contemplated by this Fourth Amendment,
the Borrowers acknowledge that each has performed, satisfied, or complied
with all covenants and conditions to be performed, satisfied or complied
with by it under the Agreement, as amended hereby. The Borrowers hereby
covenant and agree that, after giving effect to the consummation of the
transactions contemplated hereby, the Borrowers will continue to perform,
satisfy or comply with all covenants and conditions to be performed,
satisfied or complied with by each of them under the Agreement, as amended
hereby.
8.2 The obligations of the Borrower (i) to repay to the Agent
and the Banks all of the unpaid principal of each of the Revolving Loans
made or to be made in the future pursuant to the Agreement, as amended
hereby, (ii) to pay to the Agent all of the unpaid interest accrued or to
accrue thereon, (iii) to pay to the Agent and the Banks all of the other
Obligations of the Borrowers, are and will continue to be entitled to all
of the benefits and to all of the security created or contemplated by the
Agreement, as amended hereby, and the other Loan Documents.
8.3 Except as otherwise expressly provided in this Fourth
Amendment, all of the terms, conditions and provisions of the Agreement
and each of the other Loan Documents remain unaltered and are in full
force and effect. The Agreement and this Fourth Amendment shall be read
and construed as one Agreement.
8.4 This Fourth Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
and the same instrument. In making proof of this Fourth Amendment, it
shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto.
8.5 All of the Obligations undertaken hereunder by the
Borrowers are hereby undertaken by each of them jointly and severally.
8.6 The captions and headings of the various sections and
subsections of this Fourth Amendment are provided for convenience only and
shall not be construed to modify the meaning of such sections or
subsections.
8.7 The invalidity or unenforceability of any one or more
phrases, clauses or sections of this Fourth Amendment under particular
circumstances shall not affect the validity or enforceability thereof or
of the Agreement, as amended hereby, under other circumstances, or the
validity or the enforceability of the remaining portions of this Fourth
Amendment or the Agreement, as amended hereby.
8.8 This Fourth Amendment shall be deemed to be a contract
under seal and shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts (without giving effect to any
conflicts of law provisions contained therein).
IN WITNESS WHEREOF, the parties hereto have executed this Fourth
Amendment under seal as of the day first above-written by the respective
officers hereunto duly authorized.
UNITED STATES LEATHER, INC., as a Borrower
By:
Title:
A.R. CLARKE LIMITED, as a Borrower, and
Guarantor of United States Leather, Inc.'s
Obligations
By:
Title:
BANKBOSTON, N.A. (f/k/a The First National
Bank of Boston), as the Agent
By:
Title:
BANKBOSTON, N.A. (f/k/a The First National
Bank of Boston), as a Bank
By:
Title:
HELLER FINANCIAL, INC., as a Bank
By:
Title:
THE CHASE MANHATTAN BANK, as a Bank
By:
BTM CAPITAL CORPORATION, as a Bank
By:
Title:
AMENDMENT NO. 5 TO RESTATED REVOLVING CREDIT AGREEMENT
This Amendment No. 5 to Restated Revolving Credit Agreement (the
"Fifth Amendment"), made as of this 12th day of November, 1997, among
the undersigned, amends that certain Restated Revolving Credit Agreement,
dated as of December 20, 1996, as amended from time to time (as amended
previously and hereby, the "Agreement"), among the Borrowers, the Agent,
individually and as agent for itself and each of the other Banks, and the
Banks (as such terms are defined in the Agreement).
Reference is made to the following facts:
A. The Borrowers, the Agent and the Banks have entered into the
Agreement pursuant to which the Banks have, on the terms and subject to
the conditions stated therein, made loans to the U.S. Borrower;
B. The Borrowers have requested that the Agreement be further
amended to modify the financial covenants therein to avoid the occurrence
of an Event of Default; and
C. The Agent and the Banks have agreed to make the modifications
requested by the Borrowers solely in accordance with the terms and
conditions of this Fifth Amendment.
NOW, THEREFORE, in consideration of the premises and of good and
valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto agree as follows:
Section 1. Definitions All capitalized terms used herein which are
defined in the Agreement shall have the meanings herein as therein, except
as otherwise specifically provided herein.
Section 2. Amendments to the Loan Documents From and after the date
hereof, the Agreement is hereby amended as follows:
2.1 The portion of the table in Section 6.9 of the Agreement
regarding the periods from October 1, 1997 through October 31, 1997
and from November 1, 1997 through November 30, 1997 are hereby
amended to provide as follows:
"Period Amount Maximum Usual Allowance
Permitted in Minimum EBITDA
October 1, 1997
through October 31, 1997 $0 $0
November 1, 1997
through November 30, 1997 $0 $0"
2.2 Notwithstanding any provisions of Section 2B of the Agreement,
or any other terms or provisions of the Agreement, the U.S. Borrower and
the Canadian Borrower shall be prohibited, from and after the date hereof,
from borrowing any Eurodollar Loans, and all Revolving Loans made from and
after the date hereof shall be Base Rate Loans. Without derogating from
the foregoing, all Eurodollar Loans outstanding prior to the date hereof
shall continue as Eurodollar Loans, subject to the terms and conditions of
the Agreement, for the remainder of their respective Interest Periods; and
upon the expiration of such Interest Periods such Revolving Loans shall
be, from and after the expiration of such Interest Periods, Base Rate
Loans.
Section 3. Conditions Precedent to this Amendment. The agreements
of the Agent and the Banks set forth in this Fifth Amendment are subject
to the satisfaction of the following conditions precedent:
3.1 At the time of the execution and delivery of the Fifth
Amendment, there shall exist no Defaults or Events of Default under the
terms of the Agreement, the Loan Documents and the Ancillary Documents;
3.2 The U.S. Borrower shall have reimbursed the Agent for all of the
reasonable fees and disbursements of counsel to the Agent, which shall
have been incurred by the Agent prior to or in connection with the
preparation, negotiation, execution and delivery of this Fifth Amendment
and the consummation of the transactions contemplated herein;
3.3 Since the date of the commencement of the Agent's most recent
commercial finance examination, there shall have been no changes in the
assets, liabilities, financial condition, business, income, operations or
prospects of any of the Borrowers, the effect of which have had or will
have, in the aggregate, a material adverse effect on the assets,
properties, business, prospects, income, operations or financial condition
of the Borrowers;;
3.4 This Fifth Amendment shall have been duly and properly
authorized, executed and delivered to the Agent and the Banks, and shall
be in full force and effect; and
3.5 The U.S. Borrowers shall have paid to the Agent, for the benefit
of the Agent and the U.S. Banks in accordance with their respective U.S.
Commitment Percentages immediately following the execution and delivery
hereof, a non-refundable restructuring fee of $50,000.
Section 4. Representations and Warranties. In order to induce the
Agent and the Banks to enter into this Fifth Amendment, the Borrowers,
jointly and severally, represent and warrant to the Agent and each Bank
that:
4.1 Each of the Borrowers (a) is a corporation duly organized,
validly existing and in good standing under the laws of the state or
province in which it is organized as listed on Exhibit D to the Agreement,
(b) has all requisite corporate power to own its property and conduct its
business as now conducted and as presently contemplated, and (c) is duly
qualified and in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction listed in Exhibit D to the
Agreement.
4.2 The execution, delivery and performance of this Fifth Amendment
and the transactions contemplated hereby are within the corporate power
and authority of each Borrower and have been authorized by all necessary
corporate proceedings, and do not (a) require any consent or approval of
any creditors, trustees for creditors or shareholders of any of the
Borrowers, including without limitation, the Indenture Trustee or any
other party pursuant to the terms of the Indenture Agreement, (b)
contravene any provision of the charter documents or by-laws of any of the
Borrowers or any law, rule or regulation applicable to any of the
Borrowers, (c) contravene any provision of, or constitute an event of
default or events that, but for the requirement that time elapse or notice
be given, or both, would constitute an event of default, under, any other
agreement, instrument, order or undertaking binding on any of the
Borrowers, including, without limitation, the Indenture Agreement, or (d)
result in or require the imposition of any Encumbrance on any of the
properties, assets or rights of any of the Borrowers other than Permitted
Encumbrances; and
4.3 Each of the representations warranties, covenants and negative
covenants set forth in this Fifth Amendment, the Agreement, and the other
Loan Documents is true and correct on the date hereof in all material
respects, and no event has occurred and no condition exists which
constitutes a Default or Event of Default under the Agreement, or any
other Loan Documents or any Ancillary Documents.
Section 5. Indemnification. The Borrowers shall absolutely and
unconditionally indemnify and hold harmless the Agent and each of the
Banks against any and all claims, demands, suits, actions, causes of
action, damages, losses, settlement payments, obligations, costs, expenses
and all other liabilities whatsoever which shall at any time or times be
incurred or sustained by the Agent or any of the Banks, or by any of their
shareholders, directors, officers, employees, representatives,
subsidiaries, affiliates or agents (other than as a result of the gross
negligence or willful misconduct of the Agent or any of the Banks or such
officers, directors, shareholders, employees or agents thereof) on account
of, or in relation to, or in any way in connection with, any of the
arrangements or transactions contemplated by, associated with or ancillary
to either this Amendment, the Agreement or any of the other Loan Documents
or any of the Ancillary Documents, whether or not all or any of the
transactions contemplated by, associated with, or ancillary to this Fifth
Amendment, the Agreement, any of such Loan Documents or any of such
Ancillary Documents, are ultimately consummated.
Section 6. Miscellaneous.
6.1 As of the date hereof, and after giving effect to the
consummation of any transactions contemplated by this Fifth Amendment, the
Borrowers acknowledge that each has performed, satisfied, or complied with
all covenants and conditions to be performed, satisfied or complied with
by it under the Agreement. The Borrowers hereby covenant and agree that,
after giving effect to the consummation of the transactions contemplated
hereby, the Borrowers will continue to perform, satisfy or comply with all
covenants and conditions to be performed, satisfied or complied with by
each of them under the Agreement.
6.2 The obligations of the Borrowers (i) to repay the Agent, for the
benefit of the Banks, all of the unpaid principal of each of the Revolving
Loans made or to be made in the future pursuant to the Agreement, (ii) to
pay to the Agent, for the benefit of the Banks, all of the unpaid interest
accrued or to accrue thereon, (iii) to pay to the Agent and the Banks all
of the other Obligations of the Borrowers, are and will continue to be
entitled to all of the benefits and to all of the security created or
contemplated by the Agreement, and the other Loan Documents.
6.3 Except as otherwise expressly provided in this Fifth Amendment,
all of the terms, conditions and provisions of the Agreement and each of
the other Loan Documents remain unaltered and are in full force and
effect. The Agreement and this Fifth Amendment shall be read and
construed as one Agreement.
6.4 This Fifth Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
and the same instrument. In making proof of this Fifth Amendment, it
shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto.
6.5 All of the Obligations undertaken hereunder by the Borrowers are
hereby undertaken by each of them jointly and severally.
6.6 The captions and headings of the various sections and
subsections of this Fifth Amendment are provided for convenience only and
shall not be construed to modify the meaning of such sections or
subsections.
6.7 The invalidity or unenforceability of any one or more phrases,
clauses or sections of this Fifth Amendment under particular circumstances
shall not affect the validity or enforceability thereof or of the
Agreement, under other circumstances, or the validity or the
enforceability of the remaining portions of this Fifth Amendment or the
Agreement.
6.8 This Fifth Amendment shall be deemed to be a contract under seal
and shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of
law provisions contained therein).
IN WITNESS WHEREOF, the parties hereto have executed this Fifth
Amendment under seal as of the date first above written by their
respective officers herein and duly authorized.
UNITED STATES LEATHER, INC.,
as a Borrower
By:
Title:
A.R. CLARKE LIMITED,
as a Borrower and a Guarantor of United
States Leather, Inc.'s Obligations
By:
Title:
BANKBOSTON, N.A. (f/k/a The First National
Bank of Boston, as the Agent
By:
Title:
BANKBOSTON, N.A. (f/k/a The First National
Bank of Boston, as a Bank
By:
Title:
HELLER FINANCIAL, INC., as a Bank
By:
Title:
THE CHASE MANHATTAN BANK, as a Bank
By:
Title:
BTM CAPITAL CORPORATION, as a Bank
By:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNITED STATES LEATHER, INC. AS OF
AND FOR NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 443
<SECURITIES> 0
<RECEIVABLES> 46,520
<ALLOWANCES> (2,439)
<INVENTORY> 46,779
<CURRENT-ASSETS> 97,335
<PP&E> 85,426
<DEPRECIATION> (41,782)
<TOTAL-ASSETS> 241,460
<CURRENT-LIABILITIES> 67,467
<BONDS> 129,970
1
0
<COMMON> 0
<OTHER-SE> 37,066
<TOTAL-LIABILITY-AND-EQUITY> 241,460
<SALES> 70,158
<TOTAL-REVENUES> 70,158
<CGS> 65,364
<TOTAL-COSTS> 71,144
<OTHER-EXPENSES> 12,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,826
<INCOME-PRETAX> (14,052)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,052)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,052)
<EPS-PRIMARY> (140,520)
<EPS-DILUTED> 0
</TABLE>
