UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-12368
THE LEATHER FACTORY, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2543540
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3847 East Loop 820 South, Ft. Worth, Texas 76119
(Address of principal executive offices) (Zip code)
(817) 496-4414
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to by 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.
Class Shares outstanding as of May 15, 1996
----- -------------------------------------
Common Stock, par value $.0024 per share 9,853,161
Page 1 of 28 pages contained in the sequential numbering system.
The Exhibit Index may be found on Page 14 of the sequential numbering system.
<PAGE>
THE LEATHER FACTORY, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income
Three months ended March 31, 1996 and 1995 ........................... 3
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995................................... 4
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995............................. 5
Consolidated Statement of Stockholders' Equity
Three months ended March 31, 1996 ................................. 6
Notes to Consolidated Financial Statements.............................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................8-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 12
Item 6. Exhibits and Reports on Form 8-K .................................. 12
SIGNATURES.................................................................. 13
EXHIBIT INDEX..............................................................14-18
2
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 7,356,805 $ 8,568,942
COST OF SALES 4,462,141 4,821,538
-------------- -------------
Gross Profit 2,894,664 3,747,404
OPERATING EXPENSES 2,753,592 2,645,362
-------------- -------------
INCOME FROM OPERATIONS 141,072 1,102,042
OTHER (INCOME) EXPENSE:
Interest expense 170,983 168,823
Other, net (5,097) (5,839)
-------------- -------------
Total other (income) expense 165,886 162,984
-------------- -------------
INCOME BEFORE INCOME TAXES (24,814) 939,058
PROVISION FOR INCOME TAXES (2,820) 381,033
--------------- -------------
NET INCOME (LOSS) $ (21,994) $ 558,025
============== =============
NET INCOME PER SHARE OF COMMON STOCK $ - $ 0.06
============== =============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 9,788,530 9,812,030
============== =============
DIVIDENDS PAID PER SHARE $ - $ -
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------------ ------------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 158,169 $ 477,159
Accounts receivable-trade, net of allowance for
doubtful accounts of $42,000 and $39,000
in 1996 and 1995, respectively 2,787,784 2,784,050
Inventory 8,306,275 7,903,179
Prepaid income taxes 201,346 203,559
Deferred income taxes 101,992 88,321
Other current assets 783,644 656,837
------------------ ------------------
Total current assets 12,339,210 12,113,105
------------------ ------------------
PROPERTY AND EQUIPMENT, at cost 2,587,488 2,474,056
Less-accumulated depreciation and amortization (1,076,725) (1,014,966)
------------------ ------------------
Property and equipment, net 1,510,763 1,459,090
GOODWILL and other, net of accumulated amortization of
$350,000 and $300,000 in 1996 and 1995, respectively 6,014,609 5,761,181
------------------ ------------------
$ 19,864,582 $ 19,333,376
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,890,209 $ 1,398,917
Accrued expenses and other liabilities 477,042 655,489
Income taxes payable 47,250 48,300
Notes payable and current maturities of long-term debt 8,046,414 1,296,359
------------------ ------------------
Total current liabilities 10,460,915 3,399,065
------------------ ------------------
DEFERRED INCOME TAXES 88,576 85,197
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 54,780 6,566,809
SENIOR CUMULATIVE CONVERTIBLE PREFERRED STOCK - -
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.10 par value; 20,000,000
shares authorized, none issued or outstanding - -
Common stock, $0.0024 par value; 25,000,000 shares
authorized, 9,853,161 shares issued in 1996 and 1995 23,648 23,648
Paid-in capital 4,130,796 4,130,796
Retained earnings 5,432,051 5,454,045
Less: Unearned Shares held by ESOP, 64,631
shares in 1996 and 1995 (326,184) (326,184)
------------------ ------------------
Total stockholders' equity 9,260,311 9,282,305
------------------ ------------------
$ 19,864,582 $ 19,333,376
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (21,994) $ 558,025
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation & amortization 118,283 101,254
(Gain) loss on sales of assets (346) (1,800)
Net changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable-trade (3,734) (450,161)
Inventory (403,096) (489,953)
Prepaid income taxes 2,213 -
Other current assets (126,807) (193,801)
Accounts payable 491,292 (76,774)
Accrued expenses and other liabilities (178,447) (517,911)
Income taxes payable (1,050) 328,053
Deferred income taxes (10,292) (34,670)
---------------- ---------------
Total adjustments (111,984) (1,335,763)
---------------- ---------------
Net cash used in operating activities (133,978) (777,738)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (119,480) (61,025)
Proceeds from sales of assets 236 2,000
Cash paid for acquisitions, net of cash acquired (300,000) (5,127,532)
Decrease in assets restricted for acquisitions - 5,040,656
Other intangible costs (3,792) (4,132)
---------------- ---------------
Net cash used in investing activities (423,036) (150,033)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt 1,300,000 950,000
Payments on notes payable and long-term debt (1,061,976) (298,211)
Stock issuance costs - (1,903)
---------------- ---------------
Net cash provided by financing activities 238,024 649,886
---------------- ---------------
NET INCREASE (DECREASE) IN CASH (318,990) (277,885)
CASH, beginning of period 477,159 402,253
---------------- ---------------
CASH, end of period $ 158,169 $ 124,368
================ ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $ 37,243 $ 106,476
Income taxes paid during the period 6,715 87,653
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Common Stock
-------------------------
Number Paid-in Retained Unearned
of Shares Par Value Capital Earnings ESOP Shares Total
------------ ---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 9,853,161 $ 23,648 $ 4,130,796 $ 5,454,045 $ (326,184) $ 9,282,305
Net loss - - - (21,994) - (21,994)
------------ ---------- ------------ ------------- ---------- -------------
BALANCE, March 31, 1996 9,853,161 $ 23,648 $ 4,130,796 $ 5,432,051 $ (326,184) $ 9,260,311
============ ========== ============ ============= ========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
THE LEATHER FACTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial position as of March 31,
1996 and December 31, 1995, and the results of operations and cash flows for the
three months ended March 31, 1996 and 1995. The results of operations for the
three month period are not necessarily indicative of the results to be expected
for the full fiscal year. The consolidated financial statements should be read
in conjunction with the financial statement disclosures contained in the
Company's 1995 Annual Report to Stockholders.
2. Inventories
The components of inventory consist of the following:
March 31, December 31,
1996 1995
---- ----
Finished goods held for sale $6,945,737 $6,736,811
Raw materials and work in process 1,360,538 1,166,368
---------- ----------
$8,306,275 $7,903,179
========== ==========
3. Acquisitions
On March 1, 1996, the Company acquired all of the issued and outstanding
shares of capital stock of The Leather Factory of Canada, Ltd., the Company's
Canadian distributor located in Winnipeg, Manitoba. For financial reporting
purposes, the transaction was accounted for under the purchase method, effective
March 1, 1996. The total purchase price was $300,000 (USD). Cost in excess of
assets acquired (goodwill) is being amortized over 10 years. Pro forma financial
information for the Canadian acquisition is not provided, as such amounts would
be insignificant.
4. Notes Payable and Long-Term Debt
As reported in the Company's 1995 Annual Report on Form 10-KSB, the Company
has certain financing arrangements with NationsBank of Texas, N.A. (the "Bank").
These financing arrangements include a working capital line of credit, an
acquisition line of credit, and a term facility. On March 31, 1996, the Company
was in noncompliance of certain of its affirmative covenants relating to the
aforementioned financing arrangements. These affirmative covenants generally
relate to the testing of net income or a derivative thereof, on a rolling four
quarters basis. In addition, the Company was also in noncompliance of the net
income element of the borrowing base provisions associated with its working
capital line of credit. The Bank has waived these events of noncompliance from
March 31, 1996 to June 30, 1996. As a result of the events of noncompliance and
given that management anticipates being in noncompliance with the bank covenants
as of June 30, 1996, even though the Bank has extended the maturity date of the
working capital line of credit from March 31, 1997 to June 30, 1997, all debt
owed to the Bank as March 31, 1996 has been classified as a current obligation
in the accompanying financial statements.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
-------
The Leather Factory, Inc. ("the Company") is a leading one stop source for
leather, traditional leathercraft materials involving such products as
do-it-yourself kits, stamping sets, and leatherworking tools, craft-related
items including various types of leather lace, beads, and wearable art
accessories, hardware, metal garment accessories such as belt buckles, belt
buckle designs and conchos, shoe repairing supplies and leather finishes. These
products are distributed primarily on a wholesale level and principally through
the Company's twenty-two sales/distribution units in the United States and
Canada. Moreover, the Company is a manufacturer and distributor of hat trims in
braids, leather, and woven fabrics. These hat trims are sold to hat
manufacturers and distributors.
Results of Operations
---------------------
Income Statement Comparison
The following table sets forth, for the interim periods indicated, certain
items from the Company's Consolidated Statements of Income expressed as a
percentage of net sales:
Quarterly Period Ended
March 31,
1996 1995
---- ----
Net sales 100.0% 100.0%
Cost of sales 60.7 56.3
------ ------
Gross profit 39.3 43.7
Operating expenses 37.4 30.8
------ ------
Income from operations 1.9 12.9
Interest expense, net 2.2 1.9
------ ------
Income before income taxes 0.3 11.0
Provision for income taxes -0.0 4.5
------ ------
Net income -0.3% 6.5%
====== ======
Revenues
--------
The Company's net sales decreased by 14.1% to $7,356,805 during the first
fiscal quarter ended March 31, 1996 from $8,568,942 generated in the first
quarter of 1995. The decrease in revenues was primarily due to reduced unit
sales to the retail craft industry. These sales include sales to craft store
chains, as well as to mass merchandisers. The decrease in sales was not price
driven, rather it was a function of weak overall conditions in the retail craft
industry. Sales have been impacted by what our customers in the craft and
western markets continue to consider "a difficult retail environment." The
decrease in craft market sales represented approximately 71% of the reduction in
sales compared to last year's quarter.
The Company also experienced some losses in other areas of the business
generally because of continued softness in the markets for western and
southwestern items. These losses were, again, due to changes in unit sales, not
price fluctuations and represented approximately 29% of the loss in sales. The
sales of the Company's hat trim subsidiary, Roberts,Cushman & Company, Inc.
("Cushman"), broke even with the first quarter of last year, despite the labor
strike. The effect of the new locations, TLF of Canada and the Charlotte unit
are immaterial at this time.
8
<PAGE>
Historical trends have shown that the third and fourth quarters have
generally been somewhat better than the other quarters of the year. Given the
softness and conditions of the markets in which the Company does business, there
may not be a departure from this tenet, yet long-term trends continue to be
difficult to determine at this point. This may be mitigated in the future due to
the Company's planned growth through acquisition. For more information on the
acquisition strategy of the Company, please see "-Capital Resources and
Liquidity" below. No one customer makes up ten percent (10%) or more of the
Company's sales.
Costs, Gross Profit, and Expenses
---------------------------------
Cost of sales as a percentage of revenue was 60.7% for the first fiscal
quarter of 1996 as compared to 56.3% for the same quarter in 1995. The
difference in the relative cost of sales percentage was principally attributable
to a change in sales mix. The changes in sales mix is due to the reduced sales
and market conditions noted above.
A higher relative cost of sales percentage meant that gross profit as a
percentage of sales was lower for the quarter ended March 31, 1996 compared to
March 31, 1995. Gross profit as a percentage of sales decreased to 39.3% in 1996
from 43.7% in 1995. Total gross profit decreased 22.8% to $2,894,664 from
$3,747,404 generated in the quarter ended March 31, 1995. This decrease was due
to unit sales decreases and the change in sales mix as discussed above.
Operating expenses increased $108,230 or 4.1% to $2,753,592 during the
first fiscal quarter of 1996 from $2,645,362 during the quarter ended March 31,
1995. The increase in the dollar amount of operating expenses between the two
quarters was the net result of an increase in operating expenses at Cushman,
some of which were related to the labor strike, increased advertising to
generate sales in a difficult environment, and increased salary expense to build
Company infrastructure. This increase was mitigated by reduced discretionary
bonuses and lower commissions to Company sales representatives due to lower
sales and profits. The two new units did not cause a significant increase in
operating expenses.
Net Income
----------
Net income decreased to a net loss of $21,994 during the first fiscal
quarter of 1996 from a net gain of $558,025 during the quarter ended March 31,
1995. The size of this decrease in net income between the two quarters is due to
the factors noted above regarding sales, gross profit, operating expenses.
9
<PAGE>
Capital Resources and Liquidity
-------------------------------
The primary sources of liquidity and capital resources during the first
quarter of 1996 were the Company's Acquisition Facility (defined below),
borrowings on the Company's working capital line of credit with NationsBank of
Texas, N.A., reinvesting cash flows from operating activities, and operating
leases.
Accounts receivable and inventory increased to $2,787,784 and $8,306,275
from 2,784,050 and $7,903,179 at December 31, 1995, respectively. The slight
increase in accounts receivable, despite lower sales for the quarter, is
reflective of somewhat slower collections due to market conditions as noted
above. However, the slowdown in collections was not considerable, in that the
number of days' receivables remained relatively constant, increasing from 32
days at December 31, 1995 to 34 days at March 31, 1996.
Inventory turned during the first three months of 1996 at an annual rate of
2.20 times. This is slightly lower than the number of inventory turns of 2.32
times, which resulted during the fiscal year ended December 31, 1995. The
inventory increase and turn decrease principally reflects the addition of
inventory purchased to open the new unit in Charlotte, North Carolina and to
increased inventory in the Fort Worth manufacturing location and the central
warehouse for an anticipated increase in sales to larger volume customers in the
second quarter of 1996.
The uses of cash beyond inventory, accounts receivable, and debt payments
involved the cash portion of the consideration paid to acquire the stock of TLF
of Canada, and the making of capital expenditures. Cash used for capital
expenditures totaled $119,480 and $61,025 for the fiscal quarters ended March
31, 1996 and 1995, respectively. These capital expenditures involved various
equipment and furniture and fixtures additions associated with the Company's
expansion.
As reported in the Company's 1995 Annual Report on Form 10-KSB, the Company
has certain financing arrangements with NationsBank of Texas, N.A.
("NationsBank"). These financing arrangements include a working capital line of
credit, an acquisition line of credit, and a term facility. On March 31, 1996,
the Company was in noncompliance of certain of its affirmative covenants
relating to the aforementioned financing arrangements. These affirmative
covenants generally relate to the testing of net income or a derivative thereof,
on a rolling four quarters basis. In addition, the Company was also in
noncompliance of the net income element of the borrowing base provisions
associated with its working capital line of credit. NationsBank has waived these
events of noncompliance from March 31, 1996 to June 30, 1996. As a result of the
events of noncompliance and given that management anticipates being in
noncompliance with the bank covenants as of June 30, 1996, even though
NationsBank has extended the maturity date of the working capital line of credit
from March 31, 1997 to June 30, 1997, all debt owed to NationsBank as March 31,
1996 has been classified as a current obligation in the financial statements
contained elsewhere herein.
Accordingly, at June 30, 1996, NationsBank may also waive the
noncompliance, or elect to terminate the Company's financing arrangements,
demand immediate payment of all outstanding balances and foreclose on the
Company's assets securing the NationsBank loans if payment is not made. In this
event, if the Company cannot obtain alternative financing, the Company could be
forced to consider other strategies, including reorganization under federal
bankruptcy protection. However, management believes that such strategies will
not be necessary in that: (i) the Company is financially sound, in that it is
not overly leveraged and its financial condition has not deteriorated during
this period of lower earnings; and (ii) management anticipates rising earnings
levels as the downturn in the sales to craft retailers should abate in the later
part of the second quarter and these sales will begin to increase in the
historically better third and fourth quarters. See also Notes to Consolidated
Financial Statements contained herein.
Notwithstanding the issues and possible ramifications regarding the
Company's financing arrangements discussed above, due to the possible trends
noted immediately above, management believes that the current sources of
liquidity and capital resources will be sufficient to fund current operations,
internal growth, including the opening or adding of new sales/distribution
units, and the acquisition of companies in a related business. In 1996, funding
for the opening of new units and any acquisition of companies in a related
business is expected to be provided by operating leases, cash flow from
operating activities, the Company's $10 million working capital line of credit
with NationsBank, and the Company's $20 million acquisition line ("Acquisition
Facility"). The following summarizes the Acquisition Facility.
10
<PAGE>
On July 28, 1995, the Company entered into a Stock Purchase Agreement with
Center Street Capital Partners, L.P., a Delaware limited partnership, and
Stratford Capital Partners, L.P., a Texas limited partnership (the "Buyers"),
pursuant to which the Buyers agreed to deliver a one year commitment to purchase
up to $10 million aggregate principal amount of Senior Cumulative Convertible
Preferred Stock, par value $0.10 per share (the "Preferred Stock"), of the
Company, at a purchase price of $100 per share. The proceeds from the sale of
Preferred Stock to the Buyers will be used solely by the Company to provide
financing for the Company's acquisition of businesses related to the current
business of the Company. The Company also obtained a one year commitment from
NationsBank to provide a $10 million acquisition line of credit ("Acquisition
Line"). The Preferred stock and the Acquisition Line comprise the Acquisition
Facility. The obligations of the Buyers to purchase shares of Preferred Stock
and NationsBank to allow the Company to draw down on the Acquisition Line, are
subject to the satisfaction of certain conditions precedent, which generally
regard the required terms of the Company's planned acquisitions and continued
compliance with all covenants pertaining to the Company's financing
arrangements. The Company was also in noncompliance with the covenants contained
in the Acquisition Facility as of March 31, 1996. However, the covenants
allowing for a drawing on the Acquisition Facility will be tested on a pro forma
basis with the Company and the acquisition target combined. Any of the
conditions can be waived at the option of either the Buyers or NationsBank. As
of March 31, 1996, the Company had not drawn on the Acquisition Facility. For
further detail, see Note 8 to the Consolidated Financial Statements included in
the Company's 1995 Annual Report to Stockholders. At the present time, the
Company is in discussion with the Buyers and NationsBank regarding an extension
of the time for the Acquisition Facility. In the event that the extension is not
obtained, the Company must seek alternate means of financing its acquisitions,
including debt and stock offerings on a public or private basis. There can be no
assurance that such alternative financings will be available to the Company on
acceptable terms.
In addition to the Acquisition Facility, the Company's management also
intends to utilize Common Stock to assist in purchase transactions where
appropriate. Management can make no assurances as to whether the Company can
make any acquisitions using the Acquisition Facility or the Common Stock.
Cautionary Statement
--------------------
The disclosures under "-Results of Operations" and "-Capital Resources and
Liquidity" and in the Notes to Consolidated Financial Statements as provided
elsewhere herein contain forward-looking statements. There are certain important
factors which could cause results to differ materially than those anticipated by
some of the forward-looking statements. Some of the important factors which
could cause actual results to differ materially from those in the
forward-looking statements include, among other things, changes from anticipated
levels of sales, whether due to future national or regional economic and
competitive conditions, including, but not limited to, retail craft buying
patterns, and possible negative trends in the craft and western retail markets,
customer acceptance of existing and new products, or otherwise, pricing
pressures due to competitive industry conditions, increases in prices for
leather, which is a world-wide commodity, which for some reason, may not be
passed on to the customers of the Company's products, change in tax rates,
change in interest rates, problems with the importation of the products which
the Company buys in 14 countries around the world, including, but not limited
to, transportation problems or changes in the political climate of the countries
involved, including the maintenance by said countries of Most Favored Nation
status with the United States of America, and other uncertainties, all of which
are difficult to predict and many of which are beyond the control of the
Company.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1995, in connection with the labor strike by
the Union of Needletrades, Industrial and Textile Employees ("UNITE") at the
Cushman manufacturing facility in New York, New York, the Company is party to
certain actions before the National Labor Relations Board ("NLRB"). The
following narrative describes the recent developments in these matters.
The case filed against the New York local of UNITE by the Company on
November 28, 1995, in which the Company alleged that UNITE engaged in coercive
tactics by blocking entrance to the Company's place of business, threatening
employees with physical violence and physically restraining and assaulting
employees and business invitees, has been settled and UNITE has agreed to post a
notice.
The case filed on January 17, 1996, by the Company against UNITE alleging
that UNITE engaged in unlawful secondary activity in violation of the National
Labor Relations Act by picketing and otherwise encouraging the public not to
purchase from customers of Cushman, was dismissed. The Company appealed the
decision to the Washington, D.C. office of the NLRB, where the Regional
Director's decision was upheld.
On February 14, 1996, UNITE filed charges against the Company (Cause No.
16-CA-17849) before the NLRB in which it was alleged that the Company unlawfully
discharged an employee because of her union activities. There were also claims
that the Company unilaterally granted increased benefits for the purpose of
frustrating organization of its employees. On April 11, 1996, the Regional
Director of the NLRB refused to process the complaint insofar as the discharge
was concerned. UNITE has appealed this decision to the Washington, D.C. office
of the NLRB. There has been no decision on this appeal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits required to be filed as part of this report is set forth
in the Exhibit Index, which immediately precedes such exhibits, and is
incorporated herein by reference.
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE LEATHER FACTORY, INC.
(Registrant)
Date: May 17, 1996 By /s/ Wray Thompson
-----------------
Wray Thompson
Chairman of the Board,
President and
Chief Executive Officer
Date: May 17, 1996 By /s/ John Tittle, Jr.
--------------------
John Tittle, Jr.
Chief Financial Officer,
Treasurer and Director
(Chief Financial and
Accounting Officer)
13
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
<S> <C> <C>
3.1 Certificate of Incorporation of The Leather Factory, Inc., filed as
Exhibit 3.1 to the Registration Statement on Form SB-2 of The Leather
Factory, Inc. (Commission File No. 33-81132) filed with the Securities
and Exchange Commission on July 5, 1994, and incorporated by reference
herein.
3.2 Bylaws of The Leather Factory, Inc., filed as Exhibit 3.2 to the
Registration Statement on Form SB-2 of The Leather Factory, Inc.
(Commission File No. 33-81132) filed with the Securities and Exchange
Commission on July 5, 1994, and incorporated by reference herein.
3.3 Amendment to Certificate of Incorporation of The Leather Factory, Inc.
-- Certificate of Designation, Preferences and Rights of the Senior
Cumulative Convertible Preferred Stock Dated July 24, 1995, filed as
Exhibit 3.3 to the Quarterly Report on Form 10-QSB of The Leather
Factory, Inc. (Commission File No. 1-12368) filed with the Securities
and Exchange Commission on August 10, 1995, and incorporated by
reference herein.
4.1 Second Restated Loan Agreement dated July 24, 1995, by and between The
Leather Factory, Inc., a Delaware corporation, and NationsBank of
Texas, N.A., filed as Exhibit 4.1 to the Quarterly Report on Form
10-QSB of The Leather Factory, Inc. (Commission File No. 1-12368)
filed with the Securities and Exchange Commission on August 10, 1995,
and incorporated by reference herein.
4.2 Promissory Note (Working Capital Line of Credit) dated July 24, 1995,
in the principal amount of $10,000,000, payable to the order of
NationsBank of Texas, N.A., which matures March 31, 1997, filed as
Exhibit 4.2 to the Quarterly Report on Form 10-QSB of The Leather
Factory, Inc. (Commission File No. 1-12368) filed with the Securities
and Exchange Commission on August 10, 1995, and incorporated by
reference herein.
4.3 Promissory Note (Acquisition Line) dated July 24, 1995, in the
principal amount of $10,000,000, payable to the order of NationsBank
of Texas, N.A., which matures August 1, 2000, filed as Exhibit 4.3 to
the Quarterly Report on Form 10-QSB of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and Exchange
Commission on August 10, 1995, and incorporated by reference herein.
4.4 Promissory Note dated December 28, 1994 in the principal amount of
$5,000,000, payable to the order of NationsBank of Texas, N.A., which
matures December 28, 1999, filed as Exhibit No. 4.5 to the 1994 Annual
Report on Form 10-KSB of The Leather Factory, Inc. (Commission File
No. 1-12368) filed with the Securities and Exchange Commission on
March 27, 1995, and incorporated herein by reference.
4.5 Stock Purchase Agreement dated as of July 28, 1995, by and between
Center Street Capital Partners, L.P., a Delaware Limited Partnership,
Stratford Capital Partners, L.P., a Texas Limited Partnership, and The
Leather Factory, Inc., a Delaware Corporation, filed as Exhibit 4.5 to
the Quarterly Report on Form 10-QSB of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and Exchange
Commission on August 10, 1995, and incorporated by reference herein.
</TABLE>
14
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
<S> <C> <C>
4.6 Commitment Agreement dated July 28, 1995, by and among The Leather
Factory, Inc., a Delaware Corporation, Center Street Capital Partners,
L.P., a Delaware Limited Partnership, and Stratford Capital Partners,
L.P., a Texas Limited Partnership, filed as Exhibit 4.6 to the
Quarterly Report on Form 10-QSB of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and Exchange
Commission on August 10, 1995, and incorporated by reference herein.
4.7 Registration Rights Agreement dated July 28, 1995, by and between
Center Street Capital Partners, L.P., a Delaware Limited Partnership,
Stratford Capital Partners, L.P., a Texas Limited Partnership, and The
Leather Factory, Inc., a Delaware Corporation, filed as Exhibit 4.7 to
the Quarterly Report on Form 10-QSB of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and Exchange
Commission on August 10, 1995, and incorporated by reference herein.
4.8 Shareholders Agreement dated July 28, 1995, by and between Wray
Thompson, an individual and resident of the State of Texas, Sally A.
Thompson, an individual and resident of the State of Texas, Ronald C.
Morgan, an individual and resident of the State of Texas, Robin L.
Morgan, an individual and resident of the State of Texas, Center
Street Capital Partners, L.P., a Delaware Limited Partnership,
Stratford Capital Partners, L.P., a Texas Limited Partnership, and The
Leather Factory, Inc., a Delaware Corporation, filed as Exhibit 4.8 to
the Quarterly Report on Form 10-QSB of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and Exchange
Commission on August 10, 1995, and incorporated by reference herein.
4.9 First Amendment to Second Restated Loan Agreement effective as of
December 31, 1995, by and between The Leather Factory, Inc., a
Delaware Corporation, and NationsBank of Texas, N.A., filed as Exhibit
No. 4.9 to the 1995 Annual Report on Form 10-KSB of The Leather
Factory, Inc. (Commission File No. 1-12368), filed with the Securities
and Exchange Commission on March 28, 1996, and incorporated herein by
reference.
*4.10 Second Amendment to Second Restated Loan Agreement effective as of 19
March 31, 1996, by and between The Leather Factory, Inc., a Delaware
Corporation, and NationsBank of Texas, N.A.
10.1 Stock Exchange Agreement dated July 9, 1993, by and among The Leather
Factory, Inc., a Texas corporation, National Transfer & Register
Corp., a Colorado corporation, J. Wray Thompson, Sr., Ronald C.
Morgan, Robin L. Morgan and The Leather Factory, Inc. Employees' Stock
Ownership Plan & Trust, filed as Exhibit No. 10.1 to the Registration
Statement on Form 10-SB of The Leather Factory, Inc. (Commission File
No. 0-22128), including any amendments thereto, filed with the
Securities and Exchange Commission on July 22, 1993, and incorporated
herein by reference.
10.2 Stock Exchange Agreement dated July 10, 1993, by and between National
Transfer & Register Corp., a Colorado corporation and Vicki Byrd,
filed as Exhibit No. 10.2 to the Registration Statement on Form 10-SB
of The Leather Factory, Inc. (Commission File No. 0-22128), including
any amendments thereto, filed with the Securities and Exchange
Commission on July 22, 1993, and incorporated herein by reference.
15
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
</TABLE>
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
<S> <C> <C>
10.3 Stock Purchase Agreement dated as of June 30, 1993, by and between The
Leather Factory, Inc., a Texas corporation and Steve Lindley, filed as
Exhibit No. 10.3 to the Registration Statement on Form 10-SB of The
Leather Factory, Inc. (Commission File No. 0-22128), including any
amendments thereto, filed with the Securities and Exchange Commission
on July 22, 1993, and incorporated herein by reference.
10.4 Amendment to Stock Purchase Agreement executed September 20, 1993, to
be effective June 30, 1993, by and between The Leather Factory, Inc.,
a Texas corporation and Steve Lindley, filed as Exhibit No. 19.1 to
the 1993 Annual Report on Form 10-KSB of The Leather Factory, Inc.
(Commission File No. 1-12368), filed with the Securities and Exchange
Commission on March 30, 1994, and incorporated herein by reference.
10.5 Stock Purchase Agreement dated as of June 30, 1993, by and between The
Leather Factory, Inc., a Texas corporation and Kevin F. White and
Durham Hefta, filed as Exhibit No. 10.4 to the Registration Statement
on Form 10-SB of The Leather Factory, Inc. (Commission File No.
0-22128), including any amendments thereto, filed with the Securities
and Exchange Commission on July 22, 1993, and incorporated herein by
reference.
10.6 Stock Purchase Agreement dated as of June 30, 1993, by and between The
Leather Factory, Inc., a Texas corporation and James Durr, filed as
Exhibit No. 10.5 to the Registration Statement on Form 10-SB of The
Leather Factory, Inc. (Commission File No. 0-22128), including any
amendments thereto, filed with the Securities and Exchange Commission
on July 22, 1993, and incorporated herein by reference.
10.7 The Leather Factory, Inc. 1993 Non-Qualified Incentive Stock Option
Plan, filed as Exhibit No. 10.6 to the 1993 Annual Report on Form
10-KSB of The Leather Factory, Inc. (Commission File No. 1-12368)
filed with the Securities and Exchange Commission on March 30, 1994,
and incorporated herein by reference.
10.8 Acquisition Agreement dated as of January 10, 1994, by and between The
Leather Factory, Inc., a Colorado corporation and Hi-Line Leather &
Manufacturing Company, filed as Exhibit No. 2.1 to the Current Report
on Form 8-K of The Leather Factory, Inc. (Commission File No. 1-12368)
filed with the Securities and Exchange Commission on January 10, 1994,
and incorporated herein by reference.
10.9 Asset Purchase Agreement dated as of April 15, 1994, by and among The
Leather Factory, Inc., a Colorado corporation, The Leather Warehouse
Company, a Michigan corporation, Daniel W. Holbert, Linda S. McCleary,
Richard J. Hill, and the Richard J. Hill Trust, filed as Exhibit No.
2.1 to the Current Report on Form 8-K of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and Exchange
Commission on April 15, 1994, and incorporated herein by reference.
</TABLE>
16
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
<S> <C> <C>
10.10 Acquisition Agreement by and among The Leather Factory, Inc. and David
Lieberman, Individually and as the Shareholder of Roberts, Cushman &
Company, Inc., related to the acquisition of the issued and
outstanding capital stock of Roberts, Cushman & Company, Inc., filed
as Exhibit No. 2.1 to the Current Report on Form 8-K of The Leather
Factory, Inc. (Commission File No. 1-12368) filed with the Securities
and Exchange Commission on January 9, 1995, and incorporated herein by
reference.
10.11 The Leather Factory, Inc. Employees' Stock Ownership Plan and Trust
(Restated), dated February 22, 1994, effective as of October 1, 1993,
filed as Exhibit No. 4.1 to the Registration Statement on Form S-8 of
The Leather Factory, Inc. (Commission File No. 33-81214), including
any amendments thereto, filed with the Securities and Exchange
Commission on July 5, 1994, and incorporated herein by reference.
10.12 Amendment No.1 to The Leather Factory, Inc. Employees' Stock
Ownership Plan and Trust (Restated as of October 1, 1993), dated
October 5, 1994 to be effective December 28, 1990, filed as Exhibit
No. 10.12 to the 1994 Annual Report on Form 10-KSB of The Leather
Factory, Inc. (Commission File No. 1-12368) filed with the Securities
and Exchange Commission on March 27, 1995, and incorporated herein by
reference.
10.13 Participation Agreement in The Leather Factory, Inc. Employees' Stock
Ownership Plan and Trust (Restated as of October 1, 1993), dated
February 28, 1995 to be effective January 2, 1995, filed as Exhibit
No. 10.13 to the 1994 Annual Report on Form 10-KSB of The Leather
Factory, Inc. (Commission File No. 1-12368) filed with the Securities
and Exchange Commission on March 27, 1995, and incorporated herein by
reference.
10.14 Indemnification Agreement dated October 17, 1994, by and among The
Leather Factory, Inc., a Delaware corporation, Securities Transfer
Corporation, a Texas corporation, and Halter Capital Corporation, a
Texas corporation, filed as Exhibit No. 10.14 to the 1994 Annual
Report on Form 10-KSB of The Leather Factory, Inc. (Commission File
No. 1-12368) filed with the Securities and Exchange Commission on
March 27, 1995, and incorporated herein by reference.
10.15 Guaranty, as amended, dated July 24, 1995, by and between NationsBank
of Texas, N.A., The Leather Factory, Inc., Wray Thompson, Ronald
Morgan, and Robin Morgan, filed as Exhibit No. 10.15 to the Quarterly
Report on Form 10-QSB of The Leather Factory, Inc. (Commission File
No. 1-12368) filed with the Securities and Exchange Commission on
November 9, 1995, and incorporated herein by reference.
10.16 The Leather Factory, Inc. 1995 Director Non-Qualified Stock Option
Plan and Stock Option Agreement, effective as of September 26, 1995,
subject to approval by the Company's stockholders at the 1996 Annual
Meeting of Stockholders, filed as Exhibit No. 10.16 to the Quarterly
Report on Form 10-QSB of The Leather Factory, Inc. (Commission File
No. 1-12368) filed with the Securities and Exchange Commission on
November 9, 1995, and incorporated herein by reference.
</TABLE>
17
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
<S> <C> <C>
10.17 The Leather Factory, Inc. 1995 Stock Option Plan and Stock Option
Agreements, effective as of September 26, 1995, subject to approval by
the Company's stockholders at the 1996 Annual Meeting of Stockholders,
filed as Exhibit No. 10.17 to the Quarterly Report on Form 10-QSB of
The Leather Factory, Inc. (Commission File No. 1-12368) filed with the
Securities and Exchange Commission on November 9, 1995, and
incorporated herein by reference.
13.1 The Leather Factory, Inc. 1995 Annual Report to Stockholders, filed as
Exhibit No. 13.1 to the 1995 Annual Report on Form 10-KSB of The
Leather Factory, Inc. (Commission File No. 1-12368), filed with the
Securities and Exchange Commission on March 28, 1996. Such report,
except to the extent incorporated by reference into the Annual Report
on Form 10-KSB, was furnished for the information of the Securities
and Exchange Commission only and was not deemed filed as a part of the
aforementioned Annual Report on Form 10-KSB.
22.1 Subsidiaries of the Company, filed as Exhibit No. 22.1 to the 1995
Annual Report on Form 10-KSB of The Leather Factory, Inc. (Commission
File No. 1-12368), filed with the Securities and Exchange Commission
on March 28, 1996, and incorporated herein by reference.
*27.1 Financial Data Schedule 27
</TABLE>
------------
*Filed herewith.
18
<PAGE>
EXHIBIT 4.10
SECOND AMENDMENT TO
SECOND RESTATED LOAN AGREEMENT
<PAGE>
SECOND AMENDMENT TO
SECOND RESTATED LOAN AGREEMENT
This Second Amendment to Second Restated Loan Agreement ("Amendment") is
entered into and is effective as of March 31, 1996, by and among NATIONSBANK OF
TEXAS, N.A. ("Bank"), THE LEATHER FACTORY, INC., a Delaware corporation
("Borrower"), and THE LEATHER FACTORY, INC., a Texas corporation, and ROBERTS,
CUSHMAN & COMPANY, INC., a New York corporation (together hereinafter referred
to as "Guarantors"). This Amendment amends a Second Restated Loan Agreement
dated as of July 24, 1995, by and among Bank, Borrower and Guarantors, as
amended by a First Amendment to Second Restated Loan Agreement dated as of
December 31, 1995 ("Loan Agreement"), and for purposes of this Amendment, the
capitalized terms used herein shall have the same meaning as assigned to them in
the Loan Agreement, except as otherwise provided herein.
WHEREAS, Borrower is in default under certain financial covenants contained
in the Loan Agreement and Borrower has requested Bank to: (i) forbear exercising
its legal rights arising from the default for a specified period of time; and
(ii) amend the Loan Agreement in certain respects, and Bank has agreed to the
same subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, Borrower, Bank and Guarantors
hereby agree as follows:
1. Existing Defaults. Borrower acknowledges that it is in default of the
Borrowing Base under Section 2D and certain financial covenants under Section 4A
of the Loan Agreement ("Existing Defaults") as follows:
<PAGE>
Actual Required
------ --------
Borrowing Base
(Multiple of Net Income) 5.5 3.5
Total Liabilities/
Tangible Net Worth 3.27 2.75
EBITDA Ratio 3.77 2.50
Cash Flow Ratio 0.99 1.50
2. Waiver. The Bank agrees that from the effective date hereof until June
30, 1996 ("Waiver Period"), it will not make demand or institute legal
proceedings to enforce collection of the Loans; provided, however, Bank's
temporary waiver in exercising these rights and remedies will be conditioned
upon there being no other default under the Loan Documents, and in the event any
such default occurs, this Agreement will become null and void and the Bank may
exercise any and all rights and remedies available at law or in equity. At the
end of the Waiver Period, the Bank's waiver of the Existing Defaults will cease,
and Borrower will be subject to compliance with the Borrowing Base set forth in
Section 2D and the financial covenant ratios set forth in Section 4A of the Loan
Agreement, as well as all other terms and provisions of the Loan Documents.
3. Amendments to Loan Documents. The Loan Documents are amended as follows:
(a) Revolving Line Maturity. The maturity of the Revolving Line set forth
in the Promissory Note dated July 24, 1995, in the face amount of
$10,000,000.00, executed by Borrower and payable to the order of Bank,
is extended from March 31, 1997 to June 30, 1997.
(b) Prime Rate Option. Paragraph 2B(i) of the Loan Agreement is hereby
amended to read in its entirety as follows:
2
<PAGE>
(i) Prime Rate Option. A rate equal to the Prime Rate established by
Bank from time to time, being the variable rate of interest
announced by Bank from time to time as its general reference rate
of interest charged on similar loans, which rate of interest may
not be the lowest rate of interest charged by the Bank to other
borrowers, plus the "Applicable Percentage" set forth below,
determined based upon Borrower's compliance, as reflected in the
most recent Compliance Certificate, as defined herein, furnished
to Bank of the EBITDA Ratio ("Prime Rate Option"):
Applicable Percentage EBITDA Ratio
--------------------- ------------
0.0 % Under 3.01
0.25% 3.01 to 1.0 - 4.0 to 1.0
0.50% 4.01 to 1.0 and greater
(c) Libor Rate Option. The Applicable Percentages set forth in Paragraph
2B(ii) of the Loan Agreement are hereby amended by adding the
following:
Applicable Percentage EBITDA Ratio
--------------------- ------------
2.50% 2.26 to 1.0 - 3.0 to 1.0
2.75% 3.01 to 1.0 - 4.0 to 1.0
3.0 % 4.01 to 1.0 and greater
4. Waiver Fee. As additional consideration for the Bank's waiver of the
Existing Defaults during the Waiver Period, Borrower will pay the Bank a fee
equal to $10,000.00 simultaneously with the execution of this Agreement.
5. No Waiver. The Bank's waiver of the Existing Defaults will not be
construed as a waiver of the Existing Defaults after the Waiver Period or a
waiver of any other default now existing or hereafter arising under the Loan
Documents, or a waiver of any rights, remedies or recourses available to Bank or
an election of remedies resulting from any default under the Loan Documents.
3
<PAGE>
6. Ratification. The terms and provisions set forth in this Amendment shall
modify and supersede all inconsistent terms and provisions set forth in the Loan
Agreement and the other Loan Documents, and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Loan Agreement and
the other Loan Documents are ratified and confirmed and shall continue in full
force and effect. The Loan Agreement and the other Loan Documents, as amended
hereby, shall continue to be legal, valid, binding and enforceable in accordance
with their respective terms.
7. Representations and Warranties. Borrower and Guarantors hereby represent
and warrant to the Bank that: (a) the execution, delivery and performance of
this Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate and/or Articles of
Incorporation or Bylaws of Borrower; (b) the officers executing this Amendment
on behalf of Borrower have been authorized by the Board of Directors to execute
this Amendment and any and all other Loan Documents to be executed and/or
delivered in connection herewith; (c) the representations and warranties
contained in the Loan Agreement, as amended hereby, and the other Loan Documents
are true and correct on and as of the date hereof as though made on and as of
each such date; (d) except for the Existing Defaults, no default under the Loan
Agreement, as amended hereby, has occurred and is continuing; (e) except for the
Existing Defaults, Borrower and Guarantors are in full compliance with all
covenants and agreements contained in the Loan Agreement and the other Loan
Documents, as amended hereby; and (f) Borrower has not amended its Certificate
and/or Articles of Incorporation or its Bylaws since the date of the Loan
Agreement.
4
<PAGE>
8. Survival of Representations and Warranties. All representations and
warranties made in the Loan Agreement or any other Loan Documents, including,
without limitation, any document furnished in connection with this Amendment,
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
9. Reference to Loan Agreement. The Loan Agreement and each of the other
Loan Documents, and any and all other agreements, documents or instruments now
or hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Loan Agreement, as amended hereby, are hereby amended so that
any reference to the Loan Agreement and such other Loan Documents to the Loan
Agreement shall mean a reference to the Loan Agreement as amended hereby.
10. Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
11. Successors and Assigns. This Amendment is binding upon and shall inure
to the benefit of the Bank, Borrower and Guarantors, and their respective heirs,
executors, successors and assigns, except that Borrower and Guarantors may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Bank.
12. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
5
<PAGE>
13. Headings. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
14. Governing Law. This Amendment and the rights and obligations of the
parties hereunder shall be governed by and interpreted in accordance with the
laws of Texas and applicable United States federal law, and is performable by
Borrower and Guarantors in the county or city of Bank's address set out in the
Loan Agreement, and they expressly waive any objection as to venue in such
location.
15. NO FURTHER AGREEMENTS. THIS WRITTEN AGREEMENT, AND THE OTHER LOAN
DOCUMENTS SPECIFICALLY REFERENCED HEREIN, REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.
BANK:
NATIONSBANK OF TEXAS, N.A.
By:/s/ Eric Kosmin
----------------
ERIC KOSMIN, Vice President
BORROWER:
THE LEATHER FACTORY, INC., a Delaware
corporation
By:/s/ John Tittle, Jr.
--------------------
JOHN TITTLE, JR., Chief Financial
Officer and Treasurer
6
<PAGE>
GUARANTORS:
THE LEATHER FACTORY, INC., a Texas
corporation
By:/s/ John Tittle, Jr.
--------------------
JOHN TITTLE, JR., Chief Financial
Officer and Treasurer
ROBERTS, CUSHMAN & COMPANY, INC., a
New York corporation
By:/s/ John Tittle, Jr.
--------------------
JOHN TITTLE, JR., Chief Financial
Officer and Treasurer
7
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 158,159
<SECURITIES> 0
<RECEIVABLES> 2,787,784
<ALLOWANCES> 42,000
<INVENTORY> 8,306,275
<CURRENT-ASSETS> 12,339,210
<PP&E> 2,587,488
<DEPRECIATION> 1,076,725
<TOTAL-ASSETS> 19,864,582
<CURRENT-LIABILITIES> 10,460,915
<BONDS> 0
0
0
<COMMON> 23,648
<OTHER-SE> 9,236,663
<TOTAL-LIABILITY-AND-EQUITY> 19,864,582
<SALES> 7,356,805
<TOTAL-REVENUES> 7,356,805
<CGS> 4,462,141
<TOTAL-COSTS> 4,462,141
<OTHER-EXPENSES> 2,753,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,983
<INCOME-PRETAX> (24,814)
<INCOME-TAX> (2,820)
<INCOME-CONTINUING> (21,994)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,994)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
