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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 1934For the quarterly period ended May 1, 2004OR[  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _______________ to _______________
 Commission file number 000-21543 WILSONS THE LEATHER EXPERTS INC.  MINNESOTA
    
    41-1839933(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)7401 BOONE AVE. N.BROOKLYN PARK, MN
    
    55428(Address of principal executive offices)
    
    (Zip Code)
 (763) 391-4000  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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
    
    Yes [X]       No [  ]
 As of June 1, 2004, there were 20,876,672 shares of the Registrants common
stock, $0.01 par value per share, outstanding.




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WILSONS THE LEATHER EXPERTS INC.
INDEX PagePART I  FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements (Unaudited)
    
    3Consolidated Balance Sheets as of May 1, 2004 and January 31, 2004
    
    3Consolidated Statements of Operations for the three months ended May 1, 2004 and May 3, 2003
    
    4Consolidated Statements of Cash Flows for the three months ended May 1, 2004 and May 3, 2003
    
    5Notes to Consolidated Financial Statements
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    23Item 4.
    
    Controls and Procedures
    
    23PART II  OTHER INFORMATION
    
    24Item 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    24Item 6.
    
    Exhibits and Reports on Form 8-K
    
    24Signature
    
    28Second Amendment to Employment Agreement-WallerSecond Amendment to Employment Agreement-RogersStay Bonus Agreement-MichieluttiStay Bonus Agreement-PadoveseCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification Pursuant to Section 906Certificaton Pursuant to Section 906
  2




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PART I - FINANCIAL
INFORMATION ITEM 1. CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share amounts)
 May 1,
    
    
    January 31,2004
    
    
    2004(1)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    45,422
    
    
    $
    42,403Accounts receivable, net
    
    
    2,926
    
    
    
    6,122Inventories
    
    
    64,342
    
    
    
    89,298Prepaid expenses and other current assets
    
    
    9,082
    
    
    
    3,719TOTAL CURRENT ASSETS
    
    
    121,772
    
    
    
    141,542Property and equipment, net
    
    
    45,457
    
    
    
    60,047Goodwill and other assets, net
    
    
    2,735
    
    
    
    2,538TOTAL ASSETS
    
    $
    169,964
    
    
    $
    204,127LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    10,054
    
    
    $
    10,198Notes payable
    
    
    490
    
    
    
    490Current portion of long-term debt
    
    
    30,635
    
    
    
    30,635Accrued expenses
    
    
    19,732
    
    
    
    26,670Liabilities of discontinued operations
    
    
    366
    
    
    
    406Income taxes payable
    
    
    3,314
    
    
    
    3,214Deferred income taxes
    
    
    8,203
    
    
    
    6,477TOTAL CURRENT LIABILITIES
    
    
    72,794
    
    
    
    78,090Long-term debt
    
    
    25,053
    
    
    
    25,064Other long-term liabilities
    
    
    13,394
    
    
    
    13,893Deferred income taxes
    
    
    -
    
    
    
    1,726TOTAL LIABILITIES
    
    
    111,241
    
    
    
    118,773COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITY:Common stock, $.01 par value; 150,000,000 shares authorized; 20,876,672 and 20,807,706
shares issued and outstanding on May 1, 2004 and January 31, 2004, respectively
    
    
    209
    
    
    
    208Additional paid-in capital
    
    
    100,819
    
    
    
    100,633Accumulated deficit
    
    
    (41,580
    )
    
    
    (14,788
    )Unearned compensation
    
    
    (727
    )
    
    
    (701
    )Accumulated other comprehensive income
    
    
    2
    
    
    
    2TOTAL SHAREHOLDERS EQUITY
    
    
    58,723
    
    
    
    85,354TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    169,964
    
    
    $
    204,127
 The accompanying notes are an integral part of these consolidated financial statements.  3




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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except
per share amounts)
(Unaudited)
 For the three months endedMay 1,
    
    
    May 3,2004
    
    
    2003NET SALES
    
    $
    97,751
    
    
    $
    95,301COST OF GOODS SOLD, BUYING AND OCCUPANCY COSTS
    
    
    78,333
    
    
    
    77,212Gross margin
    
    
    19,418
    
    
    
    18,089SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    28,109
    
    
    
    32,770DEPRECIATION AND AMORTIZATION
    
    
    15,357
    
    
    
    4,279Operating loss
    
    
    (24,048
    )
    
    
    (18,960
    )INTEREST EXPENSE, net
    
    
    2,744
    
    
    
    2,268Loss before income taxes
    
    
    (26,792
    )
    
    
    (21,228
    )INCOME TAX BENEFIT
    
    
    -
    
    
    
    (8,491
    )Net loss
    
    $
    (26,792
    )
    
    $
    (12,737
    )BASIC AND DILUTED LOSS PER SHARE:Basic and diluted loss per share
    
    $
    (1.30
    )
    
    $
    (0.62
    )Weighted average shares outstanding - basic and diluted
    
    
    20,687
    
    
    
    20,438
 The accompanying notes are an integral part of these consolidated financial statements. 4




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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
(Unaudited)
 For the three months endedMay 1,
    
    
    May 3,2004
    
    
    2003OPERATING ACTIVITIES:Net loss
    
    $
    (26,792
    )
    
    $
    (12,737
    )Adjustments to reconcile loss from operations to net cash provided by
operating activities:Depreciation
    
    
    15,315
    
    
    
    4,230Amortization
    
    
    42
    
    
    
    49Amortization of deferred financing costs
    
    
    912
    
    
    
    375Gain on disposal of assets
    
    
    (120
    )
    
    
    -Restricted stock compensation expense
    
    
    101
    
    
    
    50Deferred income taxes
    
    
    -
    
    
    
    8,779Changes in operating assets and liabilities:Accounts receivable, net
    
    
    3,196
    
    
    
    585Inventories
    
    
    24,956
    
    
    
    30,173Prepaid expenses and other current assets
    
    
    (5,363
    )
    
    
    (5,668
    )Refundable income taxes
    
    
    -
    
    
    
    (7,506
    )Accounts payable and accrued expenses
    
    
    (7,082
    )
    
    
    (14,959
    )Income taxes payable and other liabilities
    
    
    (399
    )
    
    
    99Net cash provided by operating activities
    
    
    4,766
    
    
    
    3,470INVESTING ACTIVITIES:Additions to property, equipment and other assets
    
    
    (727
    )
    
    
    (2,008
    )Proceeds from the sale of property and equipment
    
    
    122
    
    
    
    -Changes in other assets
    
    
    -
    
    
    
    52Net cash used in investing activities
    
    
    (605
    )
    
    
    (1,956
    )FINANCING ACTIVITIES:Proceeds from issuance of common stock, net
    
    
    60
    
    
    
    100Debt acquisition costs
    
    
    (1,151
    )
    
    
    (1,025
    )Repayments of long-term debt
    
    
    (11
    )
    
    
    (11
    )Net cash used in financing activities
    
    
    (1,102
    )
    
    
    (936
    )NET CASH USED IN DISCONTINUED OPERATIONS
    
    
    (40
    )
    
    
    (9,737
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    3,019
    
    
    
    (9,159
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    42,403
    
    
    
    30,442CASH AND CASH EQUIVALENTS, end of period
    
    $
    45,422
    
    
    $
    21,283
 The accompanying notes are an integral part of these consolidated financial statements. 5




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WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 1.       NATURE OF ORGANIZATION Wilsons The Leather Experts Inc. (Wilsons Leather or the Company), a
Minnesota corporation, is the leading specialty retailer of quality leather
outerwear, accessories and apparel in the United States. As of May 1, 2004,
Wilsons Leather operated 458 permanent retail stores located in 45 states and
the District of Columbia, including 334 mall stores, 107 outlet stores and 17
airport stores. The Company regularly supplements its permanent mall stores
with seasonal stores during its peak selling season from October through
January. 2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements include those of the
Company and all of its subsidiaries. All material intercompany balances and
transactions between the entities have been eliminated in consolidation. At
May 1, 2004, Wilsons Leather operated in one segment: selling leather
outerwear, accessories and apparel. The Companys chief operating
decision-maker evaluates revenue and profitability performance on an enterprise
basis to make operating and strategic decisions. As more fully described in Note 4, on January 22, 2004, the Company
announced that it would liquidate up to 100 underperforming mall and outlet
stores (subsequently revised to 111 stores) and eliminate approximately 950
store-related positions. The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC) applicable to interim financial information.
Certain information and footnote disclosures, normally included in consolidated
financial statements prepared in accordance with generally accepted accounting principles
(GAAP) in the United States of America, have been condensed or
omitted in these interim statements pursuant to such rules and regulations.
Although management believes that the accompanying disclosures are adequate so
as not to make the information presented misleading, it is recommended that
these interim consolidated financial statements be read in conjunction with the
Companys most recent audited consolidated financial statements and related
notes included in its 2003 Annual Report on Form 10-K. In the opinion of
management, all adjustments (which include normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented have been made.
The Companys business is highly seasonal, and accordingly, interim operating
results are not necessarily indicative of the results that may be expected for
the fiscal year ending January 29, 2005. FISCAL YEAR Wilsons Leathers fiscal year ends on the Saturday closest to January 31.
The periods that will end or have ended January 29, 2005, and January 31, 2004,
are referred to herein as 2004 and 2003, respectively. 6




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USE OF ESTIMATES The
preparation of financial statements in conformity with GAAP in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Matters of significance in which
management relies on these estimates relate primarily to the realizability of
assets such as accounts receivable, property and equipment, and inventories,
and the adequacy of certain accrued liabilities and reserves. Ultimate results
could differ from those estimates. INVENTORIES The Company values its inventories, which consist primarily of finished
goods held for sale that have been purchased from domestic and foreign vendors,
at the lower of cost or market value, determined by the retail inventory method
on the last-in, first-out (LIFO) basis. As of May 1, 2004, and January 31,
2004, the LIFO cost of inventories approximated the first-in, first-out cost of
inventories. The inventory cost includes the cost of merchandise and freight.
A periodic review of inventory quantities on hand is performed in order to
determine if the inventory value is properly stated at the lower of cost or
market. Factors related to current inventories such as future consumer demand,
fashion trends, current aging, current and anticipated retail markdowns, and
class or type of inventory are analyzed to determine estimated net realizable
values. A provision is recorded to reduce the cost of inventories to the
estimated net realizable values, if required. Any significant unanticipated
changes in the factors noted above could have a significant impact on the value
of the Companys inventories and its reported operating results. STORE CLOSING AND IMPAIRMENT OF LONG-LIVED ASSETS The Company continually reviews its stores operating performance and
assesses plans for store closures. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets(SFAS No. 144), losses related to the
impairment of long-lived assets are recognized when expected future cash flows
are less than the assets carrying value. When a store is closed or when a
change in circumstances indicates the carrying value of an asset may not be
recoverable, the Company evaluates the carrying value of the asset in relation
to its expected future cash flows. If the carrying value is greater than the
expected future cash flows, a provision is made for the impairment of the asset
to write the asset down to estimated fair value. Fair value is determined by
estimating net future cash flows, discounted using a risk-adjusted rate of
return. These impairment charges are recorded as a component of selling,
general and administrative expenses. When a store under a long-term lease is to be closed, the Company records
a liability for any lease termination or broker fees at the time an agreement
related to such closing is signed. At May 1, 2004, and January 31, 2004, the
Company had $0.6 million and $0.5 million, respectively, accrued for store
lease terminations. REVENUE RECOGNITION The Company recognizes sales upon customer receipt of the merchandise
generally at the point of sale. Shipping and handling revenues are excluded
from net sales as a contra-expense and the related costs are included in costs
of goods sold, buying and occupancy costs. Revenue for gift 7




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certificate or gift card sales and store credits is recognized at
redemption. A reserve is provided at the time of sale for projected
merchandise returns based upon historical experience. The Company recognizes
revenue for on-line sales at the time goods are received by the customer. An
allowance for on-line sales is recorded to cover in-transit shipments, as
product is shipped to these customers Free on Board destination. INCOME TAXES Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. LOSS PER SHARE Basic loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the year. Diluted loss per
share is computed by dividing the net loss by the sum of the weighted average
number of common shares outstanding plus all additional common shares that
would have been outstanding if potentially dilutive common shares related to
stock options had been issued (calculated using the treasury stock method).
The following table reconciles the number of shares utilized in the loss per
share calculations (in thousands): For the three months endedMay 1,
    
    
    May 3,2004
    
    
    2003Weighted average common shares outstanding - basic
    
    
    20,687
    
    
    
    20,438Effect of dilutive securities: stock options
    
    
    -
    
    
    
    -Weighted average common shares outstanding - diluted
    
    
    20,687
    
    
    
    20,438
 STOCK-BASED COMPENSATION As permitted by SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123),the Company uses the intrinsic-value method for employee
stock-based compensation pursuant to Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees,under which no compensation cost
has been recognized. The Company adopted the disclosure provisions for
employee stock-based compensation and the fair-value method for non-employee
stock-based compensation of SFAS No. 123. Had compensation cost for the stock
option plans been determined consistent with SFAS No. 123, the Companys net
loss and basic and diluted loss per share would have been the following pro
forma amounts (in thousands, except per share amounts): For the three months endedMay 1,
    
    
    May 3,2004
    
    
    2003Net Loss:As reported
    
    $
    (26,792
    )
    
    $
    (12,737
    )Stock option and purchase plans
    
    
    (440
    )
    
    
    (400
    )Pro forma loss
    
    $
    (27,232
    )
    
    $
    (13,137
    )Basic and diluted loss per share:As reported
    
    $
    (1.30
    )
    
    $
    (0.62
    )Stock option and purchase plans
    
    
    (0.02
    )
    
    
    (0.02
    )Pro forma loss
    
    $
    (1.32
    )
    
    $
    (0.64
    )Weighted average fair value of options granted
    
    $
    1.64
    
    
    $
    2.02
 The pro forma amounts shown above may not be indicative of the effects on
reported net loss. The fair value of each option granted is estimated on the
date of grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 2004 and 2003: Weighted average
    
    Dividend
    
    Expected
    
    Expectedrisk free rate
    
    yield
    
    lives
    
    volatility2004
    
    
    3.0
    %
    
    
    0.0
    %
    
    
    4.8
    
    
    
    66.2
    %2003
    
    
    3.0
    %
    
    
    0.0
    %
    
    
    5.0
    
    
    
    55.3
    %
 RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS In December 2003, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation Number (FIN) 46 (revised December 2003), Consolidation of
Variable Interest 8




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Entities(FIN 46R), which addresses how a business enterprise should
evaluate whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate the entity.
The Company is required to apply FIN 46R to variable interests in variable
interest entities (VIEs) created after December 31, 2003. For variable
interests in VIEs created before January 1, 2004, FIN 46R will be applied
beginning on January 1, 2005. For any VIEs that must be consolidated under FIN
46R that were created before January 1, 2004, the assets, liabilities and
noncontrolling interests of the VIEs initially would be measured at their
carrying amounts, with any differences between the net amounts added to the
balance sheet and any previously recognized interest being recognized as the
cumulative effect of a change in accounting principle. If determining the
carrying amounts is not practicable, fair value at the date FIN 46R first
applies may be used to measure the assets, liabilities and noncontrolling
interest of the VIEs. FIN 46R has not had an impact on the Companys
consolidated financial statements. FASB Statement No. 150 (the Statement), Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity,was issued in
May 2003. The Statement establishes standards for the classification and
measurement of certain financial instruments with characteristics of both
liabilities and equity. The Statement also includes required disclosures for
financial instruments within its scope. For the Company, the Statement was
effective for instruments entered into or modified after May 31, 2003, and
otherwise was effective as of January 1, 2004, except for mandatorily
redeemable financial instruments. For certain mandatorily redeemable financial
instruments, the Statement will be effective for the Company on January 1,
2005. The effective date has been deferred indefinitely for certain other
types of mandatorily redeemable financial instruments. As of May 1, 2004, the
Company does not have any financial instruments that are within the scope of
the Statement. The provisions of the Statement will be applied to future
financial instruments, including the Equity Financing (if consummated)
described in Note 10, Additional Financing below. 3.       DISCONTINUED OPERATIONS In November 2002, the Company liquidated two companies it had previously
acquired, El Portal Group, Inc. and Bentleys Luggage Corp. (collectively
the Travel Subsidiaries), which consisted of 135 stores, due to their large
operating losses. In accordance with SFAS No. 144, the Travel Subsidiaries
were presented as a discontinued operation effective November 19, 2002, and the
consolidated financial statements were reclassified to segregate the assets,
liabilities and operating results of the Travel Subsidiaries for all periods
presented. The current liabilities of the Travel Subsidiaries as of May 1, 2004, and
January 31, 2004, were as follows (in thousands): May 1,
    
    
    January 31,2004
    
    
    2004Accrued expenses
    
    $
    366
    
    
    $
    406Total liabilities of discontinued operations
    
    $
    366
    
    
    $
    406
 In May 2003, the Company sold its Miami, Florida, distribution center for
net proceeds of $2.5 million. This facility was an asset acquired in the
Bentleys Luggage Corp. acquisition. The net proceeds from the sale decreased
cash used by discontinued operations for that period. The following summarizes the Travel Subsidiaries disposal reserve
activity during the year
to date period ended May 1, 2004 (in thousands): Discontinued
operations reserves: January 31,
    
    
    
    
    
    
    
    
    
    May 1,2004
    
    Usage
    
    Transfers
    
    2004Store closing(1)
    
    $
    388
    
    
    
    ($37
    )
    
    
    -
    
    
    $
    351Taxes
    
    
    18
    
    
    
    (3
    )
    
    
    -
    
    
    
    15Total liabilities of discontinued operations
    
    $
    406
    
    
    
    ($40
    )
    
    
    -
    
    
    $
    366
  (1)
    
    Primarily includes lease termination costs and vendor chargebacks associated with the liquidation of the
Travel Subsidiaries. 9




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4.       REORGANIZATION AND PARTIAL STORE LIQUIDATION On January 22, 2004, the Company announced that it would liquidate up to
100 underperforming mall and outlet stores (subsequently revised to 111 stores
 the liquidation stores) and eliminate approximately 950 store-related
positions. The Company entered into an Agency Agreement with a joint venture
comprised of Hilco Merchant Resources, LLC, Gordon Brothers Retail Partners,
LLC and Hilco Real Estate, LLC (the Hilco/Gordon Brothers Joint Venture) to
liquidate the inventory in the 111 stores and assist in the discussions with
landlords regarding lease terminations in approximately 94 of these stores.
Pursuant to the Agency Agreement, the Hilco/Gordon Brothers Joint Venture was
required to pay the Company a guaranteed amount of 84.0% of the cost value of
the inventory, subject to certain adjustments. The Hilco/Gordon Brothers Joint
Venture was responsible for all expenses related to the sale. The liquidation
stores were selected based on strategic criteria, including negative sales and
earnings trends, projected real estate costs, location and financial conditions
within the market. In addition, the Company announced that it would eliminate
approximately 70 positions at its corporate headquarters in Brooklyn Park,
Minnesota, and its distribution center in Las Vegas, Nevada, close its
distribution center in Las Vegas, Nevada, and write-off essentially all
remaining assets located at its distribution centers in Maple Grove, Minnesota,
and Las Vegas, Nevada. The Company recorded expenses related to the reorganization and partial
store liquidation of $14.2 million in the first quarter of 2004, primarily
related to accelerated depreciation and lease termination costs related to
store closings. The liquidation sales were completed in April 2004 and as of
May 1, 2004, all the liquidation stores have been closed. The Company expects
to have the lease termination process substantially complete in the first half
of 2004. The overall net cash outlay for the liquidation is anticipated to be
at or near zero. 5.       OTHER COMPREHENSIVE INCOME The Company reports accumulated other comprehensive income as a separate
item in the shareholders equity section of the consolidated balance sheet.
Other comprehensive income consists of foreign currency translation
adjustments. For the quarters ending May 1, 2004, and May 3, 2003, the amounts
were de minimis. 6.       LONG-TERM DEBT Long-term debt at May 1, 2004, and January 31, 2004, consisted of the
following (in thousands): May 1,
    
    
    January 31,2004
    
    
    2004Senior notes
    
    $
    30,590
    
    
    $
    30,590Term B promissory note
    
    
    25,000
    
    
    
    25,000Note payable
    
    
    490
    
    
    
    490Other loans
    
    
    98
    
    
    
    109Total debt
    
    $
    56,178
    
    
    $
    56,189Less: current portion
    
    
    (31,125
    )
    
    
    (31,125
    )Total long-term debt
    
    $
    25,053
    
    
    $
    25,064
 SENIOR NOTES On August 18, 1997, the Company issued $75.0 million of 111⁄4% Senior
Notes due August 15, 2004 (the 111⁄4% Senior Notes). Interest on the
111⁄4% Senior Notes is payable semiannually in arrears on February 15 and
August 15 of each year. The Company repurchased an aggregate of $44.4 million
of the 111⁄4% Senior Notes in fiscal 1998, 1999 and 2000. As of May 1, 2004,
and January 31, 2004, the outstanding balance on the 111⁄4% Senior Notes was
$30.6 million. The 111⁄4% Senior Notes were classified as current as of May
1, 2004, and January 31, 2004. The 111⁄4% Senior Notes are general unsecured obligations that rank
senior in right of payment to all existing and future subordinated indebtedness
and rank on equal terms in right of 10




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payment with all other current and future unsubordinated indebtedness.
The indenture governing the 111⁄4% Senior Notes contains numerous operating
covenants that limit the discretion of management with respect to certain
business matters and that place significant restrictions on, among other
things, the ability of the Company to incur additional indebtedness, to create
liens or other encumbrances, to declare or pay any dividend, to make certain
payments or investments, loans and guarantees, and to sell or otherwise dispose
of assets and merge or consolidate with another entity. At May 1, 2004, the
Company was in compliance with all covenants of the 111⁄4% Senior Notes. REVOLVING
CREDIT AGREEMENT AND TERM B PROMISSORY NOTE General Electric Capital Corporation and a syndicate of banks have
provided the Company with a senior credit facility, which was amended on
November 1, 2002, January 31, 2003, April 11, 2003, January 21, 2004, April 15,
2004, and April 27, 2004, that provides for borrowings of up to $150.0 million
in aggregate principal amount, including a $25.0 million Term B promissory note
and a $75.0 million letter of credit subfacility. Currently, the senior credit
facility expires in June 2005, at which time all borrowings, including the Term
B promissory note, become due and payable. The senior credit facility contains certain restrictions and covenants
which, among other things, restrict the Companys ability to make capital
expenditures; acquire or merge with another entity; make investments, loans or
guarantees; incur additional indebtedness; prepay, repurchase or pay any
principal on any 111⁄4% Senior Notes, except pursuant to a permitted
refinancing; create liens or other encumbrances; or pay cash dividends or make
other distributions. At May 1, 2004, the Company was in compliance with all
covenants related to the senior credit facility. At May 1, 2004, and January 31, 2004, there were no borrowings under the
revolving portion of the credit facility. At May 1, 2004, and January 31,
2004, there were $10.0 million and $6.7 million in letters of credit
outstanding, respectively. The Term B promissory note had a balance of $25.0
million on May 1, 2004, and January 31, 2004. 7.       LEGAL PROCEEDINGS In January 2003, a class action was brought on behalf of current and
former store managers of the Company in California regarding their
classification as exempt from overtime pay. In July 2003, the Company reached
a confidential settlement of the class action through mediation. A charge of
$1.9 million related to this settlement was taken during the second quarter of
2003. The court granted final approval of the settlement on January 30, 2004.
The Company paid the entire settlement during the first quarter of 2004. The Company is involved in various other legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Companys consolidated financial position and results of operations. 11




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8.       SUPPLEMENTAL BALANCE SHEET INFORMATION

May 1,
    
    
    January 31,(in thousands)
    
    2004
    
    
    2004Accounts receivable, net:Trade receivables
    
    $
    2,316
    
    
    $
    5,290Other receivables
    
    
    674
    
    
    
    964Total
    
    
    2,990
    
    
    
    6,254Less - Allowance for doubtful accounts
    
    
    (45
    )
    
    
    (88
    )Less - Deferred sales
    
    
    (19
    )
    
    
    (44
    )Total accounts receivable, net
    
    $
    2,926
    
    
    $
    6,122Inventories:Raw materials
    
    $
    2,492
    
    
    $
    3,189Finished goods
    
    
    61,850
    
    
    
    86,109Total inventories
    
    $
    64,342
    
    
    $
    89,298Property and equipment, net:Equipment and furniture
    
    $
    80,180
    
    
    $
    91,555Leasehold improvements
    
    
    24,041
    
    
    
    32,267Total
    
    
    104,221
    
    
    
    123,822Less - Accumulated depreciation
    
    
    (58,764
    )
    
    
    (63,775
    )Total property and equipment, net
    
    $
    45,457
    
    
    $
    60,047Goodwill and other assets, net:Goodwill
    
    $
    72
    
    
    $
    72Debt issuance costs
    
    
    6,610
    
    
    
    7,001Other assets
    
    
    130
    
    
    
    186Total
    
    
    6,812
    
    
    
    7,259Less - Accumulated amortization
    
    
    (4,077
    )
    
    
    (4,721
    )Total goodwill and other assets, net
    
    $
    2,735
    
    
    $
    2,538


12



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9.       LIQUIDITY The Company currently does not have the funds to pay the outstanding
principal amount of the 111⁄4% Senior Notes when they are due on August 15,
2004. The senior credit facility prohibits the Company from incurring any
indebtedness which refunds, renews, extends or refinances the 111⁄4% Senior
Notes on terms more burdensome than the current terms of such notes, and the
rate of interest with respect to any replacement notes cannot exceed the sum of
the rate of interest on United States treasury obligations of like tenor at the
time of such refunding, renewal, extension or refinancing, plus 7.0% per annum.
The Company anticipates that it will not be able to refund, renew, extend or
refinance the 111⁄4% Senior Notes with indebtedness that would comply with
such limitations. However, if the Company completes a sale of its capital
stock by August 15, 2004, on terms that are acceptable to the lenders under the
senior credit facility, such lenders have agreed that the Company may use the
proceeds from such sale to pay the 111⁄4% Senior Notes. The lenders have
agreed that the terms of the Equity Financing described in Note 10, Additional
Financing, if consummated, would be acceptable for this purpose. If the
Company is unable to close the Equity Financing for any reason, it will need to
find an alternative source of permitted financing for the repayment of the
111⁄4% Senior Notes before it will be permitted to borrow under the senior
credit facility. The Company anticipates that it will need to access the
revolving portion of the senior credit facility by the middle of July 2004. 10.     ADDITIONAL FINANCING On April 25, 2004, the Company entered into an agreement to issue
17,948,718 shares of the Companys common stock (the Equity Financing) to
three institutional investors at a price of $1.95 per share. As additional
consideration for the investors commitment, the Company has issued two million
warrants exercisable for five years to the investors, and at closing, will
issue an additional two million warrants exercisable for five years, each at an
exercise price of $3.00 per share of common stock. The closing of the
transaction is subject to a number of closing conditions, the principal
condition being the approval of the Companys shareholders. A special
shareholders meeting has been set for June 24, 2004, and a special proxy
statement for that meeting was mailed to the shareholders of the Company on May
20, 2004. The Company intends to use the proceeds from the Equity Financing to repay
the 111⁄4% Senior Notes due August 15, 2004, and for general working capital
purposes. If the Company is unable to close the Equity Financing for any
reason, it will need to find an alternative source of permitted financing for
the repayment of its 111⁄4% Senior Notes before the Company will be permitted
to borrow under the senior credit facility. There can be no assurances that
the Company will be able to obtain such financing before it needs to access the
revolving portion of the senior credit facility or repay the 111⁄4% Senior
Notes. 
  ITEM 2.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the financial condition and results of
operations of Wilsons The Leather Experts Inc. and wholly owned subsidiaries
should be read in conjunction with our most recent audited consolidated
financial statements and related notes included in our 2003 Annual Report on
Form 10-K. When we refer to we, our, us or Wilsons Leather, we mean
Wilsons The Leather Experts Inc. and its subsidiaries, including its
predecessor companies. OVERVIEW We are the leading specialty retailer of quality leather outerwear,
accessories and apparel in the United States. Our multiple store formats are
designed to target a broad customer base with a 13




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superior level of customer service. Through our worldwide leather sourcing
network and in-house design capabilities, we are able to consistently provide
our customers high-quality, fashionable merchandise at attractive prices. Our
business structure results in shorter lead times than our competition, allowing
us to react quickly to popular and emerging fashion trends and customer
preferences, rapidly replenish fast-selling merchandise and minimize fashion
risk. As of May 1, 2004, we operated a total of 458 permanent retail stores
located in 45 states and the District of Columbia, including 334 mall stores,
107 outlet stores and 17 airport stores. Each year we supplement our permanent
stores with seasonal stores during our peak selling season. Our mall stores average approximately 2,600 total leased square feet and
feature a large assortment of both classic and contemporary leather outerwear,
accessories and apparel. Our outlet stores are operated primarily under the
Wilsons Leather Outlet name, average approximately 4,000 total leased square
feet, and offer a combination of clearance merchandise from our mall stores,
special outlet-only merchandise and key in-season goods. Our airport stores
average approximately 700 total leased square feet, feature travel-related
products as well as leather accessories and provide us the opportunity to
showcase our products and the Wilsons Leatherbrand to millions of potential
customers each year in some of the worlds busiest airports. Our proprietary
labels, including M. Julian®, Maxima®, Pelle Studio® and Wilsons Leather, are
positioned to appeal to identified customer lifestyle segments. In evaluating our financial performance and operating trends, management
considers information concerning our net operating loss, net loss, basic and
diluted loss per share and certain other information before restructuring
charges and liquidation costs that are not calculated in accordance with
generally accepted accounting principles (GAAP) in the United States of
America. A reconciliation of these non-GAAP financial measures to GAAP numbers
is included in the table below. We believe that the non-GAAP numbers
calculated before restructuring charges and liquidation costs provide a useful
analysis of our ongoing operating trends and in comparing operating performance
period to period. We evaluate these non-GAAP numbers calculated before
restructuring charges and liquidation costs on a quarterly basis in order to
measure and understand our ongoing operating trends. Reconciliation of GAAP
Consolidated Statement of Operations to Adjusted Statement of
Operations:
(In thousands, except per share amounts)
(Unaudited) Three months ended
    
    
    Restructuring
    
    
    Three months endedMay 1,
    
    
    charges and
    
    
    May 1,2004 - as reported
    
    
    liquidation costs (1)
    
    
    2004 - adjustedNet sales
    
    $
    97,751
    
    
    $
    20,778
    
    
    $
    76,973Cost of goods sold, buying and occupancy costs
    
    
    78,333
    
    
    
    20,534
    
    
    
    57,799Gross margin
    
    
    19,418
    
    
    
    244
    
    
    
    19,174Selling, general and administrative expenses
    
    
    28,109
    
    
    
    3,254
    
    
    
    24,855Depreciation and amortization
    
    
    15,357
    
    
    
    11,168
    
    
    
    4,189Operating loss
    
    
    (24,048
    )
    
    
    (14,178
    )
    
    
    (9,870
    )Interest expense, net
    
    
    2,744
    
    
    
    -
    
    
    
    2,744Loss before income taxes
    
    
    (26,792
    )
    
    
    (14,178
    )
    
    
    (12,614
    )Income tax benefit
    
    
    -
    
    
    
    -
    
    
    
    -Net loss
    
    $
    (26,792
    )
    
    $
    (14,178
    )
    
    $
    (12,614
    )Basic and diluted loss per share:Basic and diluted loss per share
    
    $
    (1.30
    )
    
    $
    (0.69
    )
    
    $
    (0.61
    )Weighted average shares outstanding - basic and diluted
    
    
    20,687
    
    
    
    -
    
    
    
    20,687
  (1)
    
    Includes $14.2 million related primarily to lease termination costs and accelerated depreciation related to the closing of
approximately 111 stores. We measure performance using key operating statistics such as comparable
store sales, sales per square foot, gross margin percentage and store operating
expenses, with a focus on labor, as a percentage of sales. These results
translate into store operating contribution and store cash flow, which we use
to evaluate overall performance on an individual store basis. Store operating
contribution is calculated by deducting a stores operating expenses from its
gross margin and is measured as a percentage of sales. Store operating
contribution gives us an overall measure as to whether or not individual
locations and markets are meeting our financial objectives. In addition, general and administrative expenses are monitored in absolute
amount, as well as on a percentage of sales basis. We continue to monitor
product costs and promotional activity, which allows us to generally maintain
acceptable margin levels. Our gross margins are influenced by the mix of
merchandise between outerwear and accessories in our total sales. We also measure and evaluate investments in our retail locations,
including inventory and property and equipment. Inventory performance is
primarily measured by inventory turns, or the number of times store inventory
turns over in a given period, and amounts of owned inventory at 14




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various times based on payment terms from our vendors. The most
significant investments in property and equipment are made at the time we open
a store. Comparable store sales decreased 2.0% in the three months ended May 1,
2004, compared to flat comparable store sales in the comparable period of the
prior year (excluding the 111 liquidation stores). A store is included in the
comparable store sales calculation after it has been opened and operated by us
for more than 52 weeks. The liquidation stores are not included in the
comparable store sales calculation. The percentage change is computed by
comparing total net sales for comparable stores as thus defined at the end of
the applicable reporting period with total net sales from comparable stores for
the comparable period in the prior year. CRITICAL ACCOUNTING POLICIES We consider our critical accounting policies to be those related to
inventories and property and equipment impairment as discussed in the section
with this title in Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations that begins on page 24 of our Annual
Report on Form 10-K for the year ended January 31, 2004. No material changes
occurred to these policies in the periods covered by this report. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 1, 2004, COMPARED TO
THE THREE MONTHS ENDED MAY 3, 2003 Net Sales.Net sales increased 2.6% to $97.8 million in the three months
ended May 1, 2004, from $95.3 million in the comparable period last year.
Included in sales for the first quarter of 2004 was approximately $20.8 million
in liquidation sales resulting from the liquidation of 111 stores begun in the
fourth quarter of 2003. See Note 4. Reorganization and Partial Store
Liquidation. Comparable store sales for the three months ended May 1, 2004, decreased
2.0% compared to flat comparable store sales for the same period last year.
This comparable store sales decrease was primarily driven by competition from
the liquidation stores. Comparable store sales do not include sales for the
liquidation stores. We opened three stores and closed five stores in the three months ended
May 1, 2004 (excluding the 111 liquidation stores), compared to opening five
stores and closing 11 stores in the comparable period last year. As of May 1,
2004, we operated 458 stores compared to 612 stores (including the 111
liquidation stores closed in 2004) at May 3, 2003. We regularly supplement our
permanent mall stores with seasonal stores during our peak selling season from
October to January. Cost of Goods Sold, Buying and Occupancy Costs.Cost of goods sold,
buying and occupancy costs increased $1.1 million, or 1.5%, in the three months
ended May 1, 2004, compared to the comparable period last year. This resulted
in a $1.3 million increase in gross margin in the three months ended May 1,
2004, compared to the corresponding period in 2003. The gross margin
percentage also increased to 19.9% in the three months ended May 1, 2004,
compared to 19.0% in the comparable period last year. The increased gross
margin was due primarily to $8.8 million in fewer markdowns and $6.2 million in
decreased buying and occupancy costs offset by a $14.0 million unfavorable
mark-on (the product mark-up from cost). The lower level of markdowns was a
direct result of less clearance merchandise remaining after initiation of the
liquidation sales. The improvement in buying and occupancy costs of $6.2
million was largely driven by: (1) an improvement of $5.8 million in occupancy
costs due to the reimbursement of these expenses by the liquidator relative to
the 111 liquidation stores as well as fewer stores open in 2004 compared to 15




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2003, and (2) a $0.4 million decrease in distribution center costs due to
the closure of the Las Vegas, Nevada, distribution center in late January 2004. The $14.0 million unfavorable mark-on resulted primarily from the $2.5
million increase in sales volume offset by $16.4 million in unfavorable cost of
goods sold. The unfavorable cost of goods is a function of the liquidation
accounting of gross sales and increased cost of sales for amounts owed to the
third party liquidator. Excluding
the liquidation effects on gross margin ($0.2 million, or 1.2%, as
a result of the liquidation accounting mentioned above), gross margin for the
quarter was $19.2 million, or 24.9%, in the three months ended May 1, 2004,
compared to $18.1 million, or 19.0%, in the comparable period last year. This
improvement was driven by a lower level of clearance goods as a result of the
liquidation process, as well as positive sell-through of new receipts. Selling, General and Administrative Expenses.Selling, general and
administrative (SG&A) expenses decreased to $28.1 million in 2004 from $32.8
million in 2003, and decreased as a percentage of net sales to 28.8% from
34.4%. The $4.7 million decrease was primarily due to: (1) a $4.9 million
decrease in store selling expenses primarily due to the reimbursement of
payroll costs by the liquidator relative to the 111 liquidation stores, tighter
cost control and a new method of hours allocation in the stores resulting in
lower staffing levels during periods of slower sales (these initiatives, when
combined with a lower average store count, accounted for a $4.4 million
reduction in payroll expense and a $0.5 million reduction in benefits expense),
(2) a $0.4 million decrease in other administrative costs related to the
reduced store count and corporate restructuring and cost-saving initiatives,
(3) a $1.1 million decrease in other store expenses also due to a lower average
store count, and (4) a $0.6 million decrease in e-commerce expenses due to less
functionality improvements over the prior year and lower sales promotion
expenses due to the preparation for outsourcing e-commerce operations in the
third quarter of 2004. These expense reductions were primarily offset by a
$2.3 million increase over the prior year for lease termination fee expenses
related to the 111 liquidation stores. SG&A
expenses as a percentage of net sales, excluding liquidation effects
(which totaled $3.3 million, or 15.7%, primarily due to lease termination costs), decreased to
32.3% compared to 34.4% for the first quarter of last year. This reduction is
a result of continued improvement in controlling store-related expenses, the
closing of underperforming stores and the overhead reductions implemented in
January 2004, all discussed above. Depreciation and Amortization.Depreciation and amortization increased to
$15.4 million in the three months ended May 1, 2004, from $4.3 million in the
comparable period last year, and increased as a percentage of net sales to
15.7% from 4.5%. The increase of $11.1 million was primarily the result of
$11.2 million in accelerated depreciation recorded in 2004 for the 111
liquidation stores, offset by $0.1 million in decreased administrative
depreciation due to a lower level of headquarters assets due to headcount
reductions at our headquarters and closures of two distribution centers in the
fourth quarter of 2003. Depreciation and amortization was essentially flat
year over year, excluding the accelerated depreciation related to the
liquidation. Operating Loss.As a result of the above, the operating loss was $24.0
million in the three months ended May 1, 2004, compared to a $19.0 million net
loss for the comparable period last year, or 24.6% of net sales in 2004 as
compared to 19.9% of net sales in 2003. This was largely due to liquidation
costs of $14.2 million in 2004 (composed primarily of accelerated depreciation
and lease termination fees mentioned above), offset by: (1) $7.9 million in
lower selling, general and administrative costs in 2004 compared to 2003, (2)
$1.1 million in improved external gross margin 16




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as compared to the prior year, and (3) $0.1 million in favorable
depreciation expense in 2004 due to a lower asset base. Excluding the reorganization and liquidation operating results, the
operating loss for the quarter was $9.9 million, a 47.9% improvement over the
$19.0 million operating loss in the first quarter of 2003. This improvement
reflects the restructuring and store closing initiatives, as well as the impact
of improved product margins. Interest Expense.Net interest expense increased to $2.7 million in 2004
from $2.3 million in 2003, primarily due to a $0.5 million write-off of debt
issuance costs related to the amended senior credit facility, which reduced our
revolving line of credit borrowing capacity from $180.0 million to $125.0
million, offset by increased interest income. The reorganization and
liquidation operating results did not impact interest expense. Income Tax Benefit.The income tax benefit was $0.0 million in 2004
compared to $8.5 million in 2003 due to sustained losses, which currently
require the recording of a valuation allowance in 2004 against potentially
unrealizable net operating losses in future periods. This resulted in the
effective rate being reduced from 40.0% in 2003 to 0.0% in 2004. Net Loss.As a result of the above, the net loss for the three months
ended May 1, 2004, was $26.8 million compared to a net loss of $12.7 million in
the comparable period last year. The $14.1 million increase in net loss over
the prior year is primarily due to the $14.2 million of charges related to the
liquidation of the 111 stores during the first quarter of 2004. Excluding
these charges, the net loss for the first quarter of 2004 was $12.6 million. SUBSEQUENT EVENT On May 10, 2004, we received a non-binding proposal from an institutional
investor for the purchase in a private placement, for $35.0 million in cash, of
16,279,070 shares of our common stock at $2.15 per share and warrants to
purchase three million shares of our common stock for $3.00 per share,
exercisable for five years. Under the non-binding proposal, warrants to
purchase two million shares of our common stock would be issued at the time of
signing a definitive agreement and warrants to purchase an additional one
million shares of our common stock would be issued at closing. The
institutional investor making the non-binding proposal had previously been in
negotiations to purchase our convertible preferred stock and warrants, as
described in our press release of April 16, 2004. The institutional investor
terminated those negotiations on April 23, 2004. The agreements related to the Equity Financing (discussed in Note 10) do
not permit termination of those agreements prior to our shareholders meeting
to consider approval of the purchase of the shares, unless that meeting does
not occur by July 15, 2004, or the closing does not occur by July 22, 2004. On May 13, 2004, our Board of Directors met to consider the proposal and
unanimously determined not to withdraw its recommendation for the Equity
Financing transaction. A special shareholders meeting has been
set for June 24, 2004, and a special proxy statement for that meeting
was mailed to our shareholders on May 20, 2004. 17




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LIQUIDITY AND CAPITAL RESOURCES Our capital requirements are primarily driven by our seasonal working
capital needs, investments in new stores, remodeling existing stores, enhancing
information systems and increasing capacity for our distribution center. Our
peak working capital needs typically occur during the period from August
through early December as inventory levels are increased in advance of our peak
selling season from October through January. Our future capital requirements depend on the sustained demand for our
leather products. Many factors affect the level of consumer spending on our
products, including, among others, general business conditions, interest rates,
the availability of consumer credit, weather, the outbreak of war, acts of
terrorism or the threat of either, other significant national and international
events, taxation and consumer confidence in future economic conditions.
Consumer purchases of discretionary items, such as our leather products, tend
to decline during recessionary periods when disposable income is lower. The
general slowdown in the United States economy and the uncertain economic
outlook have shifted consumer spending habits toward large discount retailers,
which has decreased mall traffic, resulting in lower net sales on a quarterly
and annual basis. Our ability to meet our debt service obligations will be dependent upon
our future performance, which will be subject to general economic conditions
and financial, business and other factors affecting our operations. If we are
unable to generate sufficient cash flow from operations in the future to
service our debt, we may be required to refinance all or a portion of our
existing debt or to obtain additional financing. There can be no assurance
that any such refinancing or additional financing would be possible or could be
obtained on terms that are favorable to us. General Electric Capital Corporation and a syndicate of banks have
provided us with a senior credit facility, which was amended on April 15, 2004,
and April 27, 2004 (the senior credit facility or the credit agreement),
that provides for borrowings of up to $150.0 million in aggregate principal
amount, including a $25.0 million Term B promissory note and a $75.0 million
letter of credit subfacility. The maximum amount available under the revolving
credit portion of the senior credit facility is limited to:  
    
    85% of net inventories, provided that such percentage at no
time may exceed 85% of the then applicable discount rate applied in
appraising such inventories to reflect their value as if sold in an
orderly liquidation, except that the discount rate is gradually
increased from August 17 to October 1 of each year and gradually
decreased from December 17 to February 1 of each year, and except
that such amount is reduced by the amount of certain in-transit
inventory to the extent such in-transit inventory reflects a
disproportionate amount of our total inventory;
    
    plus 85% of outstanding and undrawn trade letters of credit,
provided that such percentage at no time may exceed 85% of the
discount rate applied in appraising the future inventories related to
such letters of credit to reflect their value as if sold in an
orderly liquidation;
    
    plus 85% of credit card receivables;
    
    minus a $10.0 million reserve; and
    
    minus an additional reserve, upon deposit of the proceeds from
the Equity Financing in an account controlled by the Agent under our
senior credit facility, in an amount not to exceed $3.5 million,
which will be reduced to the extent payments are made under the
registration rights agreement related to the Equity Financing and will
be reduced to zero upon effectiveness of the resale registration
statement. 18




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In addition, borrowings under the senior credit facility are subject to
the further limitations that:  
    
    the revolving credit portion of such borrowings cannot exceed
the sum of 85% of credit card receivables, plus 85% of the appraised
value of inventory (including inventory subject to trade letters of
credit) as if sold on a going-out-of-business basis;
    
    the total borrowings (i.e. the revolving credit portion of the
facility and the Term B promissory note) cannot exceed the sum of 85%
of the book value of credit card receivables, plus 95% (100% during
August, September and October) of the appraised value of inventory
(including inventory subject to trade letters of credit) as if sold
on a going-out-of-business basis;
    
    from December 31 of each year, through March 31 of the
following year, we must have no borrowings under the revolving credit
portion of the facility and outstanding letters of credit must be no
greater than $20.0 million; and
    
    until funds for the payment of the principal of our 111⁄4%
Senior Notes are deposited in an account controlled by the Agent
under our senior credit facility, we must have no borrowings under
the revolving portion of the senior credit facility and outstanding
letters of credit must be no greater than $15.0 million (plus a
specified letter of credit for an aggregate amount of $3.0 million). Peak borrowings typically occur from October through December and
outstanding letters of credit typically peak from August through September. As
of May 1, 2004, we had no borrowings under the revolving portion of the credit
facility, $25.0 million under the Term B promissory note, and $10.0 million in
outstanding letters of credit. Except as noted in the next sentence, interest is payable on revolving
credit borrowings at variable rates determined by LIBOR plus 3.25%, or the
prime rate plus 2.0% (commercial paper rate plus 3.25% if the loan is made
under the swing line portion of the revolver). If we meet certain financial
tests for our fiscal year ending January 29, 2005, these rates will be reduced
by 0.50% per annum thereafter. Interest is payable on the $25.0 million Term B
promissory note at a variable rate equal to the prime rate plus 4%, plus an
additional 5% payable pursuant to a separate letter agreement with General
Electric Capital Corporation. We pay monthly fees on the unused portion of the
senior credit facility and on the average daily amount of letters of credit
outstanding during each month. Currently, the senior credit facility expires
in June 2005, at which time all borrowings, including the Term B promissory
note, become due and payable. If we complete a sale of our capital stock on
terms that are acceptable to the lenders under our senior credit facility,
funds for the payment of the principal of the 111⁄4 Senior Notes are
deposited in an account controlled by the Agent under our senior credit
facility, and the 111⁄4% Senior Notes are repaid in cash by August 15, 2004,
the expiration of the senior credit facility (including the Term B promissory
note) will be extended to June 28, 2008. The lenders have agreed that the
terms of the Equity Financing described above under Note 10. Additional
Financing, if consummated, would be acceptable for this purpose. Prepayment
of the Term B promissory note is subject to a 1% prepayment fee. The revolving
credit portion of the facility is subject to a 1% prepayment fee under most
circumstances. The Term B promissory note is prepayable on or after July 1,
2002, only with the consent of the senior lenders under the senior credit
facility. 19




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The senior credit facility contains certain restrictions and covenants
which, among other things, restrict our ability to make capital expenditures;
acquire or merge with another entity; make investments, loans or guarantees;
incur additional indebtedness; prepay, repurchase or pay any principal on our
111⁄4% Senior Notes, except pursuant to a permitted refinancing; create liens
or other encumbrances; or pay cash dividends or make other distributions. We plan to use the senior credit facility for our immediate and future
working capital needs. Peak borrowings typically occur from October through
December and outstanding letters of credit typically peak from August through
September. We are dependent on the senior credit facility to fund working
capital and letter of credit needs. We believe that borrowing capacity under
the senior credit facility, assuming that we are able to obtain equity
financing to pay off the 111⁄4% Senior Notes, together with cash on hand,
current and anticipated cash flow from operations, cost reductions associated
with the 111 liquidation stores and the proceeds from the Equity Financing,
will be adequate to meet our working capital and capital expenditure
requirements through 2004. On August 18, 1997, we completed a private offering of $75.0 million of
our 111⁄4% Senior Notes to certain institutional buyers. Interest on the
111⁄4% Senior Notes is payable semi-annually in arrears on February 15 and
August 15 of each year. The 111⁄4% Senior Notes mature on August 15, 2004.
The 111⁄4% Senior Notes are our general unsecured obligations and rank senior
in right of payment to all of our existing and future subordinated indebtedness
and rank on equal terms in right of payment with all of our other current and
future unsubordinated indebtedness. During fiscal 2000 and fiscal 1999, we
repurchased $13.3 million and $26.1 million, respectively, of our 111⁄4%
Senior Notes. As of May 1, 2004, we had $30.6 million of 111⁄4% Senior Notes
outstanding, all of which was classified as current. We currently do not have the funds to pay the outstanding principal amount
of the 111⁄4% Senior Notes when they are due on August 15, 2004. Our senior
credit facility prohibits us from incurring any indebtedness which refunds,
renews, extends or refinances the 111⁄4% Senior Notes on terms more
burdensome than the terms of such notes, and the rate of interest with respect
to any replacement notes cannot exceed the sum of the rate of interest on
United States treasury obligations of like tenor at the time of such refunding,
renewal, extension or refinancing, plus 7.0% per annum. We anticipate that we
will not be able to refund, renew, extend or refinance the 111⁄4% Senior
Notes with indebtedness that would comply with such limitations. However, if
we complete a sale of our capital stock by August 15, 2004, on terms that are
acceptable to the lenders under our senior credit facility, such lenders have
agreed that we may use the proceeds from such sale to pay our 111⁄4% Senior
Notes. The lenders have agreed that the terms of the Equity Financing
described above and under Note 10. Additional Financing, if consummated,
would be acceptable for this purpose. On April 25, 2004, we entered into an agreement to issue 17,948,718 shares
of our common stock (the Equity Financing) to three institutional investors
at a price of $1.95 per share. As additional consideration for the investors
commitment, we have issued two million warrants exercisable for five years to
the investors, and at closing, will issue an additional two million warrants
exercisable for five years, each at an exercise price of $3.00 per share of
common stock. The closing of the transaction is subject to a number of closing
conditions, the principal condition being the approval of our shareholders. A
special shareholders meeting has been set for June 24, 2004, and a special
proxy statement for that meeting was mailed to our shareholders on May 20,
2004. We intend to use the proceeds from the Equity Financing to repay the
111⁄4% Senior Notes due August 15, 2004, and for general working capital
purposes. If we are unable to close the Equity 20




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Financing for any reason, we will need to find an alternative source of
permitted financing for the repayment of the 111⁄4% Senior Notes before we
will be permitted to borrow under the senior credit facility. There can be no assurance that we will be able to obtain such financing,
on acceptable terms or at all, before we need to access the revolving portion
of the senior credit facility or before the 111⁄4% Senior Notes become due.
We anticipate that we will need to access the revolving portion of the senior
credit facility by the middle of July 2004, and if we do not obtain the
necessary funding from some source other than operations before such time, we
could eventually deplete our cash reserves and become insolvent or have to
consider other alternatives, including filing for bankruptcy. CASH FLOW ANALYSIS Operating Activities.Operating activities for the three months ended May
1, 2004, resulted in cash provided of $4.8 million compared to cash provided of
$3.5 million in the corresponding period of 2003. The $4.8 million of cash provided by operating activities in 2004 was
comprised of: (1) a $25.0 million decrease in inventories due to a strategic
operating decision to keep inventory levels more tightly managed than in
previous years and a lower store count than in the prior year due to the net
closure of 111 liquidation stores and approximately 40 other stores, bringing
the average store count to 460 for the first quarter of 2004 compared to 616
for the first quarter of 2003, (2) $16.3 million in non-cash adjustments for
depreciation, amortization, property and equipment impairment, and restricted
stock compensation expense, of which $11.2 million was related to the 111
liquidation stores, (3) a $3.2 million decrease in accounts receivable
primarily due to lower credit card receivables as a result of a lower store
count, as well as a $0.4 million decrease in construction allowance receivables
for new store construction projects over the prior year. These sources of cash were primarily offset by: (1) a net loss from
operations of $26.8 million (of which $14.2 million related to charges for the
111 store liquidation and other restructuring activities), (2) a $7.1 million
decrease in accounts payable and accrued expenses from a reduction in the
volume of merchandise purchased and a lower level of general non-merchandise
vendor purchases in 2004 compared to 2003, (3) a $5.4 million increase in
prepaid expenses due to $3.1 million in higher prepaid rent due to timing of
rent payments, $2.8 million in offering costs related to the pending Equity
Financing transaction, and $0.2 million in higher marketing expenses prepaid
for spring campaigns, offset by $0.7 million in lower insurance prepaids due to
amortization of premiums, and, (4) a $0.4 million decrease in income taxes
payable and other liabilities primarily due to $0.5 million in amortization of
deferred gain on the sale/leaseback of our headquarters facility done in 2002
offset by a $0.1 million increase in miscellaneous income tax liability
accounts. The $3.5 million of cash provided by operating activities in 2003 was
comprised of: (1) a $30.2 million decrease in inventories due to clearance
sales, (2) an $8.8 million increase in deferred tax liabilities, (3) a $4.7
million non-cash adjustment for depreciation and amortization expense, and (4)
$0.6 million in cash provided by various other operating activities. These sources of cash were primarily offset by: (1) a $12.7 million net
loss from operations, (2) a $5.7 million increase in prepaids due to timing of
rent payments, (3) a $7.4 million increase in income taxes refundable/payable
and other liabilities primarily due to net operating losses, 21




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##### Table of Contents

\

including a $9.9 million tax refund, and (4) a $15.0 million decrease in
accrued expenses and accounts payable due to the seasonality of the business. Investing Activities.Investing activities for the three months ended May
1, 2004, were comprised of $0.7 million in capital expenditures primarily for
the construction of new stores and the renovation of and improvements to
existing stores, offset by $0.1 million from proceeds on the sale of property
and equipment. For 2004, capital expenditures are capped at $6.0 million. Investing activities for the three months ended May 3, 2003, were
comprised primarily of $2.0 million in capital expenditures and additions to
other assets used primarily for the construction of new stores and the
renovation of and improvements to existing stores. Financing Activities.Cash used in financing activities for the three
months ended May 1, 2004, was comprised primarily of $1.2 million used for debt
acquisition costs related to amendments to our senior credit facility in April
2004. Cash used in financing activities for the three months ended May 3, 2003,
was primarily $1.0 million used for debt acquisition costs related to
amendments to our senior credit facility in April 2003. OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
investors. SEASONALITY AND INFLATION A majority of our net sales and operating profit is generated in the peak
selling period from October through January, which includes the holiday selling
season. As a result, our annual operating results have been, and will continue
to be, heavily dependent on the results of our peak selling period. Net sales
are generally lowest during the period from April through July, and we
typically do not become profitable, if at all, until the fourth quarter of a
given year. Most of our stores are unprofitable during the first three
quarters. Conversely, in a typical year nearly all of our stores are
profitable during the fourth quarter, even those that may be unprofitable for
the full year. Historically, we have opened most of our stores during the last
half of the year. As a result, new mall stores opened just prior to the fourth
quarter produce profits in excess of their annualized profits since the stores
typically generate losses in the first nine months of the year. We do not believe that inflation has had a material effect on the results
of operations during the past three years, however, there can be no assurance
that our business will not be affected by inflation in the future. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS See
Note 2,  Recently Issued Accounting
Pronouncements, of the consolidated financial statements beginning on page
8 of this report for a full description of recently issued accounting pronouncements,
including the respective expected dates of adoption and effects on results of
operations and financial condition.  22




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Except for historical information, matters discussed in Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements involve risks and
uncertainties, and actual results may be materially different. Because actual
results may differ, readers are cautioned not to place undue reliance on
forward-looking statements. Factors that could cause actual results to differ
include: risks associated with our debt service, including our current
inability to access our revolving credit facility or repay the 111⁄4% Senior
Notes when due; our ability to exit store leases for the 111 liquidation
stores; changes in customer shopping patterns; competition in our markets;
economic downturns; failure of results of operations to meet expectations of
research analysts; change in consumer preferences and fashion trends away from
leather; reductions in our comparable store sales over the past three years;
our inability to grow the business as planned; decreased availability and
increased cost of leather; risks associated with foreign sourcing and
international business; risks associated with estimates made in our critical
accounting policies; seasonality of the business; dilution to our shareholders
as a result of the refinancing; loss of key members of our management team;
reliance on third parties for maintaining our management information systems;
concentration of our common stock; volatility of our common stock; war, acts
of terrorism or the threat of either; and interruption in the operation of
corporate offices and distribution centers. Certain of these risk factors are
more fully discussed in our 2003 Annual Report on Form 10-K for the fiscal
year ended January 31, 2004. 
 ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our senior credit facility carries interest rate risk that is generally
related to LIBOR, the commercial paper rate or the prime rate. If any of
those rates were to change while we were borrowing under the senior credit
facility, interest expense would increase or decrease accordingly. As of May
1, 2004, we had no borrowings under the revolving portion of the credit
facility, $25.0 million under the Term B promissory note, and $10.0 million in
outstanding letters of credit. We have no earnings or cash flow exposure due to market risks on our
fixed-rate debt obligations. However, interest rate changes would affect the
fair market value of the debt. At May 1, 2004, we had fixed rate debt of $30.6
million maturing in August 2004. 
 ITEM 4.  CONTROLS AND PROCEDURES As of the end of the period covered by this report, we conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the Exchange Act)). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information we are required to disclose in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms. There was no change in our internal control over financial reporting
during our most recently completed fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting. 
 23




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##### Table of Contents



PART II - OTHER INFORMATION 
  ITEM 2.
    CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES See Part I., Item 2. Managements Discussion and Analysis of Financial
Condition and Results of OperationsLiquidity and Capital Resources contained
herein for a description of working capital restrictions and limitations upon
the payment of dividends. We did not repurchase any shares of our common stock
during the first quarter of 2004. 
 ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K ExhibitNo.
    
    Description
    
    Method of Filing3.1
    
    Amended and Restated Articles of Incorporation of Wilsons The Leather Experts
Inc. adopted June 16, 1998, as amended by the Articles of Amendment dated
February 17, 2000, and the Articles of Amendment dated May 23, 2002. (1)
    
    Incorporated by Reference3.2
    
    Restated Bylaws of Wilsons The Leather Experts Inc. as amended June 16, 1998,
January 25, 2000, May 23, 2002, and February 5, 2004. (2)
    
    Incorporated by Reference4.1
    
    Specimen of common stock certificate. (3)
    
    Incorporated by Reference4.2
    
    Indenture dated as of August 18, 1997, by and among
Wilsons The Leather Experts Inc., the other corporations listed on
the signature pages thereof, and Wells Fargo Bank Minnesota,
National Association (formerly known as Norwest Bank Minnesota,
National Association), including specimen Certificate of 111⁄4%
Series A Senior Notes due 2004 and specimen Certificate of
111⁄4% Series B Senior Notes due 2004. (4)
    
    Incorporated by Reference4.3
    
    Registration Rights Agreement dated as of May 25, 1996, by and among CVS New
York, Inc. (formerly known as Melville Corporation), Wilsons The Leather Experts
Inc., the Managers listed on the signature pages thereto, Leather Investors
Limited Partnership I and the Partners listed on the signature pages thereto. (5)
    
    Incorporated by Reference4.4
    
    Amendment to Registration Rights Agreement dated as of August 12, 1999, by and
among Wilsons The Leather Experts Inc. and the Shareholders listed on the
attachments thereto. (6)
    
    Incorporated by Reference4.5
    
    Registration Rights Agreement dated as of April 24, 2002, by and among Wilsons
The Leather Experts Inc. and the Investors signatory thereto. (7)
    
    Incorporated by Reference
 24




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4.6
    
    Common Stock and Warrant Purchase Agreement, dated as of April 25, 2004, by and
among Wilsons The Leather Experts Inc. and the Purchasers identified on the
signatory pages thereto (the Purchase Agreement). (8)
    
    Incorporated by Reference4.7
    
    Registration Rights Agreement, dated as of April 25, 2004, by and
among Wilsons The Leather Experts Inc.
and the Investors identified therein. (9)
    
    Incorporated by Reference4.8
    
    Form of Warrant issued to the Purchasers named in the
Purchase Agreement on April 25, 2004. (10)
    
    Incorporated by Reference10.1
    
    Second Amendment to Employment Agreement dated April 19, 2004, between Joel N.
Waller and the Company
    
    Electronic Transmission10.2
    
    Second Amendment to Employment
Agreement dated April 5, 2004, between David L.
Rogers and the Company
    
    Electronic Transmission10.3
    
    Stay Bonus Agreement dated April 5, 2004, between
Peter G. Michielutti and the Company
    
    Electronic Transmission10.4
    
    Stay Bonus Agreement dated April 5, 2004, between
Arthur J. Padovese and the Company
    
    Electronic Transmission10.5
    
    Limited Waiver and Fifth Amendment to Fourth Amended and Restated Credit
Agreement dated as of April 15, 2004, among Wilsons Leather Holdings Inc.,
General Electric Capital Corporation, as Lender, Term Lender, Swing Line Lender
and as Agent, the Credit Parties signatory thereto. (11)
    
    Incorporated by Reference10.6
    
    Reaffirmation of Guaranty dated as of April 15, 2004, by Wilsons The Leather
Experts Inc., Wilsons Center, Inc., Rosedale Wilsons, Inc., River Hills Wilsons,
Inc. and the Store Guarantors listed on the signature pages thereto in favor of
General Electric Capital Corporation as Agent for Lenders. (12)
    
    Incorporated by Reference10.7
    
    Sixth Amendment to Fourth Amended and Restated Credit Agreement dated as of April
27, 2004, among Wilsons Leather Holdings Inc., General Electric Capital
Corporation, as Lender, Term Lender, Swing Line Lender and as Agent, the Credit
Parties signatory thereto and the Lenders signatory thereto. (13)
    
    Incorporated by Reference10.8
    
    Reaffirmation of Guaranty dated as of April 27, 2004 by Wilsons The Leather
Experts Inc., Wilsons Center, Inc., Rosedale Wilsons, Inc., River Hills Wilsons,
Inc. and the Store Guarantors listed on the signature pages thereto in favor of
General Electric Capital Corporation as Agent for Lenders. (14)
    
    Incorporated by Reference
 25




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31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
    
    Electronic Transmission31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
    
    Electronic Transmission32.1
    
    Certification of Chief Executive Officer pursuant to
Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    Electronic Transmission32.2
    
    Certification of Chief Financial Officer pursuant to
Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    Electronic Transmission
  1.
    
    Incorporated by reference to the same numbered exhibit to the Companys
Report on Form
10-Q for the quarter ended May 4, 2002, (File No. 000-21543).2.
    
    Incorporated by reference to the same numbered exhibit to the Companys
Report on Form 10-K for the year ended January 31, 2004, (File No. 000-21543).3.
    
    Incorporated by reference to the same numbered exhibit to Amendment No.
1 to the Companys Registration Statement on Form S-l (333-13967) filed with the
Commission on December 24, 1996.4.
    
    Incorporated by reference to Exhibit 10.3 to the Companys Report on
Form 10-Q for the quarter ended August 2, 1997, filed with the Commission.5.
    
    Incorporated by reference to Exhibit 4.8 to the Companys
Registration Statement on Form S-l (333-13967) filed with the Commission on October 11, 1996.6.
    
    Incorporated by reference to Exhibit 4.5 to the Companys Report on
Form 10-K for the fiscal year ended January 29, 2000, filed with the Commission (File No.
000-21543).7.
    
    Incorporated by reference to Exhibit 4.2 to the Companys Report on
Form 8-K filed with the Commission on May 3, 2002.8.
    
    Incorporated by reference to Exhibit 4.1 to the Companys Report on
Form 8-K filed with the Commission on April 27, 2004.9.
    
    Incorporated by reference to Exhibit 4.2 to the Companys Report on
Form 8-K filed with the Commission on April 27, 2004.10.
    
    Incorporated by reference to Exhibit 4.3 to the Companys Report on
Form 8-K filed with the Commission on April 27, 2004. 26




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##### Table of Contents



11.
    
    Incorporated by reference to Exhibit 10.48 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543).12.
    
    Incorporated by reference to Exhibit 10.49 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543).13.
    
    Incorporated by reference to Exhibit 10.52 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543).14.
    
    Incorporated by reference to Exhibit 10.53 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543). B.       Reports on Form 8-K: The Company filed the following reports on Form
8-K during the first quarter ended May 1, 2004: On February 6, 2004, the Company filed a report on Form 8-K
disclosing the announcement by the Company on January 22, 2004, that
pending the outcome of negotiations with its landlords, it would be
closing up to 111 of its mall and outlet stores. In addition, the Company
announced that it had entered into an agency agreement to liquidate the
inventory in the 111 stores. On March 9, 2004, the Company announced its fourth quarter and year
to date earnings for the period ended January 31, 2004. The earnings
release was furnished to the SEC on a Form 8-K filed on March 9, 2004. On April 16, 2004, the Company announced it had entered into an
agreement to amend its revolving credit facility. In addition, the
Company announced that they would file a notification of a late filing for
its 10-K with the SEC that same day due to a significant pending financing
transaction expected to close in the near term. The report on Form 8-K
was filed on April 22, 2004. On April 26, 2004, the Company announced that it had entered into an
agreement for a private placement sale of 17,948,718 shares of common
stock to three investors at a price of $1.95 per share. The report on
Form 8-K was filed on April 27, 2004. 27




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##### Table of Contents



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. WILSONS THE LEATHER EXPERTS INC.By:
    
    /s/
    
    Peter G. MichieluttiPeter G. Michielutti
Executive Vice President and
Chief Financial OfficerDate: June 9, 2004
 28




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##### Table of Contents



INDEX TO EXHIBITS ExhibitNo.
    
    Description
    
    Method of Filing3.1
    
    Amended and Restated Articles of Incorporation of Wilsons The Leather Experts
Inc. adopted June 16, 1998, as amended by the Articles of Amendment dated
February 17, 2000, and the Articles of Amendment dated May 23, 2002. (1)
    
    Incorporated by Reference3.2
    
    Restated Bylaws of Wilsons The Leather Experts Inc. as amended June 16, 1998,
January 25, 2000, May 23, 2002, and February 5, 2004. (2)
    
    Incorporated by Reference4.1
    
    Specimen of common stock certificate. (3)
    
    Incorporated by Reference4.2
    
    Indenture dated as of August 18, 1997, by and among
Wilsons The Leather Experts Inc., the other corporations listed on
the signature pages thereof, and Wells Fargo Bank Minnesota,
National Association (formerly known as Norwest Bank Minnesota,
National Association), including specimen Certificate of 111⁄4%
Series A Senior Notes due 2004 and specimen Certificate of
111⁄4% Series B Senior Notes due 2004. (4)
    
    Incorporated by Reference4.3
    
    Registration Rights Agreement dated as of May 25, 1996, by and among CVS New
York, Inc. (formerly known as Melville Corporation), Wilsons The Leather Experts
Inc., the Managers listed on the signature pages thereto, Leather Investors
Limited Partnership I and the Partners listed on the signature pages thereto. (5)
    
    Incorporated by Reference4.4
    
    Amendment to Registration Rights Agreement dated as of August 12, 1999, by and
among Wilsons The Leather Experts Inc. and the Shareholders listed on the
attachments thereto. (6)
    
    Incorporated by Reference4.5
    
    Registration Rights Agreement dated as of April 24, 2002, by and among Wilsons
The Leather Experts Inc. and the Investors signatory thereto. (7)
    
    Incorporated by Reference4.6
    
    Common Stock and Warrant Purchase Agreement, dated as of April 25, 2004, by and
among Wilsons The Leather Experts Inc. and the Purchasers identified on the
signatory pages thereto (the Purchase Agreement). (8)
    
    Incorporated by Reference
 29




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4.7
    
    Registration Rights Agreement, dated as of April 25, 2004, by and
among Wilsons The Leather Experts Inc.
and the Investors identified therein. (9)
    
    Incorporated by Reference4.8
    
    Form of Warrant issued to the Purchasers named in the
Purchase Agreement on April 25, 2004. (10)
    
    Incorporated by Reference10.1
    
    Second Amendment to Employment Agreement dated April 19, 2004, between Joel N.
Waller and the Company
    
    Electronic Transmission10.2
    
    Second Amendment to Employment
Agreement dated April 5, 2004, between David L.
Rogers and the Company
    
    Electronic Transmission10.3
    
    Stay Bonus Agreement dated April 5, 2004, between
Peter G. Michielutti and the Company
    
    Electronic Transmission10.4
    
    Stay Bonus Agreement dated April 5, 2004, between
Arthur J. Padovese and the Company
    
    Electronic Transmission10.5
    
    Limited Waiver and Fifth Amendment to Fourth Amended and Restated Credit
Agreement dated as of April 15, 2004, among Wilsons Leather Holdings Inc.,
General Electric Capital Corporation, as Lender, Term Lender, Swing Line Lender
and as Agent, the Credit Parties signatory thereto. (11)
    
    Incorporated by Reference10.6
    
    Reaffirmation of Guaranty dated as of April 15, 2004, by Wilsons The Leather
Experts Inc., Wilsons Center, Inc., Rosedale Wilsons, Inc., River Hills Wilsons,
Inc. and the Store Guarantors listed on the signature pages thereto in favor of
General Electric Capital Corporation as Agent for Lenders. (12)
    
    Incorporated by Reference10.7
    
    Sixth Amendment to Fourth Amended and Restated Credit Agreement dated as of April
27, 2004, among Wilsons Leather Holdings Inc., General Electric Capital
Corporation, as Lender, Term Lender, Swing Line Lender and as Agent, the Credit
Parties signatory thereto and the Lenders signatory thereto. (13)
    
    Incorporated by Reference10.8
    
    Reaffirmation of Guaranty dated as of April 27, 2004 by Wilsons The Leather
Experts Inc., Wilsons Center, Inc., Rosedale Wilsons, Inc., River Hills Wilsons,
Inc. and the Store Guarantors listed on the signature pages thereto in favor of
General Electric Capital Corporation as Agent for Lenders. (14)
    
    Incorporated by Reference31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
    
    Electronic Transmission
 30




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31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
    
    Electronic Transmission32.1
    
    Certification of Chief Executive Officer pursuant to
Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    Electronic Transmission32.2
    
    Certification of Chief Financial Officer pursuant to
Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    Electronic Transmission
  1.
    
    Incorporated by reference to the same numbered exhibit to the Companys
Report on Form
10-Q for the quarter ended May 4, 2002, (File No. 000-21543).2.
    
    Incorporated by reference to the same numbered exhibit to the Companys
Report on Form 10-K for the year ended January 31, 2004, (File No. 000-21543).3.
    
    Incorporated by reference to the same numbered exhibit to Amendment No.
1 to the Companys Registration Statement on Form S-l (333-13967) filed with the
Commission on December 24, 1996.4.
    
    Incorporated by reference to Exhibit 10.3 to the Companys Report on
Form 10-Q for the quarter ended August 2, 1997, filed with the Commission.5.
    
    Incorporated by reference to Exhibit 4.8 to the Companys
Registration Statement on Form S-l (333-13967) filed with the Commission on October 11, 1996.6.
    
    Incorporated by reference to Exhibit 4.5 to the Companys Report on
Form 10-K for the fiscal year ended January 29, 2000, filed with the Commission (File No.
000-21543).7.
    
    Incorporated by reference to Exhibit 4.2 to the Companys Report on
Form 8-K filed with the Commission on May 3, 2002.8.
    
    Incorporated by reference to Exhibit 4.1 to the Companys Report on
Form 8-K filed with the Commission on April 27, 2004.9.
    
    Incorporated by reference to Exhibit 4.2 to the Companys Report on
Form 8-K filed with the Commission on April 27, 2004.10.
    
    Incorporated by reference to Exhibit 4.3 to the Companys Report on
Form 8-K filed with the Commission on April 27, 2004.11.
    
    Incorporated by reference to Exhibit 10.48 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543).12.
    
    Incorporated by reference to Exhibit 10.49 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543). 31




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##### Table of Contents



13.
    
    Incorporated by reference to Exhibit 10.52 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543).14.
    
    Incorporated by reference to Exhibit 10.53 to the Companys Report on
Form 10-K for the year ended January 31, 2004, (File No. 000-21543). 32