SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 24, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________to_______________
Commission file number 1-8769
R. G. BARRY CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-4362899
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
13405 Yarmouth Road, NW, Pickerington, Ohio 43147
(Address of principal executive offices) (Zip Code)
614-864-6400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(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
Common Shares, $1 Par Value,
Outstanding as of June 24, 1995 - 5,533,813
Index to Exhibits at page 12
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 24, 1995 Dec. 31, 1994
ASSETS:
Cash. . . . . . . . . . . . $ 947,000 2,360,000
Accounts receivable, less allowances . 9,178,000 23,412,000
Inventory (note 2) . . . . . . . 44,669,000 26,062,000
Deferred federal income taxes (note 3) 2,635,000 2,635,000
Recoverable income taxes . . . . . 2,532,000 -
Prepaid expenses and other assets . . 1,829,000 1,930,000
Total current assets . . . . 61,790,000 56,399,000
Property, plant and equipment, at cost 36,526,000 35,663,000
Less accumulated depreciation
and amortization. . . . . . . 22,195,000 21,878,000
Net property, plant and equipment 14,331,000 13,785,000
Goodwill . . . . . . . . . . 4,519,000 4,578,000
Other assets . . . . . . . . . 2,198,000 2,199,000
$ 82,838,000 76,961,000
LIABILITIES & SHAREHOLDERS' EQUITY:
Current installments of long-term debt
and capital lease obligations. . . 885,000 677,000
Short-term notes payable . . . . . 19,000,000 2,000,000
Accounts payable. . . . . . . . 6,394,000 8,174,000
Accrued expenses. . . . . . . . 2,253,000 6,481,000
Total current liabilities. . . 28,532,000 17,332,000
Accrued supplemental retirement plan . 2,258,000 2,130,000
Long-term debt and capital lease obligations,
excluding current installments:
Notes payable (note 5) . . . . . 15,000,000 15,000,000
Subordinated sinking fund debentures - 700,000
Capital lease obligations . . . . 670,000 745,000
Long-term debt and capital lease
obligations . . . . . . . 15,670,000 16,445,000
Total liabilities . . . . . 46,460,000 35,907,000
Shareholders' equity:
Preferred shares, $1 par value.
Authorized 4,000,000 Class A,
500,000 Class B and 500,000 Series I
Junior Participating Class B shares,
none issued . . . . . . . . - -
Common shares, $1 par value.
Authorized 7,500,000 shares
(excluding treasury shares). . . 5,534,000 5,543,000
Additional capital in excess of
par value. . . . . . . . . 16,586,000 16,770,000
Retained earnings. . . . . . . 14,258,000 18,741,000
Net shareholders' equity . . . 36,378,000 41,054,000
$ 82,838,000 76,961,000
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended Twenty-Five Weeks Ended
June 24, June 25, June 24, June 25,
1995 1994 1995 1994
Net sales. . . . $10,806,000 9,406,000 25,785,000 22,862,000
Cost of sales . . 4,734,000 4,949,000 12,345,000 12,587,000
Gross profit . . 6,072,000 4,457,000 13,440,000 10,275,000
Selling, general &
admin. expense . 9,530,000 7,510,000 19,694,000 14,807,000
Operating loss . ( 3,458,000) ( 3,053,000) ( 6,254,000) ( 4,532,000)
Royalty income . . 44,000 100,000 44,000 200,000
Interest expense . ( 669,000) ( 290,000) ( 1,156,000) ( 447,000)
Interest income. . 13,000 27,000 16,000 57,000
Net interest
expense . . . ( 656,000) ( 263,000) ( 1,140,000) ( 390,000)
Loss before income
tax benefit . . ( 4,070,000) ( 3,216,000) ( 7,350,000) ( 4,722,000)
Income tax benefit
(note 3) . . . ( 1,591,000) ( 1,206,000) ( 2,867,000) ( 1,770,000)
Net loss . . . $( 2,479,000) ( 2,010,000) ( 4,483,000) ( 2,952,000)
Net loss per common
share (note 4) . $ (0.45) (0.40) (0.81) (0.58)
Average number of
shares outstanding 5,530,000 5,098,000 5,533,000 5,097,000
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twenty-Five Weeks Ended
June 24, 1995 June 25, 1994
Cash flows from operating activities:
Net loss . . . . . . . . . . $( 4,483,000) ( 2,952,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of
property, plant, and equipment. . 707,000 642,000
Amortization of goodwill . . . . 59,000
Amortization of deferred compensation - 84,000
Net (increase) decrease in:
Accounts receivable, net. . . . 14,234,000 7,244,000
Inventory. . . . . . . . . (18,607,000) (12,572,000)
Prepaid expenses and other
current assets . . . . . . 101,000 ( 852,000)
Refundable income taxes . . . . ( 2,532,000) ( 1,770,000)
Other assets. . . . . . . . 1,000 ( 122,000)
Net increase (decrease) in:
Accounts payable . . . . . . ( 1,780,000) 1,496,000
Accrued expenses . . . . . . ( 4,228,000) ( 3,530,000)
Accrued supplemental retirement
and other liabilities . . . . 128,000 ( 187,000)
Net cash used in operating
activities . . . . . . . (16,400,000) (12,145,000)
Cash flows from investing activities:
Additions of property, plant
and equipment, net . . . . . . ( 1,253,000) ( 857,000)
Cash flows from financing activities:
Proceeds from short-term notes . . . 17,000,000 14,000,000
Acquisition of treasury shares ( 240,000) ( 517,000)
Proceeds from stock options exercised 47,000 165,000
Repayment of long-term debt
and capital lease obligations. . . ( 567,000) ( 558,000)
Net cash provided by
financing activities. . . . 16,240,000 13,090,000
Net increase (decrease) in cash . . . ( 1,413,000) 88,000
Cash at beginning of the period . . . 2,360,000 1,483,000
Cash at end of the period . . . . . $ 947,000 1,571,000
Supplemental cash flow disclosures:
Interest paid. . . . . . . . . $ 1,138,000 494,000
Taxes paid. . . . . . . . . . $ 2,633,000 1,771,000
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
Under Item 1 of Part I of Form 10-Q
for the Periods Ended
June 24, 1995 and June 25, 1994
1. These interim financial statements are unaudited. All adjustments
(consisting solely of normal recurring adjustments) have been made,
which in the opinion of management, are necessary to fairly present
the results of operations for the periods.
2. A substantial portion of inventory is valued using the dollar value
LIFO method and, therefore, it is impractical to separate inventory
value between raw materials, work-in-process and finished goods.
3. Income tax expense (benefit) for the periods ended June 24, 1995
and June 25, 1994, consists of:
1995 1994
Current:
U. S. Federal (benefit) ($2,310,000) ($1,520,000)
State and Local ( 557,000) ( 250,000)
Total ($2,867,000) ($1,770,000)
The income tax benefit reflects a combined federal, foreign, state
and local effective rate of 39.0% for the first half of 1995 and
37.5% for the same period of 1994, as compared to the statutory
U. S. federal rate of 34.0% in both years.
Income tax for the periods ended June 24, 1995 and June 25, 1994
differed from the amounts computed by applying the U. S. federal
income tax rate of 34.0% to pretax income as a result of the
following:
1995 1994
Computed "expected" tax expense:
U. S. Federal (benefit) ($2,499,000) ($1,605,000)
State and Local (benefit) net
of Federal income tax benefit ( 368,000) ( 165,000)
Total ($2,867,000) ($1,770,000)
4. Net loss per common share has been computed based on the average
number of common shares outstanding during each period. Period
ending and average shares outstanding for prior periods have been
retroactively restated to give effect to the four-for-three share
split, distributed in the form of a share dividend on June 22,
1994, to shareholders of record on June 1, 1994.
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Financial Statements, continued
5. In 1994, the Company and several of its officers and directors were
named as defendants in three purported class actions filed in the
United States District Court for the Southern District of Ohio,
Eastern Division. The Complaints generally alleged that the
Company made several false and misleading statements in violation
of certain provisions of federal securities laws. One complaint
also alleged claims arising under state law. The plaintiffs filed
an Amended and Consolidated Class Action Complaint in May, 1995.
The Amended and Consolidated Complaint is generally identical in
substance to the original Complaints. On July 11, 1995, the
Company and the individual defendants filed with the District Court
a Motion to Dismiss the Amended and Consolidated Complaint. The
Company believes that this action is without merit and that it has
meritorious defenses. The Company intends to defend itself
vigorously against this litigation. Management does not expect the
resolution of this matter to have a material adverse effect on the
Company's financial position or results of operations.
R. G. BARRY CORPORATION AND SUBSIDIARIES
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At the end of the second quarter of 1995, the Company had $33.3 million
in net working capital. At the end of the second quarter of 1994, the
Company had $23.9 million in net working capital, and at the end of the
1994 fiscal year, $39.1 million. The increase in working capital from
the second quarter of 1994 to the second quarter of 1995, is largely due
to the additional long-term debt that the Company borrowed in July 1994.
The decline in net working capital from year end 1994 to the end of the
second quarter of 1995, is mainly due to the first half loss, capital
expenditures during the first half of 1995, routine repayment of long-
term debt, and the acquisition of treasury shares.
At the end of the second quarter of 1995, the Company had $0.9 million in
cash, $9.2 million in accounts receivable and $44.7 million in inventory.
This compares with $1.6 million in cash, $9.8 million in accounts
receivable and $30.3 million in inventory at the end of the same quarter
of 1994. The primary element of working capital that changed is
inventory. At the end of 1994, the Company expressed the belief that it
had some amount of excess inventory on hand and that it planned to
systematically reduce the amount of excess inventory throughout 1995.
Inventory at the end of the second quarter of 1995 was $14.3 million
greater than at the end of the second quarter of 1994. This increase in
inventory reflects: a) the excess inventory that the Company had on hand
at year end 1994, that is expected to be utilized in the balance of 1995,
b) added inventory needed to support anticipated increases in net sales
during the third and fourth quarters of 1995, and c) inventories of
Vesture Corporation, which the Company acquired in July 1994, after the
end of the second quarter in 1994.
At fiscal year end 1994, the Company had $2.4 million in cash, $23.4
million in accounts receivable and $26.1 million in inventory. From the
end of the year to the end of the current quarter, accounts receivable
have decreased by $14.2 million, as the Company collected account
balances that were due at year end. The increase in inventory, from year
end, is a normal increase, as the Company builds inventory to support
anticipated sales later in the year.
The Company has in place a Revolving Credit Agreement ("Revolver"), with
its two main lending banks, to provide the Company additional capital to
meet its seasonal working capital needs. The Revolver provides the
Company with a seasonally adjusted available line of credit ranging from
$5.5 million as of December 31st, to a peak of $38.0 million from July
through November. The Revolver has been modified several times in the
past few years in order to meet the Company's needs. The Revolver was
recently extended through September 1995. The Company has held
discussions with its banks, and based upon those discussions, is
confident of obtaining an extension of the Revolver in order to permit
the Company to meet its anticipated seasonal funding needs over a longer
period. The Company is in compliance with all covenants of its long-term
debt agreements.
At the end of the second quarter of 1995, the Company had borrowed $19.0
million under the Revolver, all of which has been classified as short-
term debt in the accompanying consolidated financial statements. At the
end of the same quarter of 1994, the Company had borrowed $19.5 million,
of which $14.0 million was classified as short-term debt and $5.5 million
was classified as long-term debt.
Management's Discussion and Analysis of Financial Condition
and Results of Operation - continued
Results of Operations
During the second quarter of 1995, the Company had net sales of $10.8
million, compared with $9.4 million during the same quarter of 1994, a
14.9% increase. For the first half of 1995 net sales amounted to $25.8
million, a 12.8% increase over net sales of $22.9 during the first half
of 1994. Substantially all the increase in net sales during the periods
is from the Company's comfort footwear. There were no significant price
increases during the periods.
Gross profit in the second quarter of 1995, increased to $6.1 million,
from $4.5 million in 1994. Gross profit as a percent of net sales also
increased during the quarter, to 56.2 percent from 47.4 percent in 1994.
For the first half of 1995, gross profit increased to $13.4 million from
$10.3 million last year. Gross profit as a percent of net sales for the
first half, also increased to 52.1% from 44.9% last year. Improved
manufacturing efficiencies from last year to this year, plus the
reduction in value of the Mexican peso from last year, and changes in the
mix of products sold from last year to this, have all helped reduce costs
and/or increase gross profit.
Selling, general and administrative expenses during the second quarter
and the first half increased by a sizable amount from 1994 to 1995. For
the second quarter these expenses increased from $7.5 million to $9.5
million, and for the first half these expenses increased from $14.8
million to $19.7 million. As noted in the Company's first quarter 10-Q,
during the second half of 1994, the Company increased the fixed portion
of its selling, general and administrative expense in the area of
marketing and product support, in preparation for an anticipated increase
in future net sales. Many of these expenses are incurred throughout the
year, rather than at the time of sale. Since these additional expenses
were first incurred during the latter half of 1994, there were no similar
expenses during the first half of 1994 to compare with during the first
half of 1995. In addition, the first half of 1995 includes the expenses
of Vesture Corporation, which the Company acquired in July 1994; there
were none of Vesture's expenses recognized during the first half of 1994
prior to its acquisition.
The Company has negotiated a new agreement to receive royalties on a
tradename formerly used by the Company during the 1970's and 1980's.
This royalty agreement commences during the second quarter of 1995 and
continues for five years with certain renew rights granted to the
licensee. The Company does not expect the royalty agreement, which
contains annual minimum payments beginning at $150 thousand per year, to
have a material impact on its results of operations.
Interest on the additional long-term debt that the Company borrowed in
July 1994, is the primary reason for the increase in net interest expense
during the first half of 1995. In addition, interest rates incurred on
short-term borrowings during 1995 have averaged about 1.5 percent higher
in 1995 than in 1994.
For the second quarter of 1995, the Company incurred a net loss of $2.5
million after taxes, or $0.45 per share, compared with a net loss in the
same quarter of last year of $2.0 million, or $0.40 per share. For the
first six months of 1995, the Company incurred a net loss of $4.5
million, or $0.81 per share, compared with a net loss of $3.0 million, or
$0.58 per share for the first six months of 1994.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The Company previously reported that the Company and
certain of its officers and directors were named as a
defendants in three related putative class action lawsuits
styled as Gerber, et al. v. R. G. Barry Corporation, et
al., Case No. C2-94-1190 (filed December 8, 1994),
Culveyhouse v. R. G. Barry Corporation, et al., Case No.
C2-94-1250 (filed December 27, 1994), and Knopf, et al. v.
R. G. Barry Corporation, et al., Case No. C2-95-50 (filed
January 17, 1995), in the United States District Court for
the Southern District of Ohio. On April 24, 1995, the
United States District Court for the Southern District of
Ohio consolidated these three class actions into a single
case. The Plaintiffs filed an Amended and Consolidated
Class Action Complaint in May, 1995. The Amended and
Consolidated Complaint, which is generally identical in
substance to the three original complaints, alleges that
the defendants violated federal securities laws by making
false and misleading statements, engaged in common law
fraud and deceit by making material misstatements and
violated state law by making negligent misrepresentations.
Plaintiffs seek damages in an unspecified amount. On July
11, 1995, the Company and the other defendants filed a
Motion to Dismiss the Amended and Consolidated Complaint.
The Court has not ruled on the Motion.
Item 2. Changes in Securities.
(a), (b) Not Applicable.
Item 3. Defaults Upon Senior Securities.
(a), (b) Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders of the Company (the
"Annual Meeting") was held on May 10, 1995. At the close
of business on the record date [March 15, 1995] 5,544,847
common shares were outstanding and entitled to vote at the
Annual Meeting. At the Annual Meeting 5,041,199 or 90.9%
of the outstanding common shares entitled to vote were
represented in person or by proxy.
(b) Directors elected at the Annual Meeting:
Philip G. Barach
For: 5,007,467
Withheld: 33,732 Broker non-vote: -0-
Richard L. Burrell
For: 5,004,074
Withheld: 37,125 Broker non-vote: -0-
Edward M. Stan
For: 5,003,427
Withheld: 37,772 Broker non-vote: -0-
PART II OTHER INFORMATION, continued
Item 4. (b) continued.
Directors whose term of office continued after the
Annual Meeting:
Leopold Abraham II Gordon Zacks
Harvey M. Krueger Christian Galvis
William Giovanello Charles E. Ostrander
(c) See Item 4(b) for the voting results for directors.
Proposal to increase the authorized number of common
shares of the Company from 7,500,000 to 15,000,000
common shares:
For: 4,850,006 Abstain: 52,793
Against: 138,400 Broker non-vote: -0-
Ratify the selection of KPMG Peat Marwick as
independent accountants for the Company for 1995:
For: 5,009,497 Abstain: 16,790
Against: 14,912 Broker non-vote: -0-
(d) Not Applicable.
Item 5. Other Information. - No response required.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: See Index to Exhibits at page 12.
(b) Reports on Form 8-K: No reports on Form 8-K
were filed during the quarter ended June 24, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
R. G. BARRY CORPORATION
Registrant
August 2, 1995 /s/ Richard L. Burrell
Date Richard L. Burrell
Senior Vice President-Finance
(Principal Financial Officer)
(Duly Authorized Officer)
R. G. BARRY CORPORATION
INDEX TO EXHIBITS
Exhibit Page
Number Description Number
4 (a) Ninth Amendment to Revolving 13
Credit Agreement, dated as of
June 12, 1995, by and among
Registrant, The Bank of New York,
and The Huntington National Bank
27 Financial Data Schedule 16