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 September 23, 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 September 23, 1995 - 7,392,871
Index to Exhibits at page 11
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Sept 23, 1995 Dec 31, 1994
ASSETS:
Cash. . . . . . . . . . . . $ 759,000 2,360,000
Accounts receivable, less allowances . 35,681,000 23,412,000
Inventory (note 2) . . . . . . . 46,361,000 26,062,000
Deferred federal income taxes (note 3) 2,635,000 2,635,000
Prepaid expenses and other assets . . 1,685,000 1,930,000
Total current assets . . . . 87,121,000 56,399,000
Property, plant and equipment, at cost 37,581,000 35,663,000
Less accumulated depreciation
and amortization. . . . . . . 22,650,000 21,878,000
Net property, plant and equipment 14,931,000 13,785,000
Goodwill, net of amortization . . . 4,490,000 4,578,000
Other assets . . . . . . . . . 2,472,000 2,199,000
$109,014,000 76,961,000
LIABILITIES & SHAREHOLDERS' EQUITY:
Current installments of long-term debt
and capital lease obligations. . . 885,000 677,000
Short-term notes payable . . . . . 38,000,000 2,000,000
Accounts payable. . . . . . . . 8,375,000 8,174,000
Accrued expenses. . . . . . . . 2,846,000 6,481,000
Total current liabilities. . . 50,106,000 17,332,000
Accrued supplemental retirement plan . 2,336,000 2,130,000
Long-term debt and capital lease
obligations, excluding current
installments:
Note payable . . . . . . . . 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 . . . . . 68,112,000 35,907,000
Shareholders' equity:
Preferred shares, $1 par value.
Authorized 4,000,000 Class A,
1,000,000 Series I Junior
Participating Class B shares,
none issued . . . . . . . - -
Common shares, $1 par value.
Authorized 15,000,000 shares
(excluding treasury shares). . . 7,393,000 5,543,000
Additional capital in excess of
par value. . . . . . . . . 14,786,000 16,770,000
Retained earnings. . . . . . . 18,723,000 18,741,000
Net shareholders' equity . . . 40,902,000 41,054,000
$109,014,000 76,961,000
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended Thirty-Eight Weeks Ended
Sept 23, Sept 24, Sept 23, Sept 24,
1995 1994 1995 1994
Net sales . . . . $44,442,000 37,115,000 70,227,000 59,977,000
Cost of sales. . . 24,773,000 22,709,000 37,118,000 35,296,000
Gross profit . . 19,669,000 14,406,000 33,109,000 24,681,000
Selling, general &
admin. expense. . 11,450,000 9,771,000 31,144,000 24,578,000
Operating
income. . . . 8,219,000 4,635,000 1,965,000 103,000
Royalty income . . 44,000 100,000 88,000 300,000
Interest expense. . ( 959,000) ( 654,000) ( 2,115,000) ( 1,101,000)
Interest income . . 16,000 56,000 32,000 113,000
Net interest
expense . . . ( 943,000) ( 598,000) ( 2,083,000) ( 988,000)
Earnings (loss) before
tax (benefit) . . 7,320,000 4,137,000 ( 30,000) ( 585,000)
Income tax (benefit)
(note 3). . . . 2,855,000 1,551,000 ( 12,000) ( 219,000)
Net earnings (loss) $4,465,000 2,586,000 ( 18,000) ( 366,000)
Net earnings (loss)
per common
share (note 4). . $ 0.61 0.36 0.00 (0.05)
Average number of
shares outstanding 7,387,000 7,257,000 7,381,000 6,950,000
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-Eight Weeks Ended
Sept 23, 1995 Sept 24, 1994
Cash flows from operating activities:
Net loss . . . . . . . . . . $( 18,000) ( 366,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of
property, plant and equipment. . 1,162,000 950,000
Amortization of goodwill . . . . 88,000 19,000
Amortization of deferred compensation - 125,000
Net (increase) decrease in:
Accounts receivable, net . . . (12,269,000) (13,982,000)
Inventory . . . . . . . . (20,299,000) (15,892,000)
Prepaid expenses and other
current assets . . . . . . 245,000 ( 921,000)
Deferred federal income taxes. . - -
Recoverable income taxes . . . - ( 219,000)
Other assets . . . . . . . ( 273,000) ( 347,000)
Net increase (decrease) in:
Accounts payable . . . . . . 201,000 3,467,000
Accrued expenses . . . . . . ( 3,635,000) ( 2,843,000)
Accrued supplemental retirement
and other liabilities. . . . 206,000 272,000
Net cash used in operating
activities. . . . . . . (34,592,000) (29,737,000)
Cash flows from investing activities:
Additions of property, plant
and equipment, net . . . . . . ( 2,308,000) ( 1,428,000)
Cash flows from financing activities:
Proceeds from short-term notes. . . 36,000,000 25,000,000
Acquisition of treasury shares ( 240,000) ( 517,000)
Stock options exercised . . . . . 106,000 527,000
Proceeds from issuance of long-term debt - 15,000,000
Repayment of long-term debt
and capital lease obligations . . ( 567,000) ( 8,891,000)
Net cash provided by
financing activities . . . 35,299,000 31,119,000
Net (decrease) in cash . . . . . . ( 1,601,000) ( 46,000)
Cash at beginning of the period . . . 2,360,000 1,483,000
Cash at end of the period . . . . . $ 759,000 1,437,000
Supplemental cash flow disclosures:
Interest paid . . . . . . . . $ 2,300,000 1,020,000
Taxes paid, net. . . . . . . . $ 2,634,000 1,703,000
Supplemental Non-cash Investing and Financing Activities:
In July, 1994, the Company purchased all the capital stock of Vesture
Corporation for $5,000,000, by the issuance of Company treasury shares. In
conjunction with the acquisition, the Company acquired $1,032,000 fair value
of assets, and assumed $657,000 of liabilities of Vesture.
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
Under Item 1 of Part I of Form 10-Q
for the Periods Ended
Sept 23, 1995 and Sept 24, 1994
1. These interim financial statements are unaudited. All adjustments
(consisting solely of normal recurring adjustments) have been made, which
in the opinion of management, are necessary to fairly present the results
of operations for the periods.
2. A substantial portion of inventory is valued using the dollar value LIFO
method and, therefore, it is impractical to separate inventory values
between raw materials, work-in-process and finished goods.
3. Income tax (benefit) for the periods ended Sept 23, 1995 and Sept 24,
1994, consists of:
1995 1994
Current:
U. S. Federal (benefit) . . ($ 9,000) ($ 188,000)
State & Local . . . . . ( 3,000) ( 31,000)
Total. . . . . . . ($ 12,000) ($ 219,000)
The income tax (benefit) reflects a combined federal, foreign, state
and local effective rate of 40.0% for the first nine months of 1995 and
37.4% 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 Sept 23, 1995 and Sept 24, 1994
differed from the amounts computed by applying the U. S. federal income
tax rate of 34.0% to pretax income (loss) as a result of the following:
1995 1994
Computed "expected" tax expense
(benefit):
U. S. Federal (benefit) . . ($ 10,000) ($ 199,000)
State & Local (benefit) net of
Federal income tax benefit. ( 2,000) ( 20,000)
Total. . . . . . . ($ 12,000) ($ 219,000)
4. Net earnings (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 have been retroactively restated to
give effect to the four-for-three share split, distributed on September
15, 1995, to shareholders of record on September 1, 1995.
Per share earnings for each of the first three quarters of 1994, do
not total the per share earnings for the first nine months of 1994, as a
result of the impact of rounding following the Company's issuance of
common shares in conjunction with the acquisition of Vesture Corporation
during the third quarter of 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. Plaintiffs
seek damages in an unspecified amount. 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.
6. As previously noted, in July, 1994, the Company acquired all of the
outstanding stock of Vesture Corporation, formerly of Randleman, North
Carolina. Vesture Corporation manufactures and markets microwave heated
comfort products, similar to products the Company also manufactures and
markets.
The purchase price was paid by the issuance of approximately 320
thousand treasury shares of the Company [427 thousand shares after
retroactive restatement for the four-for-three stock split distributed on
September 15, 1995], valued at $5 million. The Company accounted for the
acquisition as a purchase. As a result of the purchase, the Company
recognized $4.6 million in goodwill which is being amortized over a forty
year period.
R. G. BARRY CORPORATION AND SUBSIDIARIES
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Company ended the third quarter of 1995 with $37.0 million in net
working capital. This compares with $34.2 million at the end of the same
quarter in 1994, and $39.1 million as of the end of fiscal 1994. The change in
net working capital is almost entirely due to profits earned by the Company
during the 1994, and to capital expenditures during 1995.
The Company's capital expenditures in 1995, relate primarily to the
acquisition of machinery and equipment, and were funded out of working
capital. The Company does not currently have commitments for future additional
capital expenditures at amounts materially different from those normally in
place.
Some of the changes in the components of the Company's net working
capital are: i) Accounts receivable increased at the end of the third quarter
of 1995, to $35.7 million from $31.2 million at the end of the third quarter
of 1994, and $23.4 at the end of fiscal 1994. The increase in receivables from
third quarter 1994 to 1995, is mainly related to the increase in sales from
$37.1 million in third quarter 1994 to $44.4 million in the third quarter of
1995. The increase from the end of fiscal 1994 mainly represents a normal
seasonal growth in receivables. ii) Inventories ended the third quarter of
1995 at $46.4 million compared with $34.4 million one year ago, and $26.1
million as of fiscal year end 1994. The increase in inventories from year end
follows a normal seasonal buildup in inventories, as the Company prepares to
satisfy the demand for its products anticipated for the fourth quarter of the
year. The increase in inventories from third quarter of 1994 to the third
quarter of 1995, is greater than one might expect, partially due to the
Company having ended the third quarter of 1994 with less inventory than it
anticipated as a result of having fallen behind in production during the third
quarter of 1994. In addition, in 1995, the Company had planned for a growth in
inventory to support its anticipated fourth quarter shipping requirements to
meet customer demands. iii) Mainly as a result of the increase in receivables
and inventory the Company ended the third quarter of 1995 with short-term
borrowings from banks under its Revolving Credit Agreement ("Revolver") of
$38.0 million. At the end of the third quarter of 1994, short-term borrowings
amounted to $25.0 million.
The Company continues to have in place the Revolver with its two main
lending banks, which provides the Company with 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 $45.0 million from mid- September through
November. The Revolver has been modified several times in the past few years
in order to meet the Company's needs. The Revolver currently extends through
December, 1995. The Company has begun negotiations with its banks for a
multiyear extension of the Revolver in order to permit the Company to meet its
anticipated seasonal funding needs for the next few years. The Company has
complied with all covenants of its long-term debt agreements.
Results of Operations
During the third quarter of 1995, net sales amounted to $44.4 million, a
19.7 percent increase over net sales in the third quarter of 1994. For the
first nine months of 1995, net sales amounted to $70.2 million compared with
$60.0 million for the first nine months of 1994, a 17.1 percent increase.
Increases in net sales, both for the third quarter and nine months, were
derived from both slippers and thermal products, and primarily represent
increases in volume and mix changes with only modest price increases.
Gross profit during the third quarter of 1995, was $19.7 million, up 36.5
percent from $14.4 million during the third quarter of 1994. For the first
nine months of 1995, gross profit amounted to $33.1 million, increasing 34.1
percent from the same nine months of 1994. The primary source of increased
gross profit dollars is the increase in sales.
Gross profit as a percentage of net sales also increased during the third
quarter, to 44.3 percent from 38.8 percent in 1994. For the entire first nine
months of 1995, gross profit percentage increased to 47.1 percent from 41.2
percent last year. As noted in last year's report, during 1994, the Company
incurred added costs following the installation of a fully integrated software
system in 1994, which created some manufacturing problems that caused some
increased costs of manufacturing. In 1995, there were no similar problems,
which was a large portion of the reason for improved gross profit percentages
in 1995.
Selling, general and administrative expenses during the quarter increased
by 17.2 percent to $11.5 million compared with $9.8 million in the third
quarter of 1994. For the nine months, these expenses increased by 26.7 percent
to $31.1 million compared with $24.6 million for the nine months of 1994. For
the third quarter, these increases are in line with the increases in net sales
realized by the Company. For the nine months, these increases are slightly
greater than the increase in net sales, principally in response to the
Company's need to support anticipated future sales growth.
During the third quarter of 1995, net interest expense increased by $345
thousand to $943 thousand, largely due to the Company's increased usage of its
short-term bank lines of credit when compared to usage in the third quarter of
1994. For the first nine months of 1995, net interest expense increased by
$1.1 million to $2.1 million, mainly as a result of the $15 million of
additional long-term debt that the Company borrowed in July, 1994, and the
increased usage of short-term bank lines of credit when compare to the prior
year. Interest rates on short-term bank borrowings have averaged about 1.5
percent more throughout 1995 than in 1994.
For the third quarter of 1995, the Company earned a net profit of $4.5
million after taxes, or $0.61 per share, compared with a net profit in the
same quarter of last year of $2.6 million, or $0.36 per share. For the first
nine months of 1994, the Company essentially broke even, with a nominal loss
of $18 thousand, or $0.00 per share, compared with a net loss of $366
thousand, or $0.05 per share for the first nine months of 1994. All per share
calculations have all been retroactively restated to give effect to the 4 for
3 share split paid to shareholders on September 15, 1995. Increases in net
sales and improvements in gross profit margins are largely the reasons for the
improvement in profitability from 1994 to 1995.
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 favor of
plaintiffs and all other members of the purported class in such
amounts as the court determines have been sustained by them. 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) -(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 11.
(b) Reports on Form 8-K: No reports on Form 8-K were filed
during the quarter ended September 23, 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
November 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) Tenth Amendment to Revolving 12
Credit Agreement, dated as of
September 21, 1995, by and among
Registrant, The Bank of New York,
and The Huntington National Bank
27 Financial Data Schedule 15