SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________to_______________
Commission file number 1-8769
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 March 30, 1996 - 7,411,883
Index to Exhibits at page 11
-1-
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 30, 1996 Dec. 30, 1995
ASSETS:
Cash and cash equivalents. . . . . $ 657,000 6,267,000
Accounts receivable, less allowances . 14,525,000 18,252,000
Inventory (note 3) . . . . . . . 39,839,000 31,708,000
Deferred federal income taxes . . . 4,406,000 4,406,000
Recoverable income taxes . . . . . 665,000 -
Prepaid expenses. . . . . . . . 2,101,000 2,088,000
--------- ---------
Total current assets . . . . 62,193,000 62,721,000
---------- ----------
Property, plant and equipment, at cost 36,622,000 36,964,000
Less accumulated depreciation
and amortization. . . . . . . 22,298,000 22,808,000
---------- ----------
Net property, plant and equipment 14,324,000 14,156,000
---------- ----------
Goodwill, less accumulated amortization 4,433,000 4,462,000
Other assets . . . . . . . . . 3,071,000 3,001,000
$ 84,021,000 84,340,000
============ ==========
LIABILITIES & SHAREHOLDERS' EQUITY:
Current installments of long-term debt
and capital lease obligations. . . 115,000 815,000
Short-term notes payable . . . . . 12,000,000 -
Accounts payable. . . . . . . . 5,502,000 8,961,000
Accrued expenses. . . . . . . . 1,736,000 9,017,000
--------- ---------
Total current liabilities. . . 19,353,000 18,793,000
---------- ----------
Accrued retirement costs and other. . 2,550,000 2,546,000
Long-term debt and capital lease
obligations, excluding current
installments:
Notes payable . . . . . . . . 15,000,000 15,000,000
Capital lease obligations . . . . 390,000 390,000
------- -------
Long-term debt and capital lease
obligations . . . . . . . 15,390,000 15,390,000
---------- ----------
Total liabilities . . . . . 37,293,000 36,729,000
---------- ----------
Shareholders' equity:
Preferred shares, $1 par value.
Authorized 4,000,000 Class A,
and 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). . . 7,412,000 7,410,000
Additional capital in excess of
par value. . . . . . . . . 15,169,000 15,161,000
Retained earnings. . . . . . . 24,147,000 25,040,000
---------- ----------
Net shareholders' equity . . . 46,728,000 47,611,000
---------- ----------
$ 84,021,000 84,340,000
============ ==========
-2-
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Twelve
Weeks Ended Weeks Ended
March 30, 1996 March 25, 1995
Net sales. . . . . . . . . $ 16,074,000 14,979,000
Cost of sales . . . . . . . 7,362,000 7,611,000
--------- ---------
Gross profit . . . . . . . 8,712,000 7,368,000
Selling, general &
administrative expenses . . . 9,955,000 10,164,000
--------- ----------
Operating loss . . . . . . ( 1,243,000) ( 2,796,000)
Other income. . . . . . . . 163,000 -
Interest expense . . . . . . ( 446,000) ( 487,000)
Interest income. . . . . . . 38,000 3,000
------ -----
Net interest expense . . . . ( 408,000) ( 484,000)
------- -------
Loss before income tax benefit. . ( 1,488,000) ( 3,280,000)
Income tax benefit (note 4). . . ( 595,000) ( 1,276,000)
------- - ---------
Net loss . . . . . . . . $ ( 893,000) ( 2,004,000)
======= =========
Net loss per common
share (note 5) . . . . . . $ (0.12) (0.27)
======= =====
Average number of common
shares outstanding . . . . . 7,411,000 7,383,000
========= =========
-3-
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirteen Twelve
Weeks Ended Weeks Ended
March 26, 1996 March 25, 1995
Cash flows from operating activities:
Net loss . . . . . . . . . . $ ( 893,000) ( 2,004,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of
property, plant, and equipment . 387,000 329,000
Amortization of goodwill . . . . 29,000 30,000
Net (increase) decrease in:
Accounts receivable, net . . . 3,727,000 6,791,000
Inventory . . . . . . . . ( 8,131,000) ( 5,697,000)
Prepaid expenses . . . . . . ( 13,000) 174,000
Refundable income taxes. . . . ( 665,000) ( 1,097,000)
Other assets . . . . . . . ( 70,000) 71,000
Net increase (decrease) in:
Accounts payable . . . . . . ( 3,459,000) ( 2,381,000)
Accrued expenses . . . . . . ( 7,281,000) ( 4,035,000)
Accrued retirement and other . . 4,000 32,000
----- ------
Net cash used in operating
activities. . . . . . . (16,365,000) ( 8,237,000)
----------- - ---------
Cash flows from investing activities:
Additions of property, plant
and equipment, net . . . . . . ( 555,000) ( 719,000)
------- -------
Cash flows from financing activities:
Proceeds from short-term
notes payable. . . . . . . . 12,000,000 9,000,000
Stock options exercised, (net of
treasury stock acquisitions). . . 10,000 ( 233,000)
Repayment of long-term debt
and capital lease obligations . . ( 700,000) ( 497,000)
------- -------
Net cash provided by
financing activities . . . 11,310,000 8,270,000
---------- ---------
Net decrease in cash. . . . . . . ( 5,610,000) ( 686,000)
Cash at beginning of the period . . . 6,267,000 2,360,000
--------- ---------
Cash at end of the period . . . . . $ 657,000 1,674,000
============= =========
Supplemental cash flow disclosures:
Interest paid . . . . . . . . $ 771,000 841,000
============= =======
Taxes paid . . . . . . . . . $ 5,415,000 2,509,000
============= =========
-4-
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
Under Item 1 of Part I of Form 10-Q
for the Periods Ended
March 30, 1996 and March 25, 1995
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. The Company operates on a fifty-two or fifty-three week annual fiscal
year. Prior to 1996, the fiscal quarters were comprised of a twelve week
first quarter, thirteen week second and third quarters, and a fourteen
week fourth quarter. When there was a fifty-three week fiscal year, the
Company added one week to the first fiscal quarter. Effective in 1996,
the Company has modified its fiscal quarters, so that all fiscal quarters
will routinely have thirteen weeks, except that in fifty-three week
fiscal years, the fourth quarter will have fourteen weeks. The objective
of this change is to even out the length of the fiscal quarters, and to
more closely follow the fiscal accounting periods of the Company's
principle retailing customers. Fiscal 1995 and 1996 are both fifty-two
week years.
3. 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.
4. Income tax expense benefit for the periods ended March 30, 1996 and March
25, 1995, consists of:
1996 1995
Current:
U. S. Federal (benefit) . . ($ 498,000) ($1,032,000)
State and Local. . . . . ( 97,000) ( 244,000)
------ -------
Total. . . . . . . ($ 595,000) ($1,276,000)
=========== ===========
The income tax benefit reflects a combined federal, foreign, state
and local effective rate of 40.0% for the first quarter of 1996 and 38.9%
for the same period of 1995, as compared to the statutory U. S. federal
rate of 34.0% in both years.
Income tax for the periods ended March 30, 1996 and March 25, 1995
differed from the amounts computed by applying the U. S. federal income
tax rate of 34.0% to pretax income as a result of the following:
1996 1995
Computed "expected" tax expense:
U. S. Federal (benefit) . . ($ 506,000) ($1,115,000)
Other . . . . . . . . ( 25,000) -
State and Local (benefit), net
of Federal income tax benefit ( 64,000) ( 161,000)
------ -------
Total. . . . . . . ($ 595,000) ($1,276,000)
=========== ===========
5. Net loss per common share has been computed based on the average number
of common shares outstanding during each period. Period ending and
average common shares outstanding have been retroactively restated to
give effect to all prior share splits and dividends.
-5-
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
Under Item 1 of Part I of Form 10-Q
for the Periods Ended
March 30, 1996 and March 25, 1995
(continued)
6. The Company previously reported that 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 allege that
the Company made several false and misleading statements in violation of
certain provisions of the federal securities laws. One complaint also
alleged claims arising under state law. The District Court subsequently
consolidated these three class actions into a single case. On March 11,
1996, the District Court granted the Company's motion to dismiss this
action and entered a judgement on that date dismissing with prejudice the
federal securities claims and dismissing without prejudice the state law
claims. On March 20, 1996, plaintiffs filed a motion asking that the
Court reconsider its decision. The request for reconsideration is
pending.
-6-
R. G. BARRY CORPORATION AND SUBSIDIARIES
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
As of the end of the first quarter of 1996, the Company had $42.8 million in
net working capital. This compares with $35.9 million at the end of the first
quarter of 1995, and $43.9 million at the end of the 1995 fiscal year. The
increase in working capital from the first quarter of 1995 to the first
quarter of 1996, is principally due to the profit that the Company earned
during fiscal 1995, and the reduced loss that the Company realized in the
first quarter of 1996 compared with the same quarter of 1995. The decline in
net working capital from fiscal year end 1995 to the end of the first quarter
of 1996, is mostly the result of the first quarter 1995 loss. Also
contributing to the decline in net working capital during the first quarter of
1996, is the scheduled repayment of long-term debt.
At the end of the first quarter of 1996, the Company had $0.7 million in cash,
$14.5 million in net receivables and $39.8 million in inventory. This compares
with $1.7 million in cash, $16.6 million in net receivables and $31.8 million
in inventory at the end of the first quarter of 1995. The reduction in
receivables largely reflects improved collection in accounts, and the impact
of a larger reserve for returns at the end of the first quarter of 1996
compared with 1995. Inventory increased from the first quarter of 1995 to the
first quarter of 1996, by $8.1 million. This increase in inventory largely
reflects additional amounts needed to support anticipated increases in net
sales later in 1996.
At fiscal year end 1995, the Company had $6.3 million in cash, $18.3 million
in net receivables and $31.7 million in inventory. From the end of the fiscal
year to the end of the first quarter 1996, net receivables have declined by
$3.7 million, as the Company collected substantial balances that were due it
at year end. The increase in inventory from year end represents a normal
seasonal growth in inventory, as the Company seasonally builds inventory in
anticipation of sales later in the year.
In late February 1996, the Company negotiated a new Revolving Credit Agreement
("Revolver"), with its three main lending banks, replacing the agreement that
had been in place for a number of years. The Revolver provides the Company a
seasonally adjusted available line of credit ranging from $6 million in
January, to a peak of $51 million from July through November. The Revolver
currently extends through 1998 and provides for periodic extensions upon
request and with the approval of the banks. The Revolver contains financial
covenants typical of agreements of its type and duration. The Company is in
compliance with all covenants of the Revolver, and all other debt agreements.
As of the end of the first quarter of 1996, the Company had borrowed $12.0
million under the Revolver, compared with $11.0 million as of the end of the
first quarter of 1995. There were no such borrowings outstanding as of the end
of fiscal 1995.
Results of Operations
During the first quarter of 1996, the Company had net sales of $16.1 million,
compared with $15.0 million of net sales during the first quarter of 1995, an
increase of 7.3%. There were no significant price increases during the period.
The growth in net sales occurred across the broad range of brands and products
that the Company sells, primarily in the thermal products area. In addition,
the first quarter of 1996 included thirteen weeks whereas 1995 included twelve
weeks.
-7-
Management's Discussion and Analysis of Financial Condition
and Results of Operation - continued
Gross profit dollars during the first quarter increased from $7.4 million in
1995 to $8.7 million in 1996. Gross profit as a percentage of net sales also
increased during the first quarter to 54.2 percent in 1996, from 49.2 percent
in 1995. The mix of products sold during the first quarter contributed to the
improvement in the gross profit percentage realized. In addition, the impact
of returned merchandise during the first quarter of 1996, has reduced the
amount of reported net sales. The lower amount of net sales has had the effect
of increasing the percent of gross profit, although returns have no impact on
gross profit dollars or net income for the quarter. The profit impact of
returns was estimated and accrued at year end 1995.
Selling, general and administrative expenses during the quarter decreased from
1995 to 1996, by about $200 thousand, despite the 7.3 percent increase in
sales. There was no single significant item of reduced expense, rather most
categories of expense remained relatively constant or incurred a modest
decline.
The agreement relating to the royalty income [other income] that the Company
earned in prior years terminated at the end of 1994 and was replaced with a
new agreement during the second quarter of 1995; thus there was no royalty
income during the first quarter of 1995. The new agreement requires
substantially lower minimum royalty payments than the previous agreement.
Other income in the first quarter of 1996, reflects minimum royalties plus
amounts realized in excess of the minimum requirement for the period.
Net interest expense in the first quarter of 1996, declined slightly from the
first quarter of 1995. Throughout the first quarter 1996, the Company had
fewer average borrowings under the Revolver than in 1995, and short term
interest rates for the quarter averaged about 1.2 percent less in 1996, than
in 1995.
For the quarter the Company incurred a net loss of $893 thousand after taxes,
or $0.12 per share, compared with a net loss in the first quarter of 1995 of
$2.0 million, or $0.27 per share.
-8-
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
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
Complaint, which is generally identical in substance to
the three original complaints, alleging 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 sought damages in favor of plaintiffs and all
other members of the purported class in such amounts as
the court determined had been sustained by them. On March
11, 1996, the District Court granted defendants' motion to
dismiss and entered judgment on that date dismissing with
prejudice the federal securities claims and dismissing
without prejudice the state law claims. On March 20, 1996,
the plaintiffs filed a motion with the Court asking that
the judge reconsider his decision. That motion is still
pending.
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 10.
(b) Reports on Form 8-K: No reports on Form 8-K were
filed during the quarter ended March 30, 1996.
-9-
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
April 30, 1996 /s/Richard L. Burrell
______________________________ Richard L. Burrell
Date Senior Vice President-Finance
(Principal Financial Officer)
(Duly Authorized Officer)
-10-
R. G. BARRY CORPORATION
INDEX TO EXHIBITS
Exhibit Page
Number Description Number
_______________________________________________________
27 Financial Data Schedule 12