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 29, 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 June 29, 1996 - 9,279,520
Index to Exhibits at page 13
-1-
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 29, 1996 Dec. 30, 1995
------------- -------------
ASSETS:
Cash and cash equivalents. . . . . $ 1,118,000 6,267,000
Accounts receivable, less allowances . 14,655,000 18,252,000
Inventory (note 3) . . . . . . . 50,271,000 31,708,000
Deferred federal income taxes . . . 4,406,000 4,406,000
Recoverable income taxes . . . . . 1,952,000 -
Prepaid expenses. . . . . . . . 1,598,000 2,088,000
------------ ------------
Total current assets . . . . 74,000,000 62,721,000
------------ ------------
Property, plant and equipment, at cost 37,082,000 36,964,000
Less accumulated depreciation
and amortization. . . . . . . 22,732,000 22,808,000
------------ ------------
Net property, plant and equipment 14,350,000 14,156,000
------------ ------------
Goodwill, less accumulated amortization 4,404,000 4,462,000
Other assets . . . . . . . . . 2,658,000 3,001,000
------------ ------------
$ 95,412,000 84,340,000
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY:
Current installments of long-term debt
and capital lease obligations. . . 115,000 815,000
Short-term notes payable . . . . . 21,000,000 -
Accounts payable. . . . . . . . 7,450,000 8,961,000
Accrued expenses. . . . . . . . 3,280,000 9,017,000
------------ ------------
Total current liabilities. . . 31,845,000 18,793,000
------------ ------------
Accrued retirement costs and other. . 2,621,000 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 . . . . . 49,856,000 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). . . 9,279,000 7,410,000
Additional capital in excess of
par value. . . . . . . . . 13,364,000 15,161,000
Retained earnings. . . . . . . 22,913,000 25,040,000
------------ ------------
Net shareholders' equity . . . 45,556,000 47,611,000
------------ ------------
$ 95,412,000 84,340,000
============ ============
-2-
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Twenty-Six Twenty-Five
Thirteen Weeks Ended Weeks Ended Weeks Ended
June 29, June 24, June 29, June 24,
1996 1995 1996 1995
----------- ---------- ---------- ----------
Net sales. . . . $19,961,000 10,806,000 36,035,000 25,785,000
Cost of sales . . 11,664,000 4,734,000 19,026,000 12,345,000
----------- ----------- ----------- -----------
Gross profit . . 8,297,000 6,072,000 17,009,000 13,440,000
Selling, general
and administrative
expense. . . . 9,810,000 9,530,000 19,765,000 19,694,000
----------- ----------- ----------- -----------
Operating loss . ( 1,513,000) ( 3,458,000) ( 2,756,000) ( 6,254,000)
Other income. . . 44,000 44,000 207,000 44,000
Interest expense . ( 612,000) ( 669,000) ( 1,058,000) ( 1,156,000)
Interest income. . 26,000 13,000 64,000 16,000
----------- ----------- ----------- -----------
Net interest
expense . . . ( 586,000) ( 656,000) ( 994,000) ( 1,140,000)
----------- ----------- ----------- -----------
Loss before income
tax benefit . . ( 2,055,000) ( 4,070,000) ( 3,543,000) ( 7,350,000)
Income tax benefit
(note 4) . . . ( 821,000) ( 1,591,000) ( 1,416,000) ( 2,867,000)
----------- ----------- ----------- -----------
Net loss . . . $( 1,234,000) ( 2,479,000) ( 2,127,000) ( 4,483,000)
============ =========== =========== ===========
Net loss per common
share (note 5) . $ (0.14) (0.27) (0.23) (0.49)
====== ====== ====== ======
Average number of
shares outstanding 9,274,000 9,216,000 9,268,000 9,222,000
============ =========== =========== ===========
-3-
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twenty-Six Twenty-Five
Weeks Ended Weeks Ended
June 29, 1996 June 24, 1995
------------- -------------
Cash flows from operating activities:
Net loss . . . . . . . . . . $( 2,127,000) ( 4,483,000)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization of
property, plant, and equipment. . 821,000 707,000
Amortization of goodwill . . . . 58,000 59,000
Net (increase) decrease in:
Accounts receivable, net. . . . 3,597,000 14,234,000
Inventory. . . . . . . . . (18,563,000) (18,607,000)
Prepaid expenses . . . . . . 490,000 101,000
Refundable income taxes . . . . ( 1,952,000) ( 2,532,000)
Other assets. . . . . . . . 343,000 1,000
Net increase (decrease) in:
Accounts payable . . . . . . ( 1,511,000) ( 1,780,000)
Accrued expenses . . . . . . ( 5,737,000) ( 4,228,000)
Accrued supplemental retirement
and other liabilities . . . . 75,000 128,000
------------ ------------
Net cash used in operating
activities . . . . . . . (24,506,000) (16,400,000)
------------ ------------
Cash flows from investing activities:
Additions of property, plant
and equipment, net . . . . . . ( 1,015,000) ( 1,253,000)
------------ ------------
Cash flows from financing activities:
Proceeds from short-term notes . . . 21,000,000 17,000,000
Acquisition of treasury shares - ( 240,000)
Proceeds from stock options exercised 72,000 47,000
Repayment of long-term debt
and capital lease obligations. . . ( 700,000) ( 567,000)
------------ ------------
Net cash provided by
financing activities. . . . 20,372,000 16,240,000
------------ ------------
Net increase (decrease) in cash . . . ( 5,149,000) ( 1,413,000)
Cash at beginning of the period . . . 6,267,000 2,360,000
------------ ------------
Cash at end of the period . . . . . $ 1,118,000 947,000
============ ============
Supplemental cash flow disclosures:
Interest paid. . . . . . . . . $ 966,000 1,138,000
============ ============
Taxes paid. . . . . . . . . . $ 5,618,000 2,633,000
============ ============
-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
June 29, 1996 and June 24, 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 benefit for the periods ended June 29, 1996 and June 24, 1995,
consists of:
1996 1995
Current:
U. S. Federal benefit. . . ($1,172,000) ($2,310,000)
State and Local. . . . . ( 244,000) ( 557,000)
---------- ----------
Total. . . . . . . ($1,416,000) ($2,867,000)
========== ==========
The income tax benefit reflects a combined federal, foreign, state
and local effective rate of 40.0% for the first half of 1996 and 39.0%
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 June 29, 1996 and June 24, 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. . . ($1,205,000) ($2,499,000)
Other . . . . . . . . ( 50,000) -
State and Local benefit, net
of Federal income tax benefit ( 161,000) ( 368,000)
---------- ----------
Total. . . . . . . ($1,416,000) ($2,867,000)
========== ==========
5. Net loss per common share has been computed based on the average number
of common shares outstanding during each period. Average common shares
outstanding for prior periods 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
June 29, 1996 and June 24, 1995
(continued)
5. (continued)
On June 17, 1996, the Company distributed a five for four share
split to shareholders of record on June 3, 1996. Previously the Company
had distributed a four for three share split on June 22, 1995 to
shareholders of record on June 1, 1995.
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 alleged 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 judge
subsequently consolidated these three class actions into a single case.
In March 1996, the judge granted the Company's motion to dismiss the
action and entered a judgement dismissing with prejudice the federal
securities claims and dismissing without prejudice the state law claims.
In March 1996, plaintiffs filed a motion asking that the District Court
reconsider the decision. In May 1996, the action was again dismissed.
Plaintiffs have filed no further appeal.
-6-
R. G. BARRY CORPORATION AND SUBSIDIARIES
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: The statements in this Quarterly Report on Form
10-Q which are not historical fact are forward looking statements
that involve risks and uncertainties, including, but not limited to,
product demand and market acceptance risks, the effect of economic
conditions, the impact of competitive products and pricing, capacity
and supply constraints or difficulties, weather conditions, and
other risks detailed in the Company's Securities and Exchange
Commission filings.
Liquidity and Capital Resources
At the end of the second quarter of 1996, the Company had $42.2 million
in net working capital. At the end of the second quarter of 1995, the Company
had $33.3 million in net working capital, and at the end of the 1995 fiscal
year, $43.9 million. The increase in working capital from the second quarter
of 1995 to the second quarter of 1996, is largely due to the profits earned by
the Company over the most recent four quarters. The decline in net working
capital from year end 1995 to the end of the second quarter of 1996, is mainly
due to the first half 1996 seasonal loss.
At the end of the second quarter of 1996, the Company had $1.1 million in
cash, $14.7 million in net accounts receivable and $50.3 million in inventory.
This compares with $0.9 million in cash, $9.2 million in net accounts
receivable and $44.7 million in inventory at the end of the same quarter of
1995. The principle changes in working capital are to receivables and
inventory. Net account receivables have grown from levels held one year ago,
largely due to the increase in net sales in 1996 when compared with 1995.
Inventories have grown largely to support the Company's growth in net sales
that is anticipated for the balance of the 1996 fiscal year.
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 second quarter 1996, net receivables have
declined by $3.5 million, as the Company collected account balances that were
due as of year end. The $18.5 million increase in inventory from year end to
June 1996, represents a normal seasonal growth in inventory, as the Company
seasonally builds inventory in anticipation of increased net 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 second quarter of 1996, the Company had borrowed
$21.0 million under the Revolver, compared with $19.0 million as of the end of
the same quarter of 1995. There were no such borrowings outstanding as of the
end of fiscal 1995.
-7-
Management's Discussion and Analysis of Financial Condition
and Results of Operation - continued
Results of Operations
During the second quarter of 1996, the Company had net sales just under
$20.0 million, compared with $10.8 million during the same quarter of 1995, an
increase of 84.7%. For the first half of 1996, net sales amounted to $36.0
million, an increase of 39.8% over net sales of $25.8 during the first half of
1995. The growth in net sales occurred across a broad range of Company's
comfort footwear and thermal comfort products, with a substantial portion of
the increase in net sales during the periods coming from the Company's thermal
comfort products. There were no significant price increases during the
periods. In addition, the first half of 1996 included twenty-six weeks
compared with only twenty-five weeks in 1995. The effect of this additional
week added about $3 million to net sales during the second quarter, that would
have otherwise occurred in the second half of the year.
The Company's business is very seasonal, with about three-fourths of its
annual net sales volume normally occurring in the last half of the year. While
the Company realized a nearly 40 percent growth in net sales during the first
half of 1996, the Company does not anticipate that same rate of net sales
growth to continue over the remainder of 1996 for several reasons, including:
a) during the second half of 1995 the Company commenced shipments of Pyrex
Portables with MICROCORE. Some of 1995 sales were needed to fill the supply
pipeline. With the pipeline now filled, the Company experienced replenishments
in the first half of 1996, to support the Mothers' Day seasonal market, where
there were no similar sales in 1995. For the second half of the year, the
Company expects to realize additional replenishments, but the replenishments
will be compared with the initial sales activity in the second half of 1995,
and b) the second half of 1996 will have only twenty-six weeks, while there
were twenty-seven weeks in the second half of 1995.
Gross profit in the second quarter of 1996, increased to $8.3 million,
from $6.1 million in 1995. Gross profit as a percent of net sales decreased
during the quarter, to 41.6 percent from 56.2 percent in 1995. For the first
half of 1996, gross profit increased to $17.0 million from $13.4 million last
year. Gross profit as a percent of net sales for the first half, decreased to
47.2 percent from 52.1 percent last year. The change in mix of products sold
was a portion of the reduction in gross profit percentages realized. In
addition, the Company accrued added reserves relating to the net realizable
value of certain of its thermal comfort products inventory, which contributed
about one percent to the decline in gross profit during the second quarter.
Selling, general and administrative expenses during the second quarter
and the first half are slightly higher than the amounts incurred in 1995, this
despite sizable increases in net sales during the periods. For the second
quarter, these expenses increased to $9.8 million in 1996 from $9.5 million in
1995. For the first half, these expenses increased to $19.8 million in 1996
from $19.7 million in 1995. Most elements of expense, generally, did not
change significantly from year to year.
The agreement relating to the royalty income [other income] requires
certain periodic minimum payments, plus amounts that may become due in excess
of minimum. During the first half of 1995, the Company realized the minimum
royalties. During the first half of 1996, however, the Company realized the
minimum royalties plus an amount in excess of minimum.
-8-
Management's Discussion and Analysis of Financial Condition
and Results of Operation - continued
Net interest expense in the first half of 1996, declined by about $146
thousand from the first half of 1995. Throughout most of the first half of
1996, the Company had lower average borrowings outstanding under the Revolver
than in 1995, and short term interest rates for the first half of 1996, have
generally averaged about 1 percent less than in 1995.
For the second quarter of 1996, the Company incurred a net loss of $1.2
million after taxes, or $0.14 per share, compared with a net loss in the same
quarter of last year of $2.5 million, or $0.27 per share. For the first half
of 1996, the Company incurred a net loss of $2.1 million, or $0.23 per share,
compared with a net loss of $4.5 million, or $0.49 per share for the first
half of 1995. Per share amounts have been retroactively restated for
previously issued share splits.
-9-
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 was 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 judge granted defendants' motion to dismiss and entered a 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 asking that the District Court reconsider the
decision. On May 7, 1996, the District Court denied the plaintiffs'
motion to reconsider. Plaintiffs have filed no further appeal.
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 16, 1996. At the close of business on the
record date [March 18, 1996] 7,411,883 common shares were outstanding and
entitled to vote at the Annual Meeting. At the Annual Meeting 6,207,804
or 83.8% of the outstanding common shares entitled to vote were
represented in person or by proxy.
(b) Directors elected at the Annual Meeting:
Gordon Zacks
For: 6,162,158
Withheld: 45,646 Broker non-vote: -0-
Christian Galvis
For: 6,163,582
Withheld: 44,222 Broker non-vote: -0-
-10-
PART II OTHER INFORMATION, continued
Item 4. (b) continued.
Charles E. Ostrander
For: 6,161,806
Withheld: 45,998 Broker non-vote: -0-
Directors whose term of office continued after the Annual
Meeting:
Leopold Abraham II Philip G. Barach
Harvey M. Krueger Richard L. Burrell
William Giovanello Edward M. Stan
(c) See Item 4(b) for the voting results for directors.
Proposal to approve the R. G. Barry Corporation Stock
Option Plan for Non-Employee Directors:
For: 5,880,901 Abstain: 88,896
Against: 238,007 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 29, 1996.
-11-
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 9, 1996 /s/ Richard L. Burrell
-------------- __________________________________
Date Richard L. Burrell
Senior Vice President-Finance
(Principal Financial Officer)
(Duly Authorized Officer)
-12-
R. G. BARRY CORPORATION
INDEX TO EXHIBITS
Exhibit Page
Number Description Number
- ----------- ----------- --------
27 Financial Data Schedule 14