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 25, 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 March 25, 1995 - 5,524,547
Index to Exhibits at page 10
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 25, 1995 Dec. 31, 1994
ASSETS:
Cash. . . . . . . . . . . . $ 1,674,000 2,360,000
Accounts receivable, less allowances . 16,621,000 23,412,000
Inventory (note 2) . . . . . . . 31,759,000 26,062,000
Deferred federal income taxes (note 3) 2,635,000 2,635,000
Recoverable income taxes . . . . . 1,097,000 -
Prepaid expenses. . . . . . . . 1,756,000 1,930,000
Total current assets . . . . 55,542,000 56,399,000
Property, plant and equipment, at cost 35,992,000 35,663,000
Less accumulated depreciation
and amortization. . . . . . . 21,817,000 21,878,000
Net property, plant and equipment 14,175,000 13,785,000
Goodwill, less accumulated amortization 4,548,000 4,578,000
Other assets . . . . . . . . . 2,128,000 2,199,000
$ 76,393,000 76,961,000
LIABILITIES & SHAREHOLDERS' EQUITY:
Current installments of long-term debt
and capital lease obligations. . . 880,000 677,000
Short-term notes payable . . . . . 11,000,000 2,000,000
Accounts payable. . . . . . . . 5,343,000 8,174,000
Accrued expenses. . . . . . . . 2,446,000 6,481,000
Total current liabilities. . . 19,669,000 17,332,000
Accrued supplemental retirement plan . 2,162,000 2,130,000
Long-term debt and capital lease obligations,
excluding current installments:
Notes payable . . . . . . . . 15,000,000 15,000,000
Subordinated sinking fund debentures - 700,000
Capital lease obligations . . . . 745,000 745,000
Long-term debt and capital lease
obligations . . . . . . . 15,745,000 16,445,000
Total liabilities . . . . . 37,576,000 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). . . 5,524,000 5,543,000
Additional capital in excess of
par value. . . . . . . . . 16,556,000 16,770,000
Retained earnings. . . . . . . 16,737,000 18,741,000
Net shareholders' equity . . . 38,817,000 41,054,000
$ 76,393,000 76,961,000
<PAGE>
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve Twelve
Weeks Ended Weeks Ended
March 25, 1995 March 26, 1994
Net sales. . . . . . . . . $ 14,979,000 13,456,000
Cost of sales . . . . . . . 7,611,000 7,638,000
Gross profit . . . . . . . 7,368,000 5,818,000
Selling, general &
administrative expenses . . . 10,164,000 7,297,000
Operating loss . . . . . . ( 2,796,000) ( 1,479,000)
Royalty income . . . . . . . - 100,000
Interest expense . . . . . . ( 487,000) ( 157,000)
Interest income. . . . . . . 3,000 30,000
Net interest expense . . . . ( 484,000) ( 127,000)
Loss before income tax benefit. . ( 3,280,000) ( 1,506,000)
Income tax benefit (note 3). . . ( 1,276,000) ( 564,000)
Net loss . . . . . . . . $ ( 2,004,000) ( 942,000)
Net loss per common
share (note 4) . . . . . . $ (0.36) (0.18)
Average number of common
shares outstanding . . . . . 5,537,000 5,097,000
<PAGE>
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Twelve
Weeks Ended Weeks Ended
March 25, 1995 March 26, 1994
Cash flows from operating activities:
Net loss . . . . . . . . . . $ ( 2,004,000) ( 942,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of
property, plant, and equipment . 329,000 316,000
Amortization of goodwill . . . . 30,000 -
Amortization of deferred compensation - 42,000
Net (increase) decrease in:
Accounts receivable, net . . . 6,791,000 2,522,000
Inventory . . . . . . . . ( 5,697,000) ( 2,197,000)
Prepaid expenses . . . . . . 174,000 ( 224,000)
Refundable income taxes. . . . ( 1,097,000) ( 564,000)
Other assets . . . . . . . 71,000 ( 42,000)
Net increase (decrease) in:
Accounts payable . . . . . . ( 2,831,000) ( 64,000)
Accrued expenses . . . . . . ( 4,035,000) ( 3,678,000)
Accrued supplemental retirement . 32,000 82,000
Net cash used in operating
activities. . . . . . . ( 8,237,000) ( 4,749,000)
Cash flows from investing activities:
Additions of property, plant
and equipment, net . . . . . . ( 719,000) ( 647,000)
Cash flows from financing activities:
Proceeds from short-term
notes payable. . . . . . . . 9,000,000 6,000,000
Acquisition of treasury shares,
net of stock options exercised . . ( 233,000) ( 398,000)
Repayment of long-term debt
and capital lease obligations . . ( 497,000) ( 493,000)
Net cash provided by
financing activities . . . 8,270,000 5,109,000
Net decrease in cash. . . . . . . ( 686,000) ( 287,000)
Cash at beginning of the period . . . 2,360,000 1,483,000
Cash at end of the period . . . . . $ 1,674,000 1,196,000
Supplemental cash flow disclosures:
Interest paid . . . . . . . . $ 841,000 484,000
Taxes paid . . . . . . . . . $ 2,509,000 1,725,000
<PAGE>
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 25, 1995 and March 26, 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 March 25, 1995
and March 26, 1994, consists of:
1995 1994
Current:
U. S. Federal (benefit) . . ($1,032,000) ($ 485,000)
State and Local. . . . . ( 244,000) ( 79,000)
Total. . . . . . . ($1,276,000) ($ 564,000)
The income tax benefit reflects a combined federal, foreign, state
and local effective rate of 38.9% for the first quarter 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 March 25, 1995 and March 26, 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) . . ($1,115,000) ($ 512,000)
State and Local (benefit) net
of Federal income tax benefit ( 161,000) ( 52,000)
Total. . . . . . . ($1,276,000) ($ 564,000)
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 have been retroactively
restated to give effect to all prior share splits and dividends.
5. In 1994, the Company and several of its officers and directors were
names a defendants in three purported class actions presently
pending 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 alleges claims arising under
state law. The Company believes that these actions are without
merit and that it has meritorious defenses. The Company intends to
defend itself vigorously against these actions. 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.
<PAGE>
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 1995, the Company had $35.9 million
in net working capital. This compares with $25.8 million at the end of
the first quarter of 1994, and $39.1 million at the end of the 1994
fiscal year. The increase in working capital from the first quarter of
1994 to the first quarter of 1995, is principally due to the additional
long-term debt that the Company borrowed in July 1994. The decline in
net working capital from fiscal year end 1994 to the end of the first
quarter of 1995, is mostly due to the first quarter incurred loss. Also
contributing to the decline in net working capital during the first
quarter of 1995, are capital expenditures, the scheduled repayment of
long-term debt and the acquisition of treasury shares.
At the end of the first quarter of 1995, the Company had $1.7 million in
cash, $16.6 million in net accounts receivable and $31.8 million in
inventory. This compares with $1.2 million in cash, $14.5 million in
net accounts receivable and $19.9 million in inventory at the end of the
first quarter of 1994. The increase in accounts receivable largely
reflects the increase in net sales from 1994 to 1995. At year end 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 the excess inventory throughout 1995. Inventory increased from the
first quarter of 1994 to the first quarter of 1995, by $11.8 million.
This increase in inventory reflects: a) the excess inventory that the
Company had at year end 1994, that has not yet been systematically
reduced, b) added inventory needed to support anticipated increases in
net sales later in 1995, and c) in July 1994, the Company acquired
Vesture Corporation; at the end of the first quarter of 1995, inventory
includes the inventory of Vesture, whereas there was no comparable
inventory at the end of the first quarter of 1994, prior to the
acquisition of Vesture.
At fiscal year end 1994, the Company had $2.4 million in cash, $23.4
million in net accounts receivable and $26.1 million in inventory. From
the end of the past fiscal year to the end of the first quarter 1995, net
accounts receivable have declined by $6.8 million, as the Company
collected most of the 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.
The Company has in place a Revolving Credit Agreement ("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 $38.0 million
from July through November. The Revolver currently extends through June
1995. The Company has had preliminary discussions with its banks, and
based upon those discussions, the Company expects to renew and extend the
term of the Revolver in order to meet the Company's anticipated funding
needs for a longer period. 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 1995, the Company had borrowed
$11.0 million under the Revolver, all of which was classified as short-
term debt in the accompanying consolidated financial statements. As of
the end of the first quarter of 1994, the Company had borrowed $11.5
million, including $6.0 million which was classified as short-term debt
and $5.5 million classified as long-term debt.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operation - continued
In July, 1994, the Company issued a $15 million, 9.7% Note due in 2004.
A portion of the proceeds were used to prepay the outstanding balance of
10 3/8% Notes due in 1997, and to repay long-term borrowings under the
Revolver. The balance of the proceeds, about $7.4 million, was added to
net working capital.
Results of Operations
During the first quarter of 1995, the Company had net sales of $15.0
million, compared with $13.5 million net sales during the first quarter
of 1994, an 11.3% increase. There were no significant price increases
during the period. Substantially all the growth in net sales during the
quarter is from the Company's comfort footwear.
Gross profit dollars during the first quarter increased from $5.8 million
in 1994 to $7.4 million in 1995. Gross profit as a percentage of net
sales also increased during the first quarter of 1995, to 49.2 percent
from 43.2 percent in 1994. Improved manufacturing efficiencies from the
first quarter of 1994 to the first quarter of 1995, coupled with the
devaluation of the Mexican peso, have helped reduce costs and increase
gross profit.
Selling, general and administrative expenses during the quarter increased
by a significant amount from 1994 to 1995. For the first quarter of
1995, these expenses amounted to $10.2 million, compared with $7.3
million during the same quarter in 1994. During the second half of 1994,
the Company increased the fixed portion of its selling, general and
administrative expenses in the area of marketing and product support, in
preparation for an anticipated increase in future sales. Many of these
expenses are incurred throughout the year, rather than at the time of
sale. Since these additional expenses were first incurred in the second
half of 1994, there were no similar expenses during the first quarter of
1994 to compare with during the first quarter of 1995. Therefore, there
is a sizable increase in selling, general and administrative expenses
from the first quarter of 1994 to 1995. In addition, the first quarter
of 1995 includes the expenses of Vesture Corporation which the Company
purchased in July, 1994; there were none of Vesture's expenses recognized
in the first quarter of 1994, since that was prior to the acquisition.
The agreement relating to the royalty income that the Company earned in
prior years has expired. The Company has negotiated a new agreement that
will begin accruing royalties in 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 annually,
than the previous agreement.
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 quarter of 1995 to $484 thousand compared with $127
thousand that was incurred during the same quarter of 1994. In addition,
interest rates on short-term borrowings during the first quarter of 1995
averaged about 2.5 percent higher than in 1994. Also during the first
quarter last year, the Company recognized interest income on a federal
tax refund. There was no similar interest income in 1995.
For the quarter the Company incurred a net loss of $2.0 million after
taxes, or $0.36 per share, compared with a net loss in the first quarter
of 1994 of $942 thousand, or $0.18 per share.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The Company previously reported that it was named as a
defendant 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 were given 30 days from
the date of the Court's consolidation order, to file a
Consolidated Amended Class Action Complaint.
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 25, 1995.
<PAGE>
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 27, 1995 /s/ Richard L. Burrell
Date Richard L. Burrell
Senior Vice President-Finance
(Principal Financial Officer)
(Duly Authorized Officer)
<PAGE>
R. G. BARRY CORPORATION
INDEX TO EXHIBITS
Exhibit Page
Number Description Number
27 Financial Data Schedule 11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> MAR-25-1995
<CASH> 1,674
<SECURITIES> 0
<RECEIVABLES> 19,104
<ALLOWANCES> 2,483
<INVENTORY> 31,759
<CURRENT-ASSETS> 55,542
<PP&E> 35,992
<DEPRECIATION> 21,817
<TOTAL-ASSETS> 76,393
<CURRENT-LIABILITIES> 19,669
<BONDS> 15,745
<COMMON> 5,524
0
0
<OTHER-SE> 33,293
<TOTAL-LIABILITY-AND-EQUITY> 76,393
<SALES> 14,979
<TOTAL-REVENUES> 14,979
<CGS> 7,611
<TOTAL-COSTS> 7,611
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 487
<INCOME-PRETAX> (3,280)
<INCOME-TAX> (1,276)
<INCOME-CONTINUING> (2,004)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,004)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
