<PAGE> 1
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 27, 1997
------------------------
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 (IRS Employer
of incorporation or organization) Identification Number)
13405 Yarmouth Road, NW, Pickerington, Ohio 43147
- ------------------------------------------- ----------
(Address of principal executive office) (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 27, 1997 - 9,561,210
------------------------------
Index to Exhibits at page 10
Page 1 of 11 pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 27, December 28,
------------- ------------
1997 1996
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 1,790,000 13,187,000
Accounts receivable, less allowances 32,698,000 18,556,000
Inventory (note 3) 48,895,000 28,854,000
Deferred income taxes (note 4) 5,055,000 5,055,000
Prepaid expenses 3,428,000 2,027,000
------------ ----------
Total current assets 91,866,000 67,679,000
------------ ----------
Property, plant and equipment, at cost 38,681,000 39,088,000
Less accumulated depreciation & amortization 24,399,000 25,159,000
------------ ----------
Net property, plant and equipment 14,282,000 13,929,000
------------ ----------
Goodwill, less accumulated amortization 4,260,000 4,346,000
Other assets 3,183,000 3,113,000
------------ ----------
$113,591,000 89,067,000
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current installments of long-term debt
and capital lease obligations 2,268,000 125,000
Short-term notes payable 24,000,000 --
Accounts payable 7,010,000 4,170,000
Accrued expenses 4,003,000 9,661,000
------------ ----------
Total current liabilities 37,281,000 13,956,000
------------ ----------
Accrued retirement costs and other, net 3,706,000 3,103,000
Long-term debt and capital lease obligations,
excluding current installments:
Note payable 12,857,000 15,000,000
Capital lease obligations 265,000 265,000
------------ ----------
Long-term debt and capital lease obligations 13,122,000 15,265,000
------------ ----------
Total liabilities 54,109,000 32,324,000
------------ ----------
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
22,500,000 shares (note 6) (excluding
treasury shares) 9,561,000 9,375,000
Additional capital in excess of par value 14,479,000 14,071,000
Retained earnings 35,442,000 33,297,000
------------ ----------
Net shareholders' equity 59,482,000 56,743,000
------------ ----------
$113,591,000 89,067,000
============ ==========
</TABLE>
Page 2 of 11 pages
<PAGE> 3
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
September 27, September 28, September 27, September 28,
------------- ------------- ------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $46,361,000 45,161,000 75,835,000 81,196,000
Cost of sales 24,611,000 25,307,000 38,838,000 44,333,000
----------- ---------- ---------- ----------
Gross profit 21,750,000 19,854,000 36,997,000 36,863,000
Selling, general and
administrative expenses 12,815,000 11,117,000 32,479,000 30,882,000
----------- ---------- ---------- ----------
Operating income 8,935,000 8,737,000 4,518,000 5,981,000
Other income 111,000 134,000 354,000 341,000
Interest expense (693,000) (862,000) (1,520,000) (1,920,000)
Interest income 19,000 30,000 222,000 94,000
----------- ---------- ---------- ----------
Net interest expense (674,000) (832,000) (1,298,000) (1,826,000)
Earnings before
income taxes 8,372,000 8,039,000 3,574,000 4,496,000
Income tax expense (note 4) 3,348,000 3,219,000 1,429,000 1,803,000
----------- ---------- ---------- ----------
Net earnings $ 5,024,000 4,820,000 2,145,000 2,693,000
=========== ========== ========== ==========
Earnings per common share (note 5)
Primary $0.52 0.50 0.22 0.27
===== ==== ==== ====
Fully diluted $0.52 0.50 0.22 0.27
===== ==== ==== ====
Average number of common
shares outstanding
Primary 9,921,000 9,872,000 9,809,000 9,834,000
=========== ========== ========== ==========
Fully diluted 9,971,000 9,872,000 9,844,000 9,834,000
=========== ========== ========== ==========
</TABLE>
Page 3 of 11 pages
<PAGE> 4
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Thirty-nine Thirty-nine
weeks ended weeks ended
September 27, September 28,
------------- -------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,145,000 2,693,000
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization of
property, plant and equipment 1,322,000 1,203,000
Amortization of goodwill 86,000 87,000
Net (increase) decrease in:
Accounts receivable, net (14,142,000) (15,459,000)
Inventory (20,041,000) (16,471,000)
Prepaid expenses (1,401,000) 313,000
Other (70,000) 172,000
Net increase (decrease) in:
Accounts payable 2,840,000 (1,574,000)
Accrued expenses (5,658,000) (4,645,000)
Accrued retirement costs and other 603,000 343,000
------------ -----------
Net cash used in operating activities (34,316,000) (33,338,000)
------------ -----------
Cash flows from investing activities:
Additions to property, plant and equipment, net (1,675,000) (1,585,000)
------------ -----------
Cash flows from financing activities:
Proceeds from short-term notes 24,000,000 33,000,000
Stock options exercised, net of treasury acquisitions 594,000 406,000
Repayment of long-term debt and
capital lease obligations 0 (700,000)
------------ -----------
Net cash provided by financing activities 24,594,000 32,706,000
------------ -----------
Net decrease in cash (11,397,000) (2,217,000)
Cash at the beginning of the period 13,187,000 6,267,000
------------ -----------
Cash at the end of the period $ 1,790,000 4,050,000
============ ===========
Supplemental cash flow disclosures:
Interest paid $ 1,705,000 2,066,000
============ ===========
Income taxes paid $ 3,770,000 5,618,000
============ ===========
</TABLE>
Page 4 of 11 pages
<PAGE> 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
September 27, 1997 and September 28, 1996
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.
2. The Company operates on a fifty-two or fifty-three week annual fiscal year.
Fiscal 1997 is a fifty-three week year, with the first three quarters each
having thirteen weeks and the fourth quarter having fourteen weeks. Fiscal
1996 was a fifty-two week year, consisting of four quarters each with
thirteen weeks.
3. 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.
4. Income tax for the periods ended September 27, 1997 and September 28, 1996,
consists of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current:
U. S. Federal $1,204,000 1,503,000
State & Local 225,000 300,000
---------- ---------
Total $1,429,000 1,803,000
========== =========
</TABLE>
The income tax reflects a combined federal, foreign, state and local
effective rate of 40 percent for the quarter of both years, as compared to
the statutory U. S. federal rate of 34 percent in both years.
Income tax for the periods ended September 27,1997 and September 28, 1996
differed from the amounts computed by applying the U. S. federal income tax
rate of 34 percent to pretax earnings as a result of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Computed "expected" tax:
U. S. Federal $1,215,000 1,530,000
Other 63,000 75,000
State & Local, net of
federal income tax 151,000 198,000
---------- ---------
Total $1,429,000 1,803,000
========== =========
</TABLE>
5. Net earnings per common share has been computed based on average number of
common shares outstanding during each period plus, when their effect is
dilutive, common share equivalents consisting of certain common shares
subject to stock option and stock purchase plans.
6. At the Company's Annual Shareholders' Meeting, held on May 16, 1997,
shareholders approved a proposal to increase the number of authorized
common shares, $1 par value, of the Company from 15 million to 22.5 million
shares.
Page 5 of 11 pages
<PAGE> 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 based upon the
Company's current plans and strategies, and reflect the Company's
current assessment of the risks and uncertainties related to its
business, including such things as product demand and market
acceptance; the economic environment and the impact of governmental
regulations, both in the United States and abroad; the effects of
competitive products and pricing; capacity, efficiency, and supply
constraints; weather conditions; and other risks detailed in the
Company's press releases, shareholder communications, and Securities
and Exchange Commission filings. Actual results may differ from those
currently anticipated.
Liquidity and Capital Resources
- -------------------------------
The Company has ended the third quarter of 1997 with $54.6 million in net
working capital. This compares with $47.2 million at the end of the same quarter
in 1996, and $53.7 million as of the end of fiscal 1996. The increase in net
working capital from the end of the third quarter of 1996 to the end of the
third quarter of 1997, is primarily due to the profit that the Company earned
during fiscal 1996.
The Company's net capital expenditures during the first three quarters of 1997
amounted to $1.7 million, which is nearly the same as the amount of expenditures
in the previous year. Expenditures in both years have been funded out of net
working capital.
A review of the more significant components of net working capital indicates:
o Accounts receivable decreased slightly at the end of the third quarter of
1997, to $32.7 million from $33.7 million at the end of the same quarter of
1996, and increased from $18.6 million at the end of fiscal 1996. While net
sales for the third quarter of 1997 increased slightly [2.7%], there was a
slight [3.0%] decline in receivables from third quarter 1996 to 1997. The
increase in accounts receivable from the end of fiscal 1996 to the end of
the current quarter, mainly represents a normal seasonal pattern of
fluctuation in receivables.
o Inventories ended the third quarter of 1997, at $48.9 million, nearly
equal to the inventory levels of $48.2 million one year ago, and increased
from $28.9 million as of the end of fiscal 1996. The increase in
inventories from the end of fiscal 1996, reflects normal seasonal patterns
of inventories, as the Company builds seasonal inventories in preparation
for sales anticipated in the fourth quarter of the year.
o The Company ended the third quarter of 1997, with $1.8 million in cash and
$24.0 million in short-term bank loans. This compares with the third
quarter of 1996, when the Company had $4.1 million in cash and $33 million
in short-term bank loans. The decrease in short-term bank loans is mainly
the result of the Company's improved liquidity position, following the year
end 1996 cash position of $13.2 million. There were no short-term bank
loans outstanding at the end of fiscal 1996.
The Company currently has in place a Revolving Credit Agreement ("Revolver"),
with its three main lending banks. The Revolver provides the Company a
seasonally adjusted available line of credit ranging from $6 million during
January, to a peak of $51 million from July through November. The Revolver
contains financial covenants, which the Company believes are typical of
agreements of its type and duration. The Company is in compliance with all the
covenants of the Revolver, and all other debt agreements. The Revolver currently
extends though 1999 and contains provisions for periodic extensions upon request
and with the approval of the banks.
Page 6 of 11 pages
<PAGE> 7
Management's Discussion & Analysis of Financial Condition & Results of
Operations - continued
Results of Operations
- ---------------------
During the third quarter of 1997, net sales amounted to $46.4 million, a 2.7
percent increase from the third quarter of 1996. For the nine months, net sales
amounted to $75.8 million, a 6.6 percent decline from net sales in the first
nine months of 1996. Virtually all of the decline in the first nine months net
sales occurred during the first half of the year. In its 1996 year end Annual
Report to Shareholders, the Company indicated that it expected sales and
earnings for the first half of the year to be lower than in 1996, mainly as a
result of refining its relationship with Corning Consumer Products ("Corning").
During 1997, Corning has outsourced directly the Pyrex(R) Portables(TM) fabric
carriers, which the Company had been providing to Corning. The Company continues
to supply Corning with MICROCORE(R) hot and cold thermal retention elements.
Worldwide net sales of the Company's slipper products grew substantially during
the third quarter compared with last year, and for the nine month period.
The Company had expected net sales and earnings for the third quarter to be
somewhat greater than were actually realized. About $4 million of shipments to
customers that had been anticipated for the third quarter, could not be shipped
before the end of the September, and are expected to be shipped during the
fourth quarter. The Company's production this year was late by about a week,
causing some orders to be held over into October so that they could be shipped
complete to customers.
Gross profit during the third quarter of 1997, amounted to $21.8 million, or
46.9 percent of net sales. This compares with gross profit percent of 44.0
percent in the same quarter of 1996. For the nine months, gross profit percent
also increased to 48.8 percent in 1997 compared with 45.4 percent in 1996. The
increase in gross profit percentages from year to year, is largely due to the
operating efficiencies gained by utilizing modular manufacturing in the
Company's factories. A change in mix of individual styles and products sold from
year to year, also had a positive impact on gross profit percentages.
For the quarter and nine months, total selling, general and administrative
expenses were about 15.3 percent and 5.2 percent higher, respectively, than
similar expenses incurred during the comparable periods of 1996. Had the Company
shipped the additional $4 million to customers in late September as had been
expected, as referred to above, the increase in selling, general and
administrative expenses would have been more in line with the increases in net
sales. In addition, the Company continues to expense its investment in
preparation for its entry into the French slipper market during the latter half
of 1997.
Net interest expense declined from 1996 to 1997. During the third quarter of
1997, net interest expense amounted to $674 thousand compared with $832 thousand
in the same period of 1996. For the nine months, net interest expense also
declined to $1.3 million in 1997 from $1.8 million in 1996. The decrease in net
interest expense is principally due to the Company's lower utilization of its
Revolver to fund short-term seasonal indebtedness during 1997, when compared
with 1996.
During the third quarter of 1997, the Company had net earnings of $5.0 million,
or $0.52 per share, compared with net earnings during the same quarter of 1996
of $4.8 million, or $0.50 per share. For the cumulative nine month period, the
Company earned $2.1 million in 1997, or $0.22 per share, compared with earnings
of $2.7 million in 1996, or $0.27 per share.
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
Page 7 of 11 pages
<PAGE> 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
No response required
Item 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------
(a) - (d) 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 September 27, 1997
Page 8 of 11 pages
<PAGE> 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
November 5, 1997
- ----------------
date
/s/ Richard L. Burrell
Richard L. Burrell
Senior Vice President - Finance
(Principal Financial Officer)
(Duly Authorized Officer)
Page 9 of 11 pages
<PAGE> 10
R. G. BARRY CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page Number
----------- ----------- -----------
<S> <C> <C>
27 Financial Data Schedule 11
</TABLE>
Page 10 of 11 pages
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-27-1997
<CASH> 1,790
<SECURITIES> 0
<RECEIVABLES> 35,983
<ALLOWANCES> 3,285
<INVENTORY> 48,895
<CURRENT-ASSETS> 91,866
<PP&E> 38,681
<DEPRECIATION> 24,399
<TOTAL-ASSETS> 113,591
<CURRENT-LIABILITIES> 37,281
<BONDS> 13,122
0
0
<COMMON> 9,561
<OTHER-SE> 49,921
<TOTAL-LIABILITY-AND-EQUITY> 113,591
<SALES> 75,835
<TOTAL-REVENUES> 75,835
<CGS> 38,838
<TOTAL-COSTS> 38,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,298
<INCOME-PRETAX> 3,574
<INCOME-TAX> 1,429
<INCOME-CONTINUING> 2,145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,145
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
