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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 1999
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13405 Yarmouth Road N.W., Pickerington, Ohio 43147
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 864-6400
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------------ -----------------------------------------
Common Shares, Par Value $1.00 New York Stock Exchange
(9,747,100 outstanding as
of March 15, 1999)
Series I Junior Participating New York Stock Exchange
Class A Preferred Share
Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
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 ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Based upon the closing price reported on the New York Stock Exchange on March
15, 1999, the aggregate market value of the Common Shares of the Registrant held
by non-affiliates on that date was $80,618,245.
Documents Incorporated by Reference:
(1) Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended January 2, 1999, are incorporated by reference into
Parts I and II of this Annual Report on Form 10-K.
(2) Portions of the Registrant's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on May 13, 1999, are
incorporated by reference into Part III of this Annual Report on Form
10-K.
Index to Exhibits begins on Page E-1.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
R. G. Barry Corporation ("Barry") is organized under Ohio law. Barry
and its subsidiaries, Barry de Mexico, S.A. de C.V., Barry de Acuna, S.A. de
C.V., Barry de Zacatecas, S.A. de C.V., ThermaStor Technologies, Ltd., LLC, R.
G. Barry (Texas) LP, Barry de la Republica Dominicana, S.A. de C.V., R. G. Barry
International, Inc., R.G.B., Inc. and Vesture Corporation (Barry and its
subsidiaries are referred to collectively as the "Company"), manufacture and
market products which serve the comfort needs of people. The Company believes it
is the world's largest manufacturer of comfort footwear for at-and-around-
the-home, and the dominant domestic supplier of thermal retention technology
products. Comfort is the dominant influence in the Company's brand lines.
The Company considers its at-and-around-the-home comfort footwear
group, "Barry Comfort," and the thermal retention technology products group,
"Thermal," as its two operating segments. Financial information on the Company's
segments for the three years ended January 2, 1999, is presented in Note (13) to
the Consolidated Financial Statements on pages 39, 40 and 41 of Barry's Annual
Report to Shareholders for the fiscal year ended January 2, 1999.
PRINCIPAL PRODUCTS
The Company designs, manufactures and markets specialized comfort
footwear for men, women and children. The Company is in the business of
responding to consumer demand for comfortable footwear combined with attractive
appearance. The Company designs, manufactures and markets thermal retention
consumer products in the food preservation; portable, personal comfort; and
comfort therapy categories. The Company designs, manufactures and markets
commercial products which use thermal retention technology to preserve and/or
transport temperature-sensitive, perishable commodities.
Barry Comfort
Historically, the Company's primary products have been foam-soled,
soft, washable slippers for men, women and children. The Company developed and
introduced women's Angel Treads*, the world's first foam-soled, soft, washable
slipper, in 1947. Since that time, the Company has introduced additional
slipper-type brand lines for men, women and children designed to provide
comfort, softness and washability. These footwear products are sold, for the
most part, under various brand names including Angel Treads*, Barry*Comfort,
Dearfoams*, Dearfoams* for Kids, Dearfoams* for Men, Madye's*, Snug Treds*, Soft
Notes*, EZfeet* and Mushrooms* Slippers. The Company has also marketed
slipper-type footwear under licensed trademarks.
The Company's foam-soled footwear lines have fabric uppers made of
terry cloths, velours, fleeces, satins, nylons and other washable materials, as
well as uppers made of suede. Different brand lines are marketed for men, women
and children with a variety of styles, colors and ornamentation.
The marketing strategy for the Company's slipper-type brand lines has
been to expand counter space for these products by creating and marketing brand
lines to different portions of the consumer market. Retail prices for the
Company's footwear normally range from approximately $5 to $30 per pair,
depending on the style of footwear, type of retail outlet and retailer mark-up.
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* Hereinafter denotes a trademark of the Company registered in the United States
Department of Commerce Patent and Trademark Office.
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The Company also manufactures and markets the Soft Notes* foam
cushioned casual slipper line. The Company believes that this brand line is a
bridge between slippers and casual footwear. The marketing strategy with respect
to this product emphasizes the fashion, comfort and versatility provided by the
Soft Notes* foam cushioned casual slippers.
The Company believes that many consumers of its slippers are loyal to
the Company's brand lines, usually own more than one pair of slippers and have a
history of repeat purchases. Substantially all of the slipper brand lines are
displayed on a self-selection basis in see-through packaging at the point of
purchase and have appeal to the "impulse" buyer. The Company believes that many
of the slippers are purchased as gifts for others.
Many styles of slipper-type footwear have become standard in the
Company's brand lines and are in demand year after year. For many of these
styles, the most significant changes made in response to fashion changes are in
ornamentation, fabric and/or color. The Company often introduces new, updated
styles of slippers with a view toward enhancing the fashion appeal and freshness
of its products. The Company anticipates that it will continue to introduce new
styles in future years in response to fashion changes.
It is possible to fit most consumers of the Company's slipper-type
footwear within a range of four to six sizes. This allows the Company to carry
lower levels of inventories in these lines compared to other footwear styles.
Thermal
In 1994, the Company introduced on a national basis its thermal
retention technology products for consumers featuring MICROCORE*
microwave-activated technology developed by the Company. During that year, Barry
also acquired all of the outstanding stock of Vesture Corporation ("Vesture"),
the originators of microwave-heated comfort care products.
The Company's MICROCORE* thermal retention technology consists of a
family of patented or proprietary technologies which, when energized with heat
or cold, act as reservoirs that release heat or cold at a constant temperature
for extended periods of time. The MICROCORE* thermal retention products have
application as: (1) commercial products which use the Company's MICROCORE*
patented thermal retention technology, either hot or cold, to preserve and
transport temperature-sensitive, perishable commodities such as food, medicine,
pharmaceuticals and flowers; and (2) thermal retention consumer products the
Company creates, designs, sells and distributes under its brand names.
In 1997, the Company decided to focus the thermal business on the home
delivery of prepared foods and to move away from manufacturing and marketing
cold weather-related consumer products sold in the accessory areas of department
stores. Going forward, the focus of the thermal business will be on commercial
applications of the thermal retention technologies and on comfort therapy,
personal care and housewares items.
In the commercial product area, the Company has made a strategic
decision to focus on the commercial application of MICROCORE* patented thermal
retention technology, either hot or cold, to preserve and/or transport
temperature-sensitive, perishable commodities. The Company's POWERTECH* with
MICROCORE* is a new, patented portable heat storage technology which permits
portable, electrically-energized heat storage from either A.C. or D.C. power
sources and at specific temperatures through the use of a thermostat.
Underwriters Laboratories Inc. has granted a UL listing mark to the Company's
POWERTECH* with MICROCORE* Pizza Delivery System which is designed to keep pizza
hot at oven temperatures for two hours so that a pizza is delivered to a home
oven-hot, dry and crisp. The Company launched its POWERTECH* with MICROCORE* hot
food delivery system with Donatos Pizza of
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Columbus, Ohio, a 130-store regional Midwest pizza chain, in the Fall of 1998.
The Company continues in various stages of testing the POWERTECH* with
MICROCORE* Pizza Delivery System with other national and large regional pizza
chains throughout the United States.
During the third quarter of 1998, the Company filed a lawsuit against
Domino's Pizza, Inc. and Phase Change Laboratories, Inc., alleging patent
infringement. The case covers an invention which maintains the desired
temperature of food and other items using a phase change material. Domino's
Pizza purchased a product it calls the "Heat Wave" system. The product is
manufactured by Phase Change Laboratories, Inc. The Company believes that the
product infringes upon the Company's patent as granted by the United States
Patent Office. The Company seeks damages, attorneys' fees and an injunction
against further infringement by both defendants. The matter is currently in the
early stages of discovery.
In 1996, the Company announced the launch of the PortaFreeze(TM) with
MICROCORE* portable frozen storage system which incorporates the MICROCORE*
thermal retention technology. The PortaFreeze(TM) with MICROCORE* system has
been thermally engineered to hold refrigerated and frozen materials at sub-zero
temperatures for a period of at least 24 hours without the need for an external
power source or dry ice. The Company believes that PortaFreeze(TM) with
MICROCORE* has a wide range of storage and delivery application potentials in
the food, medical and scientific industries, among others. PortaFreeze(TM)
(patent pending) is a rechargeable thermal energy cell configuration with an
insulated carrier which can be designed and manufactured to meet specific
storage and delivery needs of different industries in terms of size, temperature
parameters and desired length of temperature retention. The Company intends to
continue testing PortaFreeze(TM) with MICROCORE.*
The Company's thermal retention products for consumers generally fall
within three categories: (1) food preservation products such as breadwarmer
baskets and portable food carriers; (2) comfort therapy products such as heating
pads and backwarmers; and (3) portable, personal comfort products such as heated
booties, scarves and ear muffs. Retail prices for substantially all of the
Company's thermal retention consumer products normally range from approximately
$12 to $40, depending on the product, type of retail outlet and retailer
mark-up. The Company believes that the food preservation and comfort therapy
thermal retention products are not weather sensitive and have a year-round sales
appeal while the cold weather portion of the personal, portable comfort product
line is more seasonal and affected by weather changes. The thermal retention
consumer products are sold under the major brand lines of Dearfoams*, Vesture*,
Lava*, LavaPac*, LavaBuns* and LavaBooties*. All carry MICROCORE* energy packs.
PYREX(R) Portables(TM) with MICROCORE*, which the Company created and
are sold through Corning Consumer Products Company, are transportable food
carriers designed to keep hot dishes warm and cold dishes chilled using the
Company's patented MICROCORE* thermal retention technology.
MARKETING
The Company's slipper-type brand lines and thermal retention consumer
products are sold to traditional department stores, promotional department
stores, national chain department stores and specialty stores; through mass
merchandising channels of distribution such as discount stores, warehouse clubs,
drug and variety chain stores, and supermarkets; and to independent retail
establishments. The Company markets these products primarily through Company
salespersons and, to a lesser extent, through independent sales representatives.
The Company does not finance its customers' purchases.
Each spring and autumn, new designs and styles are presented to buyers
representing the Company's retail customers at regularly scheduled showings.
Company designers also produce new styles and experimental designs throughout
the year which are evaluated by the Company's sales and
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marketing personnel. Buyers for department stores and other large retail
customers attend the spring and autumn showings and make periodic visits to the
Company's showroom in New York. Company salespersons regularly visit retail
customers. The Company also regularly makes catalogs available to its current
and potential customers and periodically follows up with current and potential
customers by telephone. In addition, the Company participates in trade shows,
both regionally and nationally.
During the 1998 Christmas selling season, the Company provided
approximately 400 temporary merchandisers to service the retail selling floor of
department stores and chain stores nationally. The Company believes that this
point-of-sale management of the retail selling floor, combined with computerized
automatic replenishment systems the Company installed with the stores, put the
Company in a position to optimize its comfort footwear business during the
fourth quarter.
Sales during the last six months of each year have historically been
greater than during the first six months. The Company's inventory is largest in
early autumn in order to accommodate the retailers' fall selling seasons.
The Company advertises principally in the print media. The Company's
promotional efforts are often conducted in cooperation with customers. The
Company's products are displayed at the retail-store level on a self-selection
and gift-purchase basis.
The Company believes it has a substantial opportunity for expansion in
the United Kingdom and Europe for its at-and-around-the-home comfort footwear.
The Company has made a strategic commitment to building its business in Europe
with France as the first target market outside of the United Kingdom. The
Company's international sales are focused on the department store channels and
hypermarkets in the United Kingdom, France, and other major European markets.
The Company also markets its comfort footwear products in Canada, Mexico and
several other countries around the world. In 1998, the Company's foreign sales
comprised approximately 8% of its total sales. Financial information for the
three years ended January 2, 1999 for the geographic areas in which the Company
operates is presented in Note (13) to the Consolidated Financial Statements on
pages 39 and 40 of Barry's Annual Report to Shareholders for the fiscal year
ended January 2, 1999.
The Company markets its thermal retention commercial products directly
to prospective customers through Company personnel. The Company does not finance
its customers' purchases.
RESEARCH AND DEVELOPMENT
Most of the Company's research efforts are undertaken in connection
with the design and consumer appeal of new styles of slipper-type footwear and
thermal retention products. During the 1998, 1997 and 1996 fiscal years, the
amounts spent by the Company in connection with the research and design of new
products and the improvement or redesign of existing products were approximately
$3.9 million, $3.5 million and $3.0 million, respectively. Substantially all of
the foregoing activities were Company-sponsored. Approximately 50 employees are
engaged full time in research and design.
MATERIALS
The principal raw materials used by the Company in the manufacture of
its slipper and thermal retention product brand lines are textile fabrics,
threads, foams and other synthetic products. All are available domestically from
a wide range of suppliers. The Company has experienced no difficulty in
obtaining raw materials from suppliers and anticipates no future difficulty.
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TRADEMARKS AND LICENSES
Approximately 95% of the Company's sales are represented by brand items
sold under trademarks owned by the Company. The Company is the holder of many
trademarks which identify its products. The trademarks which are most widely
used by the Company include: (a) Angel Treads*, Barry*Comfort, Dearfoams*,
Dearfoams* for Kids, Dearfoams* for Men, Madye's*, Snug Treds*, Soft Notes* and
EZfeet*, in the Company's Barry Comfort business; and (b) Dearfoams*, Vesture*,
Lava*, LavaPac*, LavaBuns*, LavaBooties*, MICROCORE*, POWERTECH* and
PortaFreeze(TM), in the Company's Thermal business. The Company believes that
its products are identified by its trademarks and, thus, its trademarks are of
significant value. Each registered trademark has a duration of 20 years and is
subject to an indefinite number of renewals for a like period upon appropriate
application. The Company intends to continue the use of each of its trademarks
and to renew each of its registered trademarks.
The Company also has sold comfort footwear under various names as
licensee under license agreements with the owners of those names. In the 1998,
1997 and 1996 fiscal years, less than 1/2%, 1% and 3%, respectively, of the
Company's total sales were represented by footwear sold under licensed names.
In 1989, the Company entered into a licensing agreement with Fieldcrest
Cannon, Inc., the largest marketer of bed and bath products in the United
States, which allows the Company to manufacture and sell a line of mid-priced
slippers under the Cannon** trademark in the mass merchandise channels of the
Company's business. The Company continued its distribution and marketing of the
Cannon** line of slippers in the 1998 fiscal year, although at a declining rate.
The term of the Company's license to use the Cannon** trademark expired in
December 1998. The Company is evaluating whether to seek an extension of that
agreement.
CUSTOMERS
The only customer of the Company which accounted for more than 10% of
the Company's consolidated revenues in the 1998 fiscal year was Wal-Mart Stores,
Inc., a Barry Comfort customer, which accounted for 22%. The customers of the
Company which accounted for more than 10% of the Company's consolidated revenues
in the 1997 fiscal year were Wal-Mart, J. C. Penney Company, Inc. and Sears,
Roebuck & Company, all Barry Comfort customers, which accounted for 20%, 11% and
10%, respectively. The customers of the Company which accounted for more than
10% of the Company's consolidated revenues in fiscal year 1996 were Wal-Mart,
J.C. Penney and Sears, all Barry Comfort customers, which accounted for 15%, 12%
and 10%, respectively, and Corning, a Thermal customer, which accounted for 11%.
BACKLOG OF ORDERS
The Company's backlog of orders at the close of each of the 1998 and
1997 fiscal years was $15 million. The Company anticipates that a large
percentage of the orders as of the end of the 1998 fiscal year will be filled
during the current fiscal year.
Generally, the Company's backlog of unfilled sales orders is largest
after the spring and autumn showings of the Company. For example, the Company's
backlogs of unfilled sales orders following the conclusion of such showings
during the last two years were: August, 1998 - $67 million; August, 1997 - $79
million; February, 1998 - $22 million; and February, 1997 - $13 million. The
Company's backlog of
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** Denotes a trademark of the licensor registered to the United States
Department of Commerce Patent and Trademark Office.
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unfilled sales orders reflects the seasonal nature of the Company's sales -
approximately three-fourths of such sales occur during the second half of the
year as compared to approximately one-fourth during the first half of the year.
INVENTORY
While the styles of some of the Company's slipper-type brand lines
change little from year to year, the Company has also introduced, and intends to
continue to introduce, new, updated styles in an effort to enhance the comfort
and fashion appeal of its products. As a result, the Company anticipates that
some of its slipper styles will change from year to year, particularly in
response to fashion changes. The Company has introduced, and intends to continue
to introduce, a variety of new thermal retention products to compliment its
existing products in response to consumer and commercial demand. The Company
believes that it will be able to control the level of its obsolete inventory.
The Company traditionally has had only a limited exposure to obsolete inventory.
COMPETITION
The Company operates in the portion of the footwear industry providing
comfort footwear for at-and-around-the-home. The Company believes that it is a
small factor in the highly competitive footwear industry. The Company also
believes that it is the world's largest manufacturer of comfort footwear for
at-and-around-the-home. The Company also operates in an area where it provides
portable warmth and cold through its line of thermal retention technology
products. The Company believes that it is the dominant domestic supplier of
thermal retention technology products. The Company competes primarily on the
basis of the value, quality and comfort of its products, service to its
customers, and its marketing expertise. The Company knows of no reliable
published statistics which indicate its current relative position in the
footwear or any other industry or in the portion of the footwear industry
providing comfort footwear for at-and-around-the-home or its current relative
position in the thermal retention product industry.
MANUFACTURING, SALES AND DISTRIBUTION FACILITIES
The Company has seven manufacturing facilities. The Company operates
sewing plants in Nuevo Laredo, Ciudad Acuna, and Zacatecas, Mexico. The Company
also operates a cutting plant in Laredo, Texas and a sole molding operation in
San Angelo, Texas. The Company also has the exclusive rights to the
manufacturing output of a factory in Shenzhen, People's Republic of China. In
1999, the Company will open a sewing plant in the Dominican Republic. The
Company produces thermal retention products at its manufacturing facilities in
Asheboro, North Carolina.
The Company maintains sales offices in New York, New York; London,
England; and Paris, France. The Company also operates distribution centers in
Asheboro and Goldsboro, North Carolina; San Angelo, Texas; and Rhymney, Gwent,
Wales, and will open a distribution center in San Antonio, Texas in 1999.
The Company's principal manufacturing, sales and distribution
facilities are described more fully in Item 2. Properties.
EFFECT OF ENVIRONMENTAL REGULATION
Compliance with federal, state and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had a material effect on the Company's
capital expenditures, earnings or competitive position. The Company believes
that the nature of its operations has little, if any, environmental impact. The
Company, therefore, anticipates no
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material capital expenditures for environmental control facilities for its
current fiscal year or for the foreseeable future.
EMPLOYEES
At the close of the 1998 fiscal year, the Company employed
approximately 2,900 persons.
ITEM 2. PROPERTIES.
The Company owns a warehouse facility in Goldsboro, North Carolina,
containing approximately 120,000 square feet.
The Company leases one facility pursuant to a lease agreement with the
local government which issued industrial revenue bonds to construct and equip
the facility. The Company has the right to purchase the facility at a nominal
sum upon retirement of the bonds and intends to do so in 1999. This relationship
has been treated as a purchase for accounting and tax purposes. See Note (5) to
the Consolidated Financial Statements on pages 31 and 32 of Barry's Annual
Report to Shareholders for the fiscal year ended January 2, 1999. The following
table describes this facility:
<TABLE>
<CAPTION>
Average
Location Use Square Feet Annual Rental Lease Expires
-------- --- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Fairfield County, Ohio (Leased Administrative and 55,000 $150,000 1999
from County of Fairfield, Ohio) Executive Offices
</TABLE>
In addition to the leased property described above, the Company leases
space aggregating approximately 1 million square feet at an approximate
aggregate annual rental of $2.8 million. The following table describes the
Company's principal leased properties which were not in the preceding table:
<TABLE>
<CAPTION>
Approximate Approximate Lease
Location Use Square Feet Annual Rental Expires Renewals
- -------- --- ----------- ------------- ------- --------
<S> <C> <C> <C> <C> <C>
Distribution Center Shipping, Warehouse, Office 48,400 $ 16,000 (1) 1999 None(2)
Goldsboro, N.C.
Empire State Building Sales Office 4,300 $117,000 2003 None
New York City, N.Y.
2800 Loop 306 Manufacturing, Office, 145,800 $166,000 (1) 2000 5 years
San Angelo, Texas Warehouse
Distribution Center Shipping, Warehouse 172,800 $432,000 (1) 2007 15 years
San Angelo, Texas
Cesar Lopez de Lara Manufacturing, Office 90,200 $168,000 1999 5 years
Ave.
Nuevo Laredo, Mexico
</TABLE>
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<TABLE>
<CAPTION>
Approximate Approximate Lease
Location Use Square Feet Annual Rental Expires Renewals
- -------- --- ----------- ------------- ------- --------
<S> <C> <C> <C> <C> <C>
Ciudad Acuna Manufacturing, Office 64,700 $254,000 1999 5 years
Industrial Park
Ciudad Acuna, Mexico
Bob Bullock Loop Manufacturing, Warehouse, 165,000 $386,000 (1) 2001 2 terms of
Laredo, Texas Office 5 years each
Bob Bullock Loop Manufacturing, Warehouse, 76,000 $190,000 (1) 2006 5 years
Laredo, Texas Storage
Industrial Zone Manufacturing 26,200 $ 58,000 2003 1 term of 5
Zacatecas, Mexico years
Industrial Zone Manufacturing 25,800 $ 58,000 2005 3 terms of
Zacatecas, Mexico 5 years each
120 E. Pritchard St. Manufacturing, Office, 57,500 $ 96,000 (1) 2001 None
Asheboro, North Carolina Warehouse
8000 Interstate Administrative Office 9,600 $161,000 2003 None
Highway 10 West
San Antonio, Texas
9803 Broadway Shipping, Warehouse 150,000 $570,000 2010 None
San Antonio, Texas
Chelsea Harbour Sales & Administrative 2,500 $ 87,000 2002 None
London, England Office
Rhymney, Gwent, Wales Warehouse 8,000 $ 21,000 Month- N/A
to-
Month
</TABLE>
- ----------------------
(1) Net lease.
(2) The Company has agreed to purchase this facility from the lessor in
1999.
The Company believes that all of the buildings owned or leased by it
are well maintained, in good operating condition, and suitable for their present
uses.
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<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS.
On September 10, 1998, Barry filed a lawsuit for patent infringement of
United States Patent No. 5,790,962 against Domino's Pizza, Inc. and Phase Change
Laboratories, Inc. The case was filed on behalf of both Barry and its subsidiary
Vesture in the United States District Court for the Middle District of North
Carolina. The `962 patent covers an invention which maintains the desired
temperature of food and other items using a phase change material. Domino's
Pizza, Inc. purchases a product which it calls the "Heat Wave" system. The
product is manufactured by Phase Change Laboratories, Inc. Barry believes that
the product infringes upon the `962 Patent. Barry seeks damages, attorney's fees
and injunction against further infringement by both defendants. The matter is
currently in the early stages of discovery. The case has been assigned Civil
Action No. 1:98CV00802.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Executive Officers of the Registrant.
The following table lists the names and ages of the executive officers
of Barry as of the date of this Annual Report on Form 10-K, the positions with
Barry presently held by each executive officer and the business experience of
each executive officer during the past five years. Unless otherwise indicated,
each person has had his principal occupation for more than five years. All
executive officers serve at the pleasure of the Board of Directors.
Position(s) Held with Barry and
Name Age Principal Occupation(s) for Past Five Years
- ---- --- -------------------------------------------
Gordon Zacks 66 Chairman of the Board and Chief Executive
Officer since 1979, President since 1992, and
Director since 1959
Richard L. Burrell 66 Senior Vice President-Finance since 1992,
Treasurer and Secretary since 1976, Vice
President-Finance from 1976 to 1992, and
Director since 1984
Christian Galvis 57 Co-President and Co-Chief Operating Officer
of the Barry Comfort Group since January
1998, Executive Vice President-Operations and
Director since 1992, Vice
President-Operations from 1991 to 1992
Charles E. Ostrander 50 Co-President and Co-Chief Operating Officer
of the Barry Comfort Group since January
1998, Executive Vice President-Sales &
Marketing and Director since 1992, Vice
President-Sales & Marketing from 1990 to
1992, Vice President-Marketing from 1987 to
1990
Daniel D. Viren 52 Senior Vice President-Administration since
1992, Assistant Secretary since 1994, and
Vice President-Controller from 1988 to 1992
Harry Miller 56 Vice President-Human Resources since 1993
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information called for in this Item 5 is incorporated by reference
to page 20 of Barry's Annual Report to Shareholders for the fiscal year ended
January 2, 1999.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for in this Item 6 is incorporated by reference
to pages 18 and 19 of Barry's Annual Report to Shareholders for the fiscal year
ended January 2, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The information called for in this Item 7 is incorporated by reference
to pages 21 through 25 of Barry's Annual Report to Shareholders for the fiscal
year ended January 2, 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No response required.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheets of Barry and its subsidiaries as of
January 2, 1999 and January 3, 1998, the related Consolidated Statements of
Earnings, Shareholders' Equity and Cash Flows for each of the fiscal years in
the three-year period ended January 2, 1999, the related Notes to Consolidated
Financial Statements and the Independent Auditors' Report, appearing on pages 26
through 42 of Barry's Annual Report to Shareholders for the fiscal year ended
January 2, 1999, are incorporated by reference. Quarterly Financial Data set
forth on page 20 of Barry's Annual Report to Shareholders for the fiscal year
ended January 2, 1999, are also incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for in this Item 10 is incorporated by reference
to Barry's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 13, 1999, under the captions "ELECTION OF
DIRECTORS" and "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS--Employment
Contracts and Termination of Employment and Change-in-Control Arrangements." In
addition, information concerning Barry's executive officers is included in the
portion of Part I of this Annual Report on Form 10-K entitled "Executive
Officers of the Registrant." No information is required to be disclosed under
Item 405 of Regulation S-K.
-11-
<PAGE> 12
ITEM 11. EXECUTIVE COMPENSATION.
The information called for in this Item 11 is incorporated by reference
to Barry's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 13, 1999, under the caption "COMPENSATION OF
EXECUTIVE OFFICERS AND DIRECTORS." Neither the report on executive compensation
nor the performance graph included in Barry's definitive Proxy Statement shall
be deemed to be incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for in this Item 12 is incorporated by reference
to Barry's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 13, 1999, under the captions "SHARE OWNERSHIP"
and "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Employment Contracts
and Termination of Employment and Change-in-Control Arrangements."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for in this Item 13 is incorporated by reference
to Barry's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 13, 1999, under the captions "SHARE OWNERSHIP,"
"ELECTION OF DIRECTORS" and "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
For a list of all financial statements incorporated by reference in
this Annual Report on Form 10-K, see "Index to Financial Statements
and Financial Statement Schedules" at page 18.
(a)(2) Financial Statement Schedules.
For a list of all financial statement schedules included in this
Annual Report on Form 10-K, see "Index to Financial Statements and
Financial Statement Schedules" at page 18.
(a)(3) Exhibits.
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For list of these exhibits, see "Index to Exhibits" beginning
at page E-1. The following table identifies the executive
compensation plans and arrangements filed as exhibits to this Annual
Report on Form 10-K.
-12-
<PAGE> 13
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
10(a) R. G. Barry Corporation Associates' Retirement Incorporated herein by reference to Barry's
Plan (As Amended and Restated Effective Annual Report on Form 10-K for the fiscal
January 1, 1996) year ended January 3, 1998 (File No.
1-8769) (the "1997 Form 10-K") [Exhibit
10(a)]
10(b) R. G. Barry Corporation Supplemental Incorporated herein by reference to Barry's
Retirement Plan Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 (File
No. 0-12667) [Exhibit 10(b)]
10(c) R. G. Barry Corporation Incentive Plan for Key Incorporated herein by reference to Barry's
Employees Annual Report on Form 10-K for the fiscal
year ended December 29, 1984 (File No.
0-12667) [Exhibit 10(e)]
10(d) Employment Agreement, dated July 1, 1998, Filed herewith.
between R. G. Barry Corporation and Gordon
Zacks
10(e) Agreement, dated September 27, 1989, between Incorporated herein by reference to Barry's
R. G. Barry Corporation and Gordon Zacks Current Report on Form 8-K dated
October 11, 1989, filed October 12, 1989
(File No. 0-12667) [Exhibit 28.1]
10(f) Amendment No. 1, dated as of October 12, 1994, Incorporated herein by reference to
between R. G. Barry Corporation and Amendment No. 14 to Schedule 13D, dated
Gordon Zacks January 27, 1995, filed by Gordon Zacks on
February 13, 1995 [Exhibit 5]
10(g) Amended Split-Dollar Insurance Agreement, Incorporated herein by reference to Barry's
dated March 23, 1995, between R. G. Barry Annual Report on Form 10-K for the fiscal
Corporation and Gordon B. Zacks year ended December 30, 1995 (File No.
1-8769) (the "1995 Form 10-K")
[Exhibit 10(h)]
10(h) R. G. Barry Corporation 1988 Stock Option Plan Incorporated herein by reference to Barry's
(Reflects amendments through May 11, 1993) Registration Statement on Form S-8, filed
August 18, 1993 (Registration No. 33-67594)
[Exhibit 4(r)]
</TABLE>
-13-
<PAGE> 14
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
10(i) Form of Stock Option Agreement used in Incorporated herein by reference to the
connection with the grant of incentive stock 1995 Form 10-K [Exhibit 10(k)]
options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
10(j) Form of Stock Option Agreement used in Incorporated herein by reference to the
connection with the grant of non-qualified 1995 Form 10-K [Exhibit 10(l)]
stock options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
10(k) Description of Incentive Bonus Program Incorporated herein by reference to Barry's
Annual Report on Form 10-K for the fiscal
year ended December 28, 1991 (File No.
1-8769) [Exhibit 10(k)]
10(l) R. G. Barry Corporation Employee Stock Incorporated herein by reference to Barry's
Purchase Plan (Reflects amendments and Registration Statement on Form S-8, filed
revisions for stock dividends and stock splits August 18, 1993 (Registration No. 33-67596)
through May 11, 1993) [Exhibit 4(r)]
10(m) R. G. Barry Corporation 1994 Stock Option Plan Incorporated herein by reference to Barry's
(Reflects stock splits through June 22, 1994) Registration Statement on Form S-8, filed
August 24, 1994 (Registration No. 33-83252)
[Exhibit 4(q)]
10(n) Form of Stock Option Agreement used in Incorporated herein by reference to the
connection with the grant of incentive stock 1995 Form 10-K [Exhibit 10(p)]
options pursuant to the R. G. Barry
Corporation 1994 Stock Option Plan
10(o) Form of Stock Option Agreement used in Incorporated herein by reference to the
connection with the grant of non-qualified 1995 Form 10-K [Exhibit 10(q)]
stock options pursuant to the R. G. Barry
Corporation 1994 Stock Option Plan
10(p) Executive Employment Agreement, effective as Incorporated herein by reference to the
of January 4, 1998, between R. G. Barry 1997 Form 10-K [Exhibit 10(p)]
Corporation and Charles E. Ostrander
</TABLE>
-14-
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
10(q) Executive Employment Agreement, effective as Incorporated herein by reference to the
of January 4, 1998, between R. G. Barry 1997 Form 10-K [Exhibit 10(q)]
Corporation and Christian Galvis
10(r) Restricted Stock Agreement, effective as of Incorporated herein by reference to the
January 4, 1998, between R. G. Barry 1997 Form 10-K [Exhibit 10(r)]
Corporation and Charles E. Ostrander
10(s) Restricted Stock Agreement, effective as of Incorporated herein by reference to the
January 4, 1998, between R. G. Barry 1997 Form 10-K [Exhibit 10(s)]
Corporation and Christian Galvis
10(t) Agreement, effective as of January 4, 1998, Incorporated herein by reference to the
between R. G. Barry Corporation and 1997 Form 10-K [Exhibit 10(t)]
Richard L. Burrell
10(u) Agreement, effective as of January 4, 1998, Incorporated herein by reference to the
between R. G. Barry Corporation and 1997 Form 10-K [Exhibit 10(u)]
Daniel D. Viren
10(v) Agreement, effective as of January 4, 1998, Incorporated herein by reference to the
between R. G. Barry Corporation and 1997 Form 10-K [Exhibit 10(v)]
Harry Miller
10(w) R. G. Barry Corporation Deferred Compensation Incorporated herein by reference to the
Plan As Amended and Restated (Effective as of 1995 Form 10-K [Exhibit 10(v)]
September 1, 1995)
10(x) R. G. Barry Corporation Stock Option Plan for Incorporated herein by reference to the
Non-Employee Directors (Reflects share splits 1997 Form 10-K [Exhibit 10(x)]
and amendments through February 19, 1998)
10(y) R. G. Barry Corporation 1997 Incentive Stock Incorporated herein by reference to Barry's
Plan Registration Statement on Form S-8, filed
June 6, 1997 (Registration No. 333-28671)
[Exhibit 4(k)]
10(z) Form of Stock Option Agreement used in Incorporated herein by reference to the
connection with the grant of incentive stock 1997 Form 10-K [Exhibit 10(z)]
options pursuant to the R. G. Barry
Corporation 1997 Incentive Stock Plan
</TABLE>
-15-
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
10(aa) Form of Stock Option Agreement used in Incorporated herein by reference to the
connection with the grant of non-qualified 1997 Form 10-K [Exhibit 10(aa)]
stock options pursuant to the R. G. Barry
Corporation 1997 Incentive Stock Plan
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the fiscal
quarter ended January 2, 1999.
(c) Exhibits
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits"
beginning at page E-1.
(d) Financial Statement Schedules
Financial Statement Schedules included with this Annual Report on
Form 10-K are attached hereto. See "Index to Financial Statements
and Financial Statement Schedules" at page 18.
</TABLE>
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 31, 1999
By: /s/ Richard L. Burrell
------------------------------
Richard L. Burrell,
Senior Vice President-Finance,
Secretary and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Date Capacity
- ---- ---- --------
<S> <C> <C>
*Gordon Zacks * Chairman of the Board, President, Chief
Executive Officer and Director
*Richard L. Burrell * Senior Vice President-Finance, Secretary,
Treasurer, Principal Financial and Accounting
Officer and Director
*Christian Galvis * Executive Vice President-Operations,
Co-President and Co-Chief Operating Officer of
Barry Comfort Group and Director
*Charles E. Ostrander * Executive Vice President-Sales & Marketing,
Co-President and Co-Chief Operating Officer of
Barry Comfort Group and Director
*Leopold Abraham II * Director
*Philip G. Barach * Director
*William Giovanello * Director
*Harvey M. Krueger * Director
*Edward M. Stan * Director
</TABLE>
*By: /s/ Richard L. Burrell
---------------------------
Richard L. Burrell,
Attorney-in-Fact
Date: March 31, 1999
-17-
<PAGE> 18
R. G. BARRY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JANUARY 2, 1999
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
PAGE(S) IN ANNUAL
DESCRIPTION OF FINANCIAL STATEMENTS (ALL OF WHICH ARE REPORT TO SHAREHOLDERS
INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FOR THE FISCAL YEAR
FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 2, 1999) ENDED JANUARY 2, 1999
- ----------------------------------------------------- ----------------------
Consolidated Balance Sheets at January 2, 1999 and
January 3, 1998 .................................................26
Consolidated Statements of Earnings for the years ended
January 2, 1999, January 3, 1998 and December 28, 1996...........27
Consolidated Statements of Shareholders' Equity for the years
ended January 2, 1999, January 3, 1998 and December 28, 1996.....27
Consolidated Statements of Cash Flows for the years ended
January 2, 1999, January 3, 1998 and December 28, 1996 ..........28
Notes to Consolidated Financial Statements.........................29-41
Independent Auditors' Report........................................42
ADDITIONAL FINANCIAL DATA
The following additional financial data should be read in conjunction
with the Consolidated Financial Statements of R. G. Barry Corporation and its
subsidiaries included in the Annual Report to Shareholders for the fiscal year
ended January 2, 1999. Schedules not included with this additional financial
data have been omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.
Independent Auditor's Report on Financial Statement Schedules:
Included at page 19 of this Annual Report on Form 10-K
Schedules for the fiscal years ended January 2, 1999, January 3, 1998 and
December 28, 1996 -- 2 Reserves:
Included at pages 20 through 22 of this Annual Report on
Form 10-K
-18-
<PAGE> 19
[KPMG LOGO]
Two Nationwide Plaza Telephone 614 249 2300
Columbus, Ohio 43215 Fax 614 249 2348
Independent Auditors' Report on
Financial Statement Schedules
The Board of Directors and Shareholders
R. G. Barry Corporation:
Under date of February 12, 1999, we reported on the consolidated balance
sheets of R. G. Barry Corporation and subsidiaries as of January 2, 1999
and January 3, 1998, and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the fiscal years in the
three-year period ended January 2, 1999, as contained in the fiscal 1998
annual report to shareholders. These consolidated financial statements and
our report thereon are incorporated by reference in the annual report on
Form 10-K for the fiscal year 1998. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedules as listed in the
accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on our
audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.
KPMG LLP
Columbus, Ohio
February 12, 1999
19
<PAGE> 20
SCHEDULE 2
R. G. BARRY CORPORATION AND SUBSIDIARIES
Reserves
January 2, 1999
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ------------- -------------- ------------- ---------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Reserves deducted from accounts receivable:
Allowance for doubtful
receivables $ 204,000 77,000 49,000 1 232,000
Allowance for returns 4,300,000 5,306,000 4,300,000 2 5,306,000
Allowance for promotions 3,989,000 6,040,000 3,989,000 3 6,040,000
------------- -------------- ------------- ---------------
$ 8,493,000 11,423,000 8,338,000 11,578,000
============= ============== ============= ===============
</TABLE>
Notes:
1. Write-off uncollectible accounts.
2. Represents 1998 sales returns reserved for in fiscal 1997.
3. Represents 1998 promotions expenditures committed to and reserved for in
fiscal 1997.
20
<PAGE> 21
SCHEDULE 2
R. G. BARRY CORPORATION AND SUBSIDIARIES
Reserves
January 3, 1998
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ------------- ------------- ------------- -------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Reserves deducted from accounts receivable:
Allowance for doubtful
receivables $ 235,000 80,000 111,000 1 204,000
Allowance for returns 4,052,000 4,300,000 4,052,000 2 4,300,000
Allowance for promotions 4,685,000 3,989,000 4,685,000 3 3,989,000
------------- ------------- ------------- -------------
$ 8,972,000 8,369,000 8,848,000 8,493,000
============= ============= ============= =============
</TABLE>
Notes:
1. Write-off uncollectible accounts.
2. Represents 1997 sales returns reserved for in fiscal 1996.
3. Represents 1997 promotions expenditures committed to and reserved for in
fiscal 1996.
21
<PAGE> 22
SCHEDULE 2
R. G. BARRY CORPORATION AND SUBSIDIARIES
Reserves
December 28, 1996
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ------------- ------------- ------------- -------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Reserves deducted from accounts receivable:
Allowance for doubtful
receivables $ 349,000 140,000 254,000 1 235,000
Allowance for returns 3,021,000 4,052,000 3,021,000 2 4,052,000
Allowance for promotions 4,300,000 4,685,000 4,300,000 3 4,685,000
------------- ------------- ------------- -------------
$ 7,670,000 8,877,000 7,575,000 8,972,000
============= ============= ============= =============
</TABLE>
Notes:
1. Write-off uncollectible accounts.
2. Represents 1996 sales returns reserved for in fiscal 1995.
3. Represents 1996 promotions expenditures committed to and reserved for in
fiscal 1995.
22
<PAGE> 23
Six Year Review of Selected Financial Data
R.G. Barry Corporation and Subsidiaries
<TABLE>
<CAPTION>
1998 1997** 1996 1995 1994 1993
SUMMARY OF OPERATIONS (THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 150,773 $ 148,775 $ 148,626 $ 136,561 $ 116,720 $ 101,172
Cost of sales 77,348 77,438 83,202 76,065 69,975 59,795
Gross profit 73,425 71,337 65,424 60,496 46,745 41,377
Selling, general and administrative expenses 56,719 53,137 49,008 48,557 39,375 34,322
Interest expense, net (1,607) (1,817) (2,483) (2,962) (1,701) (1,474)
Other income (expense) 380 415 (211) 1,060 333 400
Earnings before income taxes 15,479 16,798 13,722 10,037 6,002 5,981
Income tax expense 5,712 6,680 5,465 3,738 2,191 2,183
Net earnings $ 9,767 $ 10,118 $ 8,257 $ 6,299 $ 3,811 $ 3,798
ADDITIONAL DATA
Basic earnings per share* $ 1.01 $ 1.06 $ 0.89 $ 0.68 $ 0.43 $ 0.45
Diluted earnings per share* $ 0.98 $ 1.03 $ 0.84 $ 0.65 $ 0.43 $ 0.45
Book value per share* $ 8.01 $ 7.07 $ 6.05 $ 5.14 $ 4.44 $ 3.71
Annual % change in net sales 1.3% 0.1% 8.8% 17.0% 15.4% (0.6%)
Annual % change in net earnings (3.5%) 22.5% 31.1% 65.3% 0.3% 13.7%
Net earnings as a percentage of beginning shareholders' equity 14.4% 17.8% 17.3% 15.3% 12.1% 13.9%
Basic average number of shares outstanding (in thousands)* 9,698 9,504 9,308 9,234 8,823 8,374
Diluted average number of shares outstanding (in thousands)* 9,992 9,820 9,827 9,690 8,823 8,374
FINANCIAL SUMMARY (THOUSANDS)
Current assets $ 90,233 $ 82,554 $ 67,679 $ 62,721 $ 56,683 $ 39,974
Current liabilities 17,263 20,017 13,956 18,793 17,332 12,119
Working capital 72,970 62,537 53,723 43,928 39,351 27,855
Long-term debt and capital leases 10,714 12,992 15,265 15,390 16,445 9,745
Net shareholders' equity 78,080 67,608 56,743 47,611 41,054 31,483
Net property, plant and equipment 12,875 14,231 13,929 14,156 13,785 13,410
Total assets 111,345 104,674 89,067 84,340 76,961 55,635
Capital expenditures 1,136 2,944 2,404 3,363 2,234 1,034
Depreciation and amortization of property, plant and equipment 2,413 2,531 2,571 2,158 1,905 1,607
</TABLE>
See also Management's Discussion & Analysis of Financial Condition & Results of
Operations.
*Retroactively restated to reflect 5-for-4 share split distributed June 17,
1996 and 4-for-3 share splits distributed September 15, 1995 and June 22,
1994.
**Fiscal year includes fifty-three weeks.
<PAGE> 24
MARKET AND DIVIDEND INFORMATION
R.G. Barry Corporation and Subsidiaries
<TABLE>
<CAPTION>
Market Value
Quarter High Low Close
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 First $14.13 $10.00 $13.75
Second 16.50 13.50 16.50
Third 17.69 12.75 13.88
Fourth 12.00 10.88 11.00
1997 First $11.50 $9.63 $9.75
Second 12.25 9.50 12.13
Third 14.38 11.94 14.06
Fourth 14.63 10.50 11.63
</TABLE>
Stock Exchange: New York Stock Exchange
Stock Ticker Symbol: RGB
Wall Street Journal Listing: BarryRG
Approximate Number of Registered Shareholders: 1,300
No cash dividends were paid during the periods noted. While the Company has no
current intention to pay cash dividends, it is currently able to pay cash
dividends, subject to the restrictions contained in the various loan agreements.
See also Note 4 to Consolidated Financial Statements, and Management's
Discussion & Analysis of Financial Condition & Results of Operations.
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
R.G. Barry Corporation and Subsidiaries
1998 Fiscal Quarters in thousands, except net earnings (loss) per share
First (1) Second (1) Third (1) Fourth (1)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $15,593 $16,910 $57,184 $61,086
Gross profit 10,147 8,730 26,969 27,579
Net earnings (loss) (751) (1,598) 6,065 6,051
Basic earnings (loss) per share $ (0.08) $ (0.16) $ 0.62 $ 0.63
Diluted earnings (loss) per share $ (0.08) $ (0.16) $ 0.61 $ 0.61
1997 Fiscal Quarters
First (1) Second (1) Third (1) Fourth (2)
- ----------------------------------------------------------------------------------------
Net sales $14,963 $14,511 $46,361 $72,940
Gross profit 8,359 6,888 21,750 34,340
Net earnings (loss) (1,073) (1,806) 5,024 7,973
Basic earnings (loss) per share $ (0.11) $ (0.19) $ 0.52 $ 0.84
Diluted earnings (loss) per share $ (0.11) $ (0.19) $ 0.52 $ 0.81
</TABLE>
(1) Quarter contains thirteen weeks
(2) Quarter contains fourteen weeks
See also Management's Discussion & Analysis of Financial Condition & Results of
Operations.
<PAGE> 25
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
R.G. Barry Corporation and Subsidiaries
LIQUIDITY AND CAPITAL RESOURCES
The assets used by the Company in the development, production, marketing,
warehousing and distribution, and sale of its products consist mainly of current
assets, such as cash, receivables, inventory, and prepaid expenses. The
Company's assets also include to a lesser extent net property, plant and
equipment, and other non-current assets. As of the end of 1998, 81 percent of
the Company's total assets were made up of current assets, compared with 79
percent at the end of 1997. A substantial portion of the Company's non-current
assets is net property, plant and equipment, and to a lesser extent deferred
income taxes and goodwill.
As of the end of 1998, the Company had $73.0 million in net working capital,
made up of $90.2 million in current assets, less $17.3 million in current
liabilities. At the end of 1997, the Company had $62.5 million in net working
capital. Substantially all of the increase in net working capital has been
generated as a result of the Company's net earnings for the year.
The Company ended 1998 with $29.6 million in cash and cash equivalents, $14.9
million in net trade receivables, and $38.6 million in inventory. At the end of
1997, by comparison, the Company had $22.5 million in cash and cash equivalents,
$16.0 million in net trade receivables, and $35.6 million in inventory. The
increase in cash from 1997 to 1998, is largely the result of the profits
generated by the Company in 1998 -- see also the accompanying Consolidated
Statements of Cash Flows. While net trade receivables declined from 1997 to
1998, receivables turnover indicates a slowdown in the collection of accounts.
The Company believes that the slowdown reflects retailers' expectations of
returning merchandise to the Company after the end of the 1998 fiscal year,
rather than an increased exposure to uncollectibles. The Company has provided an
accrual for the impact of the anticipated returns in its 1998 operating results.
In addition, the Company does not expect to incur any significant markdown
exposure as a result of accepting returned merchandise from its customers. The
increase in inventory from $35.6 million in 1997 to $38.6 million in 1998, is
primarily an increase in Barry Comfort finished goods inventory. Also,
contributing to the growth in inventory was the lower than anticipated sales
during November and December 1998.
Traditionally, the Company has leased most of its operating facilities. There
were no significant changes in the Company's facilities in 1998 or 1997. The
Company periodically reviews its facilities to determine whether its current
facilities will satisfy its anticipated operating needs for the foreseeable
future. Substantially all of the capital expenditures in 1998 and 1997 were for
routine additions to production machinery and equipment. During 1999, the
Company expects to open a new manufacturing facility in the Dominican Republic.
This additional leased facility is expected to support anticipated growth in the
Company's production needs for the foreseeable future. In addition, in 1999, the
Company will open an additional leased warehouse in San Antonio, Texas to
support anticipated needs and to reduce the Company's dependence upon short-term
leased facilities that accommodate peak seasonal storage needs.
The Company has typically relied on its Revolving Credit Agreement ("Revolver"),
first executed in February 1996, to satisfy additional capital requirements,
including seasonal working capital needs. In June 1998, the Company and its
three main banks agreed to extend the existing multi-year Revolver through 2000;
the Revolver provides for periodic further extensions beyond 2000, under certain
conditions. The Revolver furnishes the Company with a seasonally-adjusted
available line of credit ranging from $6 million to $51 million. During 1998,
the Company's peak borrowing amounted to $25.5 million compared with $24 million
in 1997. The daily average borrowing under the Revolver during 1998 decreased to
$7.6 million as compared with $8.2 million during 1997. The Company has met the
conditions for extension of the Revolver, and intends to seek and expects to
receive such an extension of the Revolver through 2001. The Revolver contains
covenants that the Company believes are typically found in agreements of similar
type and duration.
At times, the Company has incurred additional long-term debt to provide
long-term financing to the Company. The last time the Company incurred
additional long-term debt was in 1994, when the Company issued a $15 million,
9.7 percent note, due in 2004 ("Note"). The balance due under the Note as of the
end of 1998, was $12.9 million. The Note contains covenants that the Company
believes are normally found in similar agreements of this type. The Note and the
Revolver place restrictions on the amount of additional borrowings the Company
may make, and contain certain other financial covenants -- see also Note 4 to
the Consolidated Financial Statements for additional information. The Note
requires semi-annual interest payments and annual principal repayments, the
first of which began in July 1998, of $2.1 million. The Company is in compliance
with all covenants of the Note, Revolver and all other debt agreements.
<PAGE> 26
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
R.G. Barry Corporation and Subsidiaries
The Company last paid cash dividends in 1981. While the Company's various loan
agreements, at year end 1998, permitted the payment of cash dividends and the
repurchase of common shares for treasury, the Company has no current plans to
resume payment of cash dividends. The Company anticipates continuing to use its
cash resources to finance operations and to fund future growth. Subject to the
covenants in the various loan agreements, the Company currently may incur
additional long-term debt, should that become advisable. See also Note 4 to the
Consolidated Financial Statements for additional information.
The Company believes that it has a strong balance sheet, with strong financial
ratios. At the end of 1998, the Company's total capitalization amounted to $88.8
million, which was composed of 12.1 percent long-term debt and 87.9 percent
shareholders' equity. This compares with $80.6 million in total capitalization
at year end 1997, composed of 16.1 percent long-term debt and capital leases and
83.9 percent shareholders' equity. The Company's current ratio, a measure of the
relationship of current assets to current liabilities, was 5.23 to 1 at year end
1998, compared with 4.12 to 1 at year end 1997.
LEGAL PROCEEDINGS
During the third quarter of 1998, the Company filed a lawsuit against Domino's
Pizza, Inc., and Phase Change Laboratories, Inc., alleging patent infringement.
The case covers an invention, which maintains desired temperature of food and
other items using a phase change material. Domino's Pizza purchased a product it
calls the "Heat Wave" system. The product is manufactured by Phase Change
Laboratories, Inc. The Company believes that the product infringes upon the
Company's patent as granted by the United States Patent Office. The Company
seeks damages, attorney's fees, and an injunction against further infringement
by both defendants. The matter is currently in the early stages of discovery.
YEAR 2000 READINESS DISCLOSURES
The Company has conducted a review of its key financial, information and
operating systems to determine the extent to which it is exposed to so-called
year 2000 computer date problems. The Company believes that all of its critical
application systems have been converted to correct for potential problems.
During the first half of 1998, the Company conducted extensive tests, which have
confirmed the readiness of its systems. Key suppliers and electronic trading
partners have been contacted to obtain their commitments to conversion and
readiness, so as to minimize problems relating to the exchange of electronic
data. The Company has not separately identified the costs associated with its
conversion, but estimates that the costs incurred to date, which have been
expensed as incurred, have not been material, and does not anticipate the future
impact on its financial condition, results of operations or cash flows will be
material. The possibility exists that the Company's conversion could
inadvertently fail, although the Company believes that the impact of such an
occurrence would be manageable and minor in impact as a result of substantial
equipment and software upgrades implemented in recent years. The Company is not
dependent upon any one customer or any one supplier to conduct its business and
the Company believes that should one of its suppliers or customers prove not to
become year 2000 compliant in a timely manner, the Company can revert to
alternative compliant suppliers or resort to increased use of traditional
methods of transacting business to satisfy its customer needs. If in the future,
the Company uncovers additional risks associated with year 2000 compliance, the
Company will develop contingency plans at that time as deemed necessary.
IMPLEMENTATION OF THE "EURO" AS A COMMON LEGAL CURRENCY IN EUROPE
The Company believes that it is prepared for the implementation of the "Euro" as
the common legal currency in certain European Community countries in 1999. The
United Kingdom, which is one of the Company's principal bases of operation in
Europe, will not immediately join the transition to the Euro, although France,
where the Company also conducts business, will join. The Company's systems have
been designed with sufficient flexibility to handle the introduction of the Euro
as an additional transactional currency. The Company incurred a nominal cost in
preparing its systems for the introduction of the Euro.
<PAGE> 27
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
R.G. Barry Corporation and Subsidiaries
FOREIGN CURRENCY RISK
At times, during recent years, the value of a number of foreign currencies,
principally those in the far east, eastern Europe, and to a lesser degree in
Latin America, have been subject to fluctuations in value in world currency
markets, and in some cases currencies have suffered significant devaluation. The
Company's operations are currently conducted primarily in U. S. Dollars and to a
lesser degree in British Pound Sterling, French Francs, Swiss Francs, and German
Marks -- all currencies that historically have not been subject to significant
volatility. The Company, in accordance with established policy guidelines, at
times, hedges some of these currencies on a short-term basis, using foreign
exchange contracts as a means to protect itself from currency fluctuations. The
amount of foreign exchange contracts that the Company has maintained has not
been material to the Company's overall operations.
In addition, portions of the Company's labor costs are incurred in Mexican
Pesos, to a lesser degree in Chinese Renminbi and, in 1999, will be incurred in
Dominican Republic Pesos. As of February 1999, these currencies had been not
subject to recent significant volatility. Should any of these currencies suffer
a devaluation, when compared with the U. S. Dollar, the Company believes that
the impact of any devaluation would likely have the effect of reducing the
Company's effective costs of manufacturing in those countries, although any such
reduction is not expected to have a significant impact upon the Company's
results of operations.
RESULTS OF OPERATIONS
1998 SALES AND OPERATIONS COMPARED WITH 1997
Net sales for 1998 amounted to $150.8 million, approximately 1.3 percent greater
than net sales in 1997 of $148.8 million. For the 1998 fiscal year, net earnings
amounted to $9.8 million, approximately 3.5 percent lower than net earnings of
$10.1 million for 1997. See also, Note 13 of Notes to the Consolidated Financial
Statements for further breakdowns of net sales by geographic region of the world
and by segment of the Company's operations.
The Company operates in two differing segments: i) Barry Comfort, which
manufactures and markets at-and-around-the-home comfort footwear, and ii)
Thermal, which markets thermal retention technology products that act as hot or
cold temperature reservoirs, releasing that energy over time.
Net sales of Barry Comfort increased in 1998 to $139.6 million from $131.5
million in 1997, reflecting a 6.2 percent increase in at-and-around-the-home
comfort footwear. Barry Comfort believes that it has a substantial growth
opportunity in Europe. In 1991, the Company opened its first European office in
London, and in 1997, opened an office in Paris to further explore the French
market. Net sales in Europe, principally the United Kingdom and France, amounted
to $9.5 million in 1998, a 35.9 percent increase when compared with the $7.0
million net sales in 1997. Substantially all of the increase occurred in France.
Thermal sells proprietary thermal retention technology products, which maintain
constant temperatures over time after having been energized either by Microwave
heating or conventional cooling. Net sales of Thermal products declined in 1998
to $11.2 million from $17.3 million in 1997. The decrease was mainly the result
of the Company's decision announced in late 1997, to de-emphasize the sale of
thermal consumer products in the accessories departments of department stores,
and to concentrate its efforts on the development of commercial applications of
the thermal technologies. Also contributing to the decline in net sales was a
decision by a major customer, effective early in 1997, to source certain of its
non-MICROCORE (R) components, which generated lower margins for the Company,
directly from suppliers rather than continue to purchase them from the Company.
The Company also believes its sales of Thermal products have also been adversely
affected by the patent infringement of Domino's Pizza, Inc. and Phase Change
Laboratories, Inc. referred to above in the `Legal Proceedings' portion of this
discussion.
Gross profit increased to $73.4 million during 1998, from $71.3 million in 1997.
The Company's gross profit margin, as a percent of net sales, also increased
during 1998 to 48.7 percent, compared with 47.9 percent in 1997. Increases in
net sales of higher margin Barry Comfort at-and-around-the-home comfort
footwear, coupled with a decline in sales of lower margin non-MICROCORE(R)
components (as noted above), contributed to the growth in gross profit percent.
In addition, the expanded use of modular manufacturing has contributed to
increased gross profit margins. During the spring of 1998, the Company concluded
a project to expand the use of modular manufacturing to all of the Barry Comfort
production facilities. With modular manufacturing, the Company has realized
improved efficiencies and
<PAGE> 28
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
R.G. Barry Corporation and Subsidiaries
lowered the per product cost without making a sizable investment in
infrastructure. While the gross profit percent increased in 1998 when compared
with 1997, the Company did receive pressure from retailers regarding pricing.
The Company expects to continue to receive pressure from retailers regarding
pricing and for additional promotional support.
Selling, general and administrative expenses increased during 1998 to $56.7
million, a 6.7 percent increase over the $53.1 million expense incurred in 1997.
Most of the increase related to advertising, and marketing and sales promotion
programs in Barry Comfort, implemented in anticipation of a growth in net sales.
Net interest expense in 1998 declined to $1.6 million from $1.8 million in 1997.
The Company's improved profitability in 1998 and 1997 has resulted in improved
liquidity as well. During 1998, the Company's daily average seasonal borrowings
under the Revolver amounted to $7.6 million, compared with $8.2 million during
1997. In both years, the weighted average interest rate was approximately 6.7
percent.
For the year, earnings before income taxes amounted to $15.5 million compared
with $16.8 million in 1997, a decline of 7.9 percent. Net earnings after taxes
decreased by 3.5 percent in 1998 to $9.8 million from $10.1 million in 1997.
During 1998, the Company implemented a number of tax strategies, which have
effectively reduced the Company's overall effective income tax rate to
approximately 37 percent. For 1997, the effective income tax rate had been
nearly 40 percent. For 1998, basic earnings per share [a measure of earnings per
average common share issued and outstanding] amounted to $1.01 per share, while
diluted earnings per share [a measure that includes a computation of common
shares attributable to outstanding but unexercised options] amounted to $0.98
per share. The comparable per share calculations for 1997 were basic earnings
per share of $1.06, and diluted earnings per share of $1.03.
1997 SALES AND OPERATIONS COMPARED WITH 1996
Net sales for 1997 of $148.8 million were nearly flat when compared to net sales
in 1996 of $148.6 million. During the same period, net earnings increased by
22.5 percent to $10.1 million from $8.3 million in 1996. During 1997, a major
customer of food preservation thermal products decided to source certain
non-MICROCORE(R) components, which generated a lower profit margin to the
Company, directly beginning 1997, although the Company continued to sell its
MICROCORE(R) thermal elements to this customer during 1997. These components had
been acquired from the Company during 1996. As a result, net sales to that
customer declined by about $9 million during 1997, and thus, sales of Thermal
products decreased in 1997 to $17.3 million from $25.1 million in 1996. The
Company replaced the loss of low-margin non-MICROCORE(R) component sales with
increased volume of higher margin sales of at-and-around-the-home comfort
footwear. Net sales of Barry Comfort increased in 1997 to $131.5 million from
$123.5 million in 1996. In 1991, the Company opened its initial Barry Comfort
office in London, and during 1997, opened an office in Paris. Net sales in
Europe totaled $7.0 million in 1997, including $1.5 million in France, compared
with $5.9 million during 1996.
Gross profit increased during 1997, despite flat overall net sales for the year.
Gross profit amounted to $71.3 million, compared with $65.4 million in 1996, an
increase of 9.0 percent. The Company's gross profit margin, as a percent of net
sales, increased during 1997 to 47.9 percent, compared with 44.0 percent in
1996, due principally to the following factors: a) an increase in sales of
higher margin Barry Comfort at-and-around-the-home comfort footwear, b) improved
materials utilization from increased usage of computerized cutting, and c)
expanded use of modular manufacturing in the Company's production facilities.
Selling, general and administrative expenses increased during 1997 to $53.1
million, an 8.4 percent increase over the $49.0 million expense incurred in
1996. Most of the increase related to marketing and sales programs implemented
as a part of opening the Paris office of Barry Comfort. All expenses relating to
the startup in France were expensed during the year.
Net interest expense in 1997 declined to $1.8 million from $2.5 million in 1996.
During 1997, the Company's daily average borrowings under the Revolver amounted
to $8.2 million, with a weighted average interest rate of 6.7 percent. This
compared with average daily borrowings in 1996 of $16.9 million, and a weighted
average interest rate of 6.5 percent.
<PAGE> 29
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
R.G. Barry Corporation and Subsidiaries
For the year, earnings before income taxes amounted to $16.8 million compared
with $13.7 million in 1996, an increase of 22.4 percent. Net earnings after
taxes increased by 22.5 percent in 1997 to $10.1 million from $8.3 million in
1996. For 1997, basic earnings per share amounted to $1.06 per share, while
diluted earnings per share amounted to $1.03 per share. The comparable per share
calculations for 1996 were basic earnings per share of $0.89 per share, and
diluted earnings per share of $0.84 per share.
FORWARD LOOKING STATEMENTS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
The statements in this Annual Report to Shareholders, 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 and business environment and the impact of
governmental regulations, both in the United States and abroad; the effect of
direct sourcing by customers of competitive products from alternative suppliers;
the effect of pricing pressures from retailers; inherent risks of international
development, including foreign currency risks, the implementation of the Euro,
economic conditions, regulatory and cultural difficulties or delays in the
Company's development outside the United States; the Company's ability to
improve its processes and business practices to keep pace with the economic,
competitive and technological environment, including successfully addressing
year 2000 issues; 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 events affecting the Company and the impact of such events on the
Company's operations may vary from those currently anticipated.
<PAGE> 30
CONSOLIDATED BALANCE SHEETS
R.G. Barry Corporation and Subsidiaries
<TABLE>
<CAPTION>
JANUARY 2, 1999 January 3, 1998
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 29,596 $ 22,495
Accounts receivable:
Trade (less allowance for doubtful receivables, returns and
promotions of $11,578,000 and $8,493,000, respectively) 14,912 15,957
Other 1,073 1,004
Inventory 38,648 35,602
Deferred income taxes 3,729 4,827
Prepaid expenses 2,275 2,669
---------- ---------
Total current assets 90,233 82,554
---------- ---------
Property, plant, and equipment, at cost 41,697 40,840
Less accumulated depreciation and amortization 28,822 26,609
---------- ---------
Net property, plant, and equipment 12,875 14,231
---------- ---------
Deferred income taxes 1,187 752
Goodwill (less accumulated amortization of $512,000 and $396,000,
respectively) 4,114 4,230
Other assets 2,936 2,907
---------- ---------
$111,345 $104,674
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt and capital lease
obligations $ 2,278 $ 2,273
Accounts payable 6,581 6,389
Accrued expenses 8,404 11,355
---------- ----------
Total current liabilities 17,263 20,017
---------- ----------
Accrued retirement cost, excluding current liability 4,440 3,520
Long-term debt, excluding current installments 10,714 12,857
Capital lease obligations, excluding current installments -- 135
Other 848 537
---------- ----------
Total liabilities 33,265 37,066
---------- ----------
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;
issued and outstanding 9,745,000 and 9,564,000 shares
(excluding treasury shares of 597,000 and 561,000) 9,745 9,564
Additional capital in excess of par value 15,357 14,629
Deferred compensation (204) --
Retained earnings 53,182 43,415
---------- ---------
Net shareholders' equity 78,080 67,608
---------- ---------
Commitments and contingencies
$111,345 $104,674
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 31
CONSOLIDATED STATEMENTS OF EARNINGS
R.G. Barry Corporation and Subsidiaries
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands, except per share data)
<S> <C> <C> <C>
Net sales $ 150,773 $ 148,775 $ 148,626
Cost of sales 77,348 77,438 83,202
--------- --------- ---------
Gross profit 73,425 71,337 65,424
Selling, general and administrative expenses 56,719 53,137 49,008
--------- --------- ---------
Operating income 16,706 18,200 16,416
Other (expense) income 380 415 (211)
Interest expense, net of interest income of $389,000,
$322,000 and $172,000, respectively (1,607) (1,817) (2,483)
--------- --------- ---------
Earnings before income taxes 15,479 16,798 13,722
Income tax expense 5,712 6,680 5,465
--------- --------- ---------
Net earnings $ 9,767 $ 10,118 $ 8,257
========= ========= =========
Earnings per common share:
Basic $ 1.01 $ 1.06 $ 0.89
========= ========= =========
Diluted $ 0.98 $ 1.03 $ 0.84
========= ========= =========
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
R.G. Barry Corporation and Subsidiaries
<TABLE>
<CAPTION>
Additional
capital in Deferred
Common excess of compen- Retained
shares par value sation earnings
(in thousands)
<S> <C> <C> <C> <C>
Balance at December 30, 1995 $ 7,410 $ 15,161 $ -- $ 25,040
Net earnings -- -- -- 8,257
Five-for-four share split
(including $7,000 paid for fractional shares) 1,855 (1,862) -- --
Issuance of shares in connection with the
employee stock purchase plan 25 252 -- --
Stock options exercised 85 335 -- --
Tax benefit associated with the activity under
various stock plans -- 174 -- --
Other -- 11 -- --
--------- --------- --------- ---------
Balance at December 28, 1996 9,375 14,071 -- 33,297
Net earnings -- -- -- 10,118
Stock options exercised 193 452 -- --
Tender of shares (4) (37) -- --
Tax benefit associated with the activity under
various stock plans -- 143 -- --
--------- --------- --------- ---------
Balance at January 3, 1998 9,564 14,629 -- 43,415
Net earnings -- -- -- 9,767
Deferred compensation -- 230 (230) --
Amortization of deferred compensation -- -- 26 --
Stock options exercised 217 793 -- --
Tender of shares (36) (508) -- --
Tax benefit associated with the activity under
various stock plans -- 213 -- --
--------- --------- --------- ---------
Balance at January 2, 1999 $ 9,745 $ 15,357 $ (204) $ 53,182
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 32
CONSOLIDATED STATEMENTS OF CASH FLOWS
R.G. Barry Corporation and Subsidiaries
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,767 $ 10,118 $ 8,257
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Tax benefit associated with the activity under various
stock plans 213 143 174
Depreciation and amortization of property,
plant, and equipment 2,413 2,531 2,571
Amortization of goodwill 116 116 116
Deferred income tax expense (benefit) 663 (54) (1,181)
Loss on disposal of property, plant, and equipment 35 97 25
Amortization of deferred compensation 26 -- --
Net (increase) decrease in:
Accounts receivable 976 1,595 (304)
Inventory (3,046) (6,748) 2,854
Prepaid expenses 394 (642) 61
Other assets (29) (264) 358
Net increase (decrease) in:
Accounts payable 192 2,219 (4,791)
Accrued expenses (3,050) 1,694 644
Accrued retirement cost, net 1,019 631 405
Other liabilities 311 323 214
--------- --------- ---------
Net cash provided by operating activities 10,000 11,759 9,403
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant, and equipment (1,136) (2,944) (2,404)
Proceeds from disposal of property, plant,
and equipment 44 14 35
--------- --------- ---------
Net cash used in investing activities (1,092) (2,930) (2,369)
--------- --------- ---------
Cash flows from financing activities:
Repayment of long-term debt, capital lease obligations,
and short-term note payable (2,273) (125) (815)
Proceeds from shares issued 1,010 645 701
Purchase of common shares for treasury (544) (41) --
--------- --------- ---------
Net cash provided by (used in) financing activities (1,807) 479 (114)
--------- --------- ---------
Net increase in cash 7,101 9,308 6,920
Cash and cash equivalents at beginning of year 22,495 13,187 6,267
--------- --------- ---------
Cash and cash equivalents at end of year $ 29,596 $ 22,495 $ 13,187
========= ========= =========
Supplemental cash flow disclosures:
Interest paid $ 1,978 $ 2,035 $ 2,624
========= ========= =========
Income taxes paid $ 8,752 $ 3,937 $ 8,713
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Operations
R.G. Barry Corporation (the Company) is a United States based
multinational corporation. Its principal line of business is comfort
products for at and around the home. The predominant market for the
Company's products is North America. Products are sold primarily to
department and discount stores.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
(c) Cash Equivalents
Investments with maturities of three months or less at the date of
issuance are considered cash equivalents.
(d) Inventory
Inventory is valued at the lower of cost or market. Approximately 77%
of the 1998 and 1997 ending inventory costs are determined on the last
in, first out (LIFO) basis. The remainder are determined on the first
in, first out (FIFO) basis.
(e) Depreciation and Amortization
Depreciation and amortization have been provided substantially using
the double declining-balance method over the estimated useful lives of
the assets acquired prior to September 30, 1991. The Company adopted
the straight-line method of depreciation on its machinery and equipment
acquired after September 30, 1991.
(f) Revenue Recognition
The Company recognizes revenue when the goods are shipped to customers.
The Company has established programs which, in certain circumstances,
enable its customers to return product. The effect of these programs is
estimated and a returns allowance is provided.
(g) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(h) Per-Share Information
In 1997, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share. Statement 128 replaced
the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings
per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement
128 requirements.
The computation of basic earnings per common share for 1998, 1997, and
1996 is based on the weighted average number of outstanding common
shares during the period. Diluted earnings per common share is based on
the weighted average number of outstanding common shares during the
period, plus, when their effect is dilutive, potential common shares
consisting of certain shares subject to stock options and the stock
purchase plan.
Effective June 17, 1996, the Board of Directors of the Company approved
a five-for-four share split to shareholders of record on June 3, 1996.
The share split was distributed in the form of a share dividend. The
share split specifically excluded treasury shares.
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Significant estimates made by management include the adequacy of
accounts receivable and inventory valuation allowances, and the
realizability of the deferred tax assets.
(j) Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable, and
accrued expenses as reported in the financial statements approximate
their fair value because of the short-term maturity of those
instruments. The fair value of the Company's long-term debt is
disclosed in note 4.
(k) Goodwill
Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on the straight-line method over
40 years. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's
average cost of funds. The assessment of the recoverability of goodwill
will be impacted if estimated future operating cash flows are not
achieved.
(l) Stock Option Plans
Effective for fiscal 1996, the Company adopted SFAS No. 123, Accounting
for Stock-Based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and provide certain pro forma
information. APB Opinion No. 25 requires that compensation expense be
recorded on the date of grant only if the current market price of the
underlying stock exceeds the exercise price. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of SFAS No. 123 (see note 9).
(m) Pension Plans
On January 4, 1998, the Company adopted SFAS No. 132, Employers'
Disclosures about Pension and Other Postretirement Benefits. SFAS No.
132 revises employers' disclosures about pension and other
postretirement benefit plans. SFAS No. 132 does not change the method
of accounting for such plans. Prior year amounts in the footnotes to
the consolidated financial statements have been reclassified to conform
to the requirements of SFAS No. 132.
(n) Advertising
The Company expenses the costs of advertising as incurred. For the
years ended January 2, 1999, January 3, 1998, and December 28, 1996,
advertising expenses were $7,615,000, $6,471,000, and $5,314,000,
respectively.
(o) Comprehensive Income
On January 4, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
and presentation of comprehensive income and its components in a full
set of financial statements. The Company, however, has not engaged in
transactions or events that meet the definition of comprehensive income
and that would require to be disclosed in the consolidated financial
statements presented.
(2) INVENTORY
If the FIFO method had been used to value inventory, inventory would have
been $1,681,000, $2,409,000, and $3,113,000 higher than that reported at
the end of 1998, 1997, and 1996, respectively. Because LIFO inventory is
valued using the dollar value method, it is impracticable to separate
inventory values between raw materials, work-in-process, and finished
goods.
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R. G. Barry Corporation and Subsidiaries
continued
(3) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
JANUARY 2, January 3, Estimated
1999 1998 life in years
---------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Land and improvements $ 490 $ 490 8-15
Buildings and improvements 4,870 4,858 40-50
Machinery and equipment 28,459 27,361 3-10
Leasehold improvements 7,591 7,443 5-20
Construction in progress 287 688
--------- ---------
$ 41,697 $ 40,840
========= =========
</TABLE>
See note 5 for a summary of property and equipment, included above,
representing capitalized leases.
<TABLE>
<CAPTION>
(4) LONG-TERM DEBT AND RESTRICTIONS
Long-term debt consists of the following:
JANUARY 2, January 3,
1999 1998
-------------------------------
(in thousands)
<S> <C> <C> <C> <C>
9.7% note, due July 2004 $12,857 $15,000
Less current installments 2,143 2,143
------- -------
Long-term debt, excluding current installments $10,714 $12,857
======= =======
</TABLE>
The 9.7% note, issued in July 1994, requires semiannual interest payments
and annual principal repayments of $2,143,000, which commenced in 1998 and
end in 2004.
The Company has determined the fair value of its long-term debt based upon
the present value of expected cash flows, considering expected maturities
and using current interest rates available to the Company for borrowings
with similar terms. The fair value of the 9.7% note was $14,100,000 and
$15,700,000 at January 2, 1999 and January 3, 1998, respectively.
In February 1996, the Company negotiated a new unsecured revolving credit
agreement with its banks. The new agreement provides the Company with a
seasonally adjusted amount of credit that has a minimum availability of $6
million and a peak availability of $51 million, with interest at variable
rates. At January 2, 1999 and January 3, 1998, no amounts were outstanding.
This agreement expires on December 31, 2000.
Under the most restrictive covenants of the various loan agreements, the
Company is (1) required to maintain a seasonally adjusted current ratio, as
defined; (2) required to maintain a minimum seasonally adjusted tangible
net worth, as defined; (3) restricted as to annual acquisition of fixed
assets; and (4) restricted with regard to the amount of additional
borrowings, purchase of treasury shares and payment of dividends. At
January 2, 1999, approximately $18 million of retained earnings was
available for the payment of cash dividends and the purchase of treasury
shares (see also note 9). There were no covenant violations during 1998 and
1997.
The Company maintains compensating cash balances, which are not legally
restricted, to defray the costs of other banking services provided.
(5) Leased Assets and Lease Commitments
The Company has a lease agreement with a local government which issued
Industrial Development Revenue Bonds to construct and purchase an office
facility. The lease expires in 1999, at which time the Company has the
right to acquire (at a nominal amount) the property under this lease
agreement. The Company also has the option to acquire the leased assets
prior to the expiration of the lease for an amount approximating the
outstanding bonds, plus accrued interest. The outstanding bonds bear
interest at 6.5%. At January 2, 1999, the remaining minimum lease payment
due under this capital lease was $144,000 which includes $9,000 in
interest.
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R. G. Barry Corporation and Subsidiaries
continued
The present value of minimum capital lease payments are reflected in the balance
sheets:
JANUARY 2, 1999 January 3, 1998
------------------------------------------
(in thousands)
Current $ 135 $ 130
Noncurrent -- 135
---- ----
$ 135 $ 265
These leased assets are capitalized as property, plant, and equipment:
<TABLE>
<CAPTION>
JANUARY 2, 1999 January 3, 1998
------------------------------------------
(in thousands)
<S> <C> <C>
Land and improvements $ 392 $ 392
Buildings and improvements 2,593 2,583
------ -----
2,985 2,975
Less accumulated amortization 1,801 1,732
------ -----
Net book value $1,184 $1,243
====== =====
</TABLE>
The Company occupies certain manufacturing, warehousing, operating, and
sales facilities and uses certain equipment under cancelable and
noncancelable operating lease arrangements. A summary of the noncancelable
operating lease commitments at January 2, 1999 follows.
<TABLE>
<CAPTION>
Fiscal year AMOUNT
--------------------------------------------------------------------
(in thousands)
<S> <C>
1999 $ 3,937
2000 3,633
2001 3,094
2002 2,659
2003 2,328
Later fiscal years, through 2007 3,012
-------
$ 18,663
</TABLE>
Substantially all of these operating lease agreements are renewable for
periods of 3 to 15 years and require the Company to pay insurance, taxes
and maintenance expenses. Rent expense under cancelable and noncancelable
operating lease arrangements in 1998, 1997, and 1996 amounted to
$5,512,000, $4,986,000, and $4,956,000, respectively.
(6) INCOME TAXES
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current expense:
Federal $ 4,644 $ 5,607 $ 5,682
Foreign 108 108 137
State 297 1,019 827
------ ------ ------
5,049 6,734 6,646
Deferred expense (benefit) 663 (54) (1,181)
------ ------ ------
$ 5,712 $ 6,680 $ 5,465
====== ====== ======
</TABLE>
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
The differences between income taxes computed by applying the statutory
federal income tax rate (35% in 1998, 1997 and 1996) and income tax expense
in the consolidated financial statements are:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
(in thousands)
<S> <C> <C> <C>
Computed "expected" tax expense $5,418 $5,879 $4,803
State income taxes, net of federal income taxes 193 662 538
Foreign income tax expense 108 108 137
Other, net (7) 31 (13)
------ ------ ------
$5,712 $6,680 $5,465
====== ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
<TABLE>
<CAPTION>
JANUARY 2, 1999 January 3, 1998
-----------------------------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowances for returns,
promotions, and doubtful accounts $3,824 $3,139
Inventories, principally due to additional costs inventoried for
tax purposes and valuation allowances 1,539 1,145
Package design costs 285 327
Certain accounting accruals, including such items as
self-insurance costs, vacation costs, and others 116 216
Pension costs 1,775 1,478
------ ------
Total deferred tax assets 7,539 6,305
Deferred tax liabilities:
Basis differences and differing methods of depreciation
for book and tax purposes 551 553
Change in tax accounting method 2,072 --
Difference in gain recognition on sale of property, plant,
and equipment -- 173
------ ------
Total deferred tax liabilities 2,623 726
------ ------
Net deferred tax assets $4,916 $5,579
====== ======
</TABLE>
In order to realize the deferred tax asset, the Company will need to
generate future taxable earnings or be able to carryback to 1998 or 1997.
The Company's taxable earnings history is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------
<S> <C> <C>
Taxable earnings $19,800 $9,960
</TABLE>
The Company believes the existing net deductible temporary differences will
reverse during periods in which the Company generates net taxable earnings,
or in periods in which a carryback to 1998 or 1997 is available. Further,
the Company believes it has available certain tax planning strategies that
could be implemented, if necessary, to supplement taxable earnings from
operations. The Company has considered the above factors in concluding that
it is more likely than not that the Company will realize the benefits of
existing deferred tax assets. There can be no assurance, however, that the
Company will generate any specific level of continuing earnings.
(7) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
JANUARY 2, 1999 January 3, 1998
-----------------------------------
(in thousands)
<S> <C> <C>
Salaries and wages $ 777 $ 1,933
Income taxes 5,312 6,665
Other 2,315 2,757
----- -----
$8,404 $11,355
====== =======
</TABLE>
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(8) EMPLOYEE RETIREMENT PLANS
The Company and its domestic subsidiaries have a noncontributory retirement
plan for the benefit of salaried and nonsalaried employees, the Associates'
Retirement Plan (ARP). The employees covered under the ARP are eligible to
participate upon the completion of one year of service. Salaried
participant benefits are based upon a formula applied to a participant's
final average salary and years of service, which is reduced by a certain
percentage of the participant's social security benefits. Nonsalaried
participant benefits are based on a fixed amount for each year of service.
The ARP provides reduced benefits for early retirement. The Company intends
to fund the minimum amounts required under the Employee Retirement Income
Security Act of 1974.
The funded status of the ARP and the accrued retirement costs recognized at
January 2, 1999 and January 3, 1998 were:
<TABLE>
<CAPTION>
1998 1997
------------------------
(in thousands)
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at the beginning of the year $19,792 $19,295
Service cost 719 678
Interest cost 1,341 1,463
Actuarial loss 2,308 934
Benefits paid (997) (2,578)
------ ------
Benefit obligation at the end of the year 23,163 19,792
====== ======
Change in plan assets:
Fair value of plan assets at the beginning of the year 24,323 20,640
Actual return on plan assets (825) 6,606
Expenses (289) (345)
Benefits paid (997) (2,578)
------ ------
Fair value of plan assets at the end of the year 22,212 24,323
====== ======
Funded status (951) 4,531
Unrecognized actuarial (gain)/loss 79 (4,999)
Unrecognized prior service cost 169 197
Unrecognized net transition obligation ----- (209)
------
Net amount recognized in the consolidated balance sheets $(703) $(480)
===== =====
</TABLE>
The Company also has a Supplemental Retirement Plan (SRP) for certain
officers and other key employees of the Company as designated by the Board
of Directors. The SRP is unfunded, noncontributory, and provides for the
payment of monthly retirement benefits. Benefits are based on a formula
applied to the recipients' final average monthly compensation, reduced by a
certain percentage of their social security benefits.
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
The funded status of the SRP and the accrued retirement cost recognized at
January 2, 1999 and January 3, 1998 are:
<TABLE>
<CAPTION>
1998 1997
------------------------
(in thousands)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at the beginning of the year $3,491 $3,113
Service cost 51 43
Interest cost 249 237
Amendments 551 --
Actuarial (gain)/loss (27) 197
Benefits paid (99) (99)
------- -------
Benefit obligation at the end of the year 4,216 3,491
======= =======
Change in plan assets:
Fair value of plan assets at the beginning of the year -- --
Employer contributions 99 99
Benefits paid (99) (99)
------- ------
Fair value of plan assets at the end of the year -- --
======= ======
Funded status (4,216) (3,491)
Contribution during the fourth quarter 25 25
Unrecognized actuarial loss 193 211
Unrecognized prior service cost 635 117
Unrecognized net transition obligation 118 167
------- -------
Net amount recognized in the consolidated balance sheets (3,245) (2,971)
======= =======
Amounts recognized in the consolidated balance sheets consist of:
Accrued retirement cost, including current liability of $98,000 (3,835) (3,138)
Intangible asset 590 167
------- -------
Net amount recognized $(3,245) $(2,971)
======= =======
</TABLE>
The components of net periodic benefit cost for the retirement plans were:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
(in thousands)
<S> <C> <C> <C>
Service cost $ 770 $ 721 $ 662
Interest cost 1,591 1,700 1,604
Expected return on plan assets (1,655) (1,702) (1,582)
Net amortization (109) (142) (133)
------- ------- -------
$ 597 $ 577 $ 551
======= ======= =======
</TABLE>
Weighted average assumptions as of January 2, 1999 and January 3, 1998
were:
<TABLE>
<CAPTION>
1998 1997
------------------------
<S> <C> <C>
Discount rate 6.60% 7.25%
Rate of compensation increase 5.00% 5.00%
Expected return on plan assets 9.25% 9.25%
</TABLE>
The Company has a 401(k) plan, to which salaried and nonsalaried employees
may contribute a percentage, as defined, of their compensation per pay
period and the Company contributes 50% of the first 3% of each
participant's compensation contributed to this plan. The Company's
contribution to the 401(k) plan for the year ended January 2, 1999 and
January 3, 1998 was $247,000 and $185,000, respectively.
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(9) Shareholders' Equity
The Company has various stock option plans, which have granted incentive
stock options (ISOs) and nonqualified stock options exercisable for periods
of up to 10 years from date of grant at prices not less than fair market
value at date of grant. Information with respect to options under these
plans follows:
<TABLE>
<CAPTION>
ISO Non-qualified
number number Weighted-average
of shares of shares exercise price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at December 30, 1995 911,500 85,200 $ 6.00
Granted 207,600 54,600 12.67
Exercised (85,400) (2,700) 4.77
Canceled (14,600) -- 8.59
--------- -------- -------
Outstanding at December 28, 1996 1,019,100 137,100 7.57
Granted 127,200 55,300 11.16
Exercised (191,100) (1,400) 3.34
Canceled (26,000) -- 9.76
--------- -------- -------
Outstanding at January 3, 1998 929,200 191,000 8.83
Granted 128,500 156,500 14.08
Exercised (205,600) (11,400) 4.65
Canceled (7,100) -- 10.02
--------- -------- -------
Balance outstanding at January 2, 1999 845,000 336,100 $10.85
========= ======== =======
Options exercisable at January 2, 1999 386,500 144,900
========= ========
</TABLE>
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------------------------- ----------------------------------
Number Weighted-average Number
Range of outstanding remaining Weighted-average exercisable Weighted-average
exercise prices at 1/2/99 contractual life exercise price at 1/2/99 exercise price
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5.00 and under 59,900 4.01 $ 3.21 59,900 $ 3.21
5.01 - 10.00 406,500 5.15 $ 8.44 313,600 $ 8.46
10.01 - 15.00 695,000 8.08 $ 12.78 155,900 $ 12.45
15.01 and over 19,700 8.95 $ 15.74 2,000 $ 15.13
-------- -------
1,181,100 531,400
========= =======
</TABLE>
At January 2, 1999, the remaining number of ISO and nonqualified shares
available for grant was 120,000.
At January 2, 1999, January 3, 1998, and December 28, 1996, the options
outstanding under these plans were held by 98, 109, and 105 employees,
respectively, and had expiration dates ranging from 1999 to 2008.
Stock appreciation rights may be issued subject to certain limitations.
There were no rights outstanding at January 2, 1999, January 3, 1998, or
December 28, 1996.
Had the Company elected to determine compensation cost based on the fair
value at the grant date, as alternatively permitted under SFAS No. 123, the
Company's net earnings would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Net earnings:
As reported $9,767 $10,118 $8,257
Pro forma 8,580 9,395 7,517
Earnings per share (diluted):
As reported .98 1.03 .84
Pro forma .87 .96 .76
====== ====== ======
</TABLE>
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
Using the Black Scholes option-pricing model, the per-share,
weighted-average fair value of stock options granted during 1998, 1997, and
1996 was $7.20, $4.93, and $5.97, respectively, on the date of grant. The
assumptions used in estimating the fair value of the options as of January
2, 1999 and January 3, 1998 were:
<TABLE>
<CAPTION>
1998 1997
------------------------
<S> <C> <C>
Expected dividend yield 0% 0%
Expected volatility 40% 45%
Risk-free interest rate 5.5% 5.5%
Expected life-- ISO grants 5.5 years 5.5 years
Nonqualified grants 7.5 years 7.5 years
</TABLE>
Pro forma net earnings reflects only options granted in 1998, 1997, 1996
and 1995. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net
earnings amounts presented above because compensation cost is reflected
over the options' vesting period of 5 years and compensation cost for
options granted prior to January 1, 1995 is not considered.
The Company has an employee stock purchase plan in which approximately 800
employees are eligible to participate. Under the terms of the Plan,
employees receive options to acquire common shares at the lower of 85% of
the fair market value on their enrollment date or at the end of each two
year plan term.
Shares
subscribed
----------
Balance at December 30, 1995 61,100
Subscriptions --
Purchases (24,900)
Cancellations (36,200)
--------
Balance at December 28, 1996 --
Subscriptions 70,100
Purchases --
Cancellations (200)
--------
Balance at January 3, 1998 69,900
Subscriptions 600
Purchases --
Cancellations (9,500)
--------
Balance at January 2, 1999 61,000
========
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(10) Earnings per Share
For the years ended: (earnings amounts in thousands)
<TABLE>
<CAPTION>
1998
-------------------------------------------------------
Earnings Shares Per-share
(Numerator) (Denominator) amount
--------------------------------------------------------
<S> <C> <C> <C>
Basic EPS --
Net earnings available to
common shareholders $9,767 9,698 $1.01
Effect of dilutive securities--
Stock options -- 294 (.03)
Diluted EPS--
Net earnings available to common
shareholders plus assumed conversions 9,767 9,992 .98
1997
-------------------------------------------------------
Earnings Shares Per-share
(Numerator) (Denominator) amount
-------------------------------------------------------
Basic EPS --
Net earnings available to
common shareholders $10,118 9,504 $1.06
Effect of dilutive securities--
Stock options -- 316 (.03)
Diluted EPS--
Net earnings available to common
shareholders plus assumed conversions 10,118 9,820 1.03
1996
---------------------------------------------------
Earnings Shares Per-share
(Numerator) (Denominator) amount
---------------------------------------------------
Basic EPS --
Net earnings available to
common shareholders $ 8,257 9,308 $ .89
Effect of dilutive securities--
Stock options -- 519 (.05)
Diluted EPS--
Net earnings available to common
shareholders plus assumed conversions 8,257 9,827 .84
</TABLE>
Options to purchase 479,000 common shares at prices up to $16.43 were
outstanding in 1998 but were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares and, therefore, the effect would
be anti-dilutive.
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(11) Preferred Share Purchase Rights
In February, 1998, the Company's Board of Directors declared a distribution
of one Preferred Share Purchase Right (Right) for each outstanding common
share of the Company to shareholders of record on March 16, 1998. The new
Rights replaced similar Rights issued in 1988 which expired on March 16,
1998. Under certain conditions, each new Right may be exercised to purchase
one one-hundredth of a share of Series Junior I Participating Class A
Preferred Shares, par value $1 per share, at an initial exercise price of
$40. The Rights initially will be attached to the Common Shares. The Rights
will separate from the Common Shares and a Distribution Date will occur
upon the earlier of 10 business days after a public announcement that a
person or group has acquired, or obtained the right to acquire 20% or more
of the Company's outstanding common shares (Share Acquisition Date) or 10
business days (or such later date as the Board shall determine) after the
commencement of a tender or exchange offer that would result in a person or
group beneficially owning 20% or more of the Company's outstanding common
shares. The Rights are not exercisable until the Distribution Date.
In the event that any Person becomes the beneficial owner of more than 20%
of the then outstanding common shares, each holder of a Right will be
entitled to purchase, upon exercise of the Right, common shares having a
market value two times the exercise price of the Right. In the event that,
at any time following the Share Acquisition Date, the Company is acquired
in a merger or other business combination transaction in which the Company
is not the surviving corporation or 50% or more of the Company's assets or
earning power is sold or transferred, the holder of a Right will be
entitled to buy the number of shares of common stock of the acquiring
company which at the time of such transaction will have a market value of
two times the exercise price of the Right.
The Rights, which do not have any voting rights, expire on March 16, 2008,
and may be redeemed by the Company at a price of $0.01 per Right at any
time until 10 business days following the Share Acquisition Date.
Each Class A Preferred Share is entitled to one-tenth of one vote, while
Class B Preferred Shares are entitled to ten votes. The preferred shares
are entitled to a preference in liquidation. None of these shares have been
issued.
(12) Related-party Obligation
The Company and a key executive have entered into an agreement pursuant to
which the Company is obligated for up to two years after the death of the
key executive to purchase, if the estate elects to sell, up to $4 million
of the Company's common shares, at their fair market value. To fund its
potential obligation to purchase such shares, the Company has purchased a
$5 million life insurance policy on the key executive, the cash surrender
value of which is included in other assets in the accompanying consolidated
balance sheets. In addition, for a period of 24 months following the key
executive's death, the Company will have a right of first refusal to
purchase any common shares of the Company owned by the key executive at the
time of his death if his estate elects to sell such shares. The Company
would have the right to purchase such shares on the same terms and
conditions as the estate proposes to sell such shares.
(13) Segment Reporting
On January 4, 1998, the Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, which establishes new
standards for the manner in which public enterprises report information
about operating segments, their products and the geographic areas where
they operate.
The Company manufactures and markets comfort footwear for
at-and-around-the-home and supplies thermal retention technology products.
The Company considers its at-and-around-the-home comfort footwear group,
"Barry Comfort", and the thermal retention technology products group,
"Thermal", as its two operating segments.
The accounting policies of the operating segments are substantially similar
to those described in note 1, except that the disaggregated financial
information has been prepared using certain management reports, which by
their very nature require estimates. In addition, certain items from these
management reports have not been allocated among operating segments. Some
of the more significant items include: a) costs of certain administrative
functions, b) current and deferred income tax expense (benefit) and
deferred tax assets (liabilities), and c) in some years, certain operating
provisions.
Revenues, and net property, plant and equipment, have been allocated to
geographic areas based upon the location of the Company's operating unit.
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R. G. Barry Corporation and Subsidiaries
continued
Revenues
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------
(in thousands)
<S> <C> <C> <C>
United Kingdom $ 5,597 $ 5,535 $ 5,901
France 3,946 1,489 --
United States/North America 141,230 141,751 142,725
-------- -------- --------
$150,773 $148,775 $148,626
======== ======== ========
</TABLE>
Net Property, Plant and Equipment
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands)
--------------------------------------------------
<S> <C> <C> <C>
United States $ 9,068 $10,221 $ 9,550
Mexico 3,487 3,791 4,202
Other 320 219 177
------- ------- -------
$12,875 $14,231 $13,929
======= ======= =======
</TABLE>
Net Sales by Product Line
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands)
---------------------------------------------------
<S> <C> <C> <C>
Thermal retention technology products $ 11,182 $ 17,287 $ 25,102
At-and-around-the-home comfort footwear 139,591 131,488 123,524
-------- -------- --------
$150,773 $148,775 $148,626
======== ======== ========
</TABLE>
In 1998, one Barry Comfort customer accounted for approximately 22% of the
Company's net sales. In 1997, three Barry Comfort customers accounted for
approximately 20%, 11% and 10% of the Company's net sales. In 1996, three
Barry Comfort customers accounted for approximately 15%, 12% and 10% of the
Company's net sales and one Thermal customer accounted for approximately
11% of the Company's net sales.
Other Segment Information
<TABLE>
Inter-
1998 Barry segment
(in thousands) Comfort Thermal Eliminations Total
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $139,591 $11,182 $ -- $150,773
Depreciation and amortization 2,153 260 -- 2,413
Interest income 641 -- (252) 389
Interest expense 1,996 252 (252) 1,996
Pre tax earnings (loss) 16,188 (457) (252) 15,479
Additions to property, plant, and equipment 952 184 -- 1,136
Total assets devoted $106,533 $ 7,571 $(2,759) $111,345
======== ======= ======== ========
</TABLE>
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R. G. Barry Corporation and Subsidiaries
continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Inter-
1997 Barry segment
(in thousands) Comfort Thermal Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $131,488 $17,287 $ -- $148,775
Depreciation and amortization 2,176 355 -- 2,531
Interest income 593 -- (271) 322
Interest expense 2,139 271 (271) 2,139
Pre tax earnings 15,571 1,498 (271) 16,798
Additions to property, plant, and equipment 2,856 88 -- 2,944
Total assets devoted $ 98,620 $ 8,987 $(2,933) $104,674
======== ======= ======= ========
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Inter-
1996 Barry segment
(in thousands) Comfort Thermal Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $123,524 $25,102 $ -- $148,626
Depreciation and amortization 2,347 224 -- 2,571
Interest income 490 -- (318) 172
Interest expense 2,655 318 (318) 2,655
Pre tax earnings 12,431 1,609 (318) 13,722
Additions to property, plant, and equipment 1,476 928 -- 2,404
Total assets devoted $ 82,075 $10,028 $(3,036) $ 89,067
======== ======= ======= ========
</TABLE>
(14) Contingent Liabilities
The Company has been named as defendant in various lawsuits arising from
the ordinary course of business. In the opinion of management, the
resolution of such matters is not expected to have a material adverse
effect on the Company's financial position or results of operations.
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
R. G. Barry Corporation and Subsidiaries
The Board of Directors and Shareholders
R.G. Barry Corporation:
We have audited the accompanying consolidated balance sheets of R.G. Barry
Corporation and subsidiaries as of January 2, 1999 and January 3, 1998, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the fiscal years in the three-year period ended January 2,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of R.G. Barry
Corporation and subsidiaries as of January 2, 1999 and January 3, 1998, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended January 2, 1999, in conformity with generally
accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 12, 1999
<PAGE> 47
R. G. BARRY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JANUARY 2, 1999
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Location
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<S> <C> <C>
3(a)(1) Articles of Incorporation of Registrant (as Incorporated herein by reference to
filed with Ohio Secretary of State on March 26, Registrant's Annual Report on Form 10-K for
1984) the fiscal year ended December 31, 1988
(File No. 0-12667) ("Registrant's 1988
Form 10-K") [Exhibit 3(a)(i)]
3(a)(2) Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant Authorizing the Registrant's 1988 Form 10-K
Series I Junior Participating Class B Preferred [Exhibit 3(a)(i)]
Shares (as filed with the Ohio Secretary of
State on March 1, 1988)
3(a)(3) Certificate of Amendment to the Articles of Incorporated herein by reference to
Registrant (as filed with the Ohio Secretary of Registrant's 1988 Form 10-K
State on May 9, 1988) [Exhibit 3(a)(i)]
3(a)(4) Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with the Registrant's Annual Report on Form 10-K for
Ohio Secretary of State on May 22, 1995) the fiscal year ended December 30, 1995
(File No. 1-8769) ("Registrant's 1995 Form
10-K") [Exhibit 3(b)]
3(a)(5) Certificate of Amendment to Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with the Registrant's 1995 Form 10-K [Exhibit 3(c)]
Ohio Secretary of State on September 1, 1995)
3(a)(6) Certificate of Amendment to Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with the Registrant's Registration Statement on Form
Ohio Secretary of State on May 30, 1997) S-8, filed June 6, 1997 (Registration No.
333-28671) [Exhibit 4(h)(6)]
3(a)(7) Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant Authorizing Registrant's Annual Report on Form 10-K for
Series I Junior Participating Class A Preferred the fiscal year ended January 3, 1998 (File
Shares (as filed with the Ohio Secretary of No. 1-8769) ("Registrant's 1997 Form 10-K")
State on March 10, 1998) [Exhibit 3(a)(7)]
</TABLE>
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<TABLE>
<CAPTION>
Exhibit No. Description Location
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<S> <C> <C>
3(a)(8) Articles of Incorporation of Registrant Incorporated herein by reference to
(reflecting amendments through March 10, 1998) Registrant's 1997 Form 10-K [Exhibit
[for purposes of SEC reporting compliance only 3(a)(8)]
-- not filed with the Ohio Secretary of State]
3(b) Regulations of Registrant, as amended Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended January 2, 1988 (File
No. 0-12667) [Exhibit 3(b)]
4(a) Trust Indenture, dated as of July 1, 1972, by Incorporated herein by reference to
and between Registrant and The Huntington Registrant's Registration Statement on Form
National Bank of Columbus, as Trustee S-1, filed June 27, 1972 (Registration No.
2-44432) [Exhibit 4(a)]
4(b) First Supplemental Trust Indenture, dated as of Incorporated herein by reference to
May 2, 1975, by and between Registrant and The Registrant's Registration Statement on Form
Huntington National Bank of Columbus, as Trustee S-7, filed March 3, 1978 (Registration No.
2-60888) [Exhibit 2(b)(ii)]
4(c) Second Supplemental Trust Indenture, dated as Incorporated herein by reference to
of April 1, 1978, by and between Registrant and Registrant's Registration Statement on Form
The Huntington National Bank of Columbus, as S-7, filed March 3, 1978 (Registration No.
Trustee 2-60888) [Exhibit 2(b)(iii)]
4(d) Third Supplemental Indenture, dated as of June Incorporated herein by reference to
22, 1984, between Registrant and The Huntington Registrant's Current Report on Form 8-K
National Bank, as Trustee dated June 22, 1984, filed June 26, 1984
(File No. 1-7231) [Exhibit 4(d)]
4(e) Fourth Supplemental Trust Indenture, dated as Incorporated herein by reference to
of February 27, 1985, between Registrant and Registrant's Annual Report on Form 10-K for
The Huntington National Bank, as Trustee the fiscal year ended December 29, 1984
(File No. 0-12667) [Exhibit 4(e)]
4(f) Revolving Credit Agreement, made to be Incorporated herein by reference to
effective on February 28, 1996, among Registrant's 1995 Form 10-K [Exhibit 4(f)]
Registrant, The Bank of New York, The
Huntington National Bank and NBD Bank
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
4(g) Agreement to Extend Revolving Credit Agreement, Incorporated herein by reference to
dated May 1, 1997, among Registrant, The Bank Registrant's Quarterly Report on Form 10-Q
of New York, The Huntington National Bank and for the fiscal quarter ended June 28, 1997
NBD Bank (File No. 1-8769) [Exhibit 4]
4(h) Note Agreement, dated July 5, 1994, between Incorporated herein by reference to
Registrant and Metropolitan Life Insurance Registrant's Registration Statement on Form
Company S-3, filed July 21, 1994 (Registration
No. 33-81820) [Exhibit 4(t)]
4(i) Rights Agreement, dated as of February 19, Incorporated herein by reference to
1998, between Registrant and The Bank of New Registrant's Current Report on Form 8-K,
York, as Rights Agent dated March 13, 1998 and filed March 16,
1998 (File No. 1-8769) [Exhibit 4]
9(a) Zacks-Streim Voting Trust and amendments thereto Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993 (File
No. 1-8769) [Exhibit 9]
9(b) Documentation related to extension of term of Incorporated herein by reference to
the Voting Trust Agreement for the Zacks-Streim Registrant's 1995 Form 10-K [Exhibit 10(a)]
Voting Trust
10(a) R. G. Barry Corporation Associates' Retirement Incorporated herein by reference to
Plan (As Amended and Restated Effective January Registrant's 1997 Form 10-K [Exhibit 10(a)]
1, 1996)
10(b) R. G. Barry Corporation Supplemental Retirement Incorporated herein by reference to
Plan Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 1990
(File No. 0-12667) [Exhibit 10(b)]
10(c) R. G. Barry Corporation Incentive Plan for Key Incorporated herein by reference to
Employees Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 1984
(File No. 0-12667) [Exhibit 10(e)]
10(d) Employment Agreement, dated July 1, 1998, *
between Registrant and Gordon Zacks
</TABLE>
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<PAGE> 50
<TABLE>
<CAPTION>
Exhibit No. Description Location
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<S> <C> <C>
10(e) Agreement, dated September 27, 1989, between Incorporated herein by reference to
Registrant and Gordon Zacks Registrant's Current Report on Form 8-K
dated October 11, 1989, filed October 12,
1989 (File No. 0-12667) [Exhibit 28.1]
10(f) Amendment No. 1, dated as of October 12, 1994, Incorporated herein by reference to
between Registrant and Gordon Zacks Amendment No. 14 to Schedule 13D, dated
January 27, 1995, filed by Gordon Zacks on
February 13, 1995 [Exhibit 5]
10(g) Amended Split-Dollar Insurance Agreement, dated Incorporated herein by reference to
March 23, 1995, between Registrant and Registrant's 1995 Form 10-K [Exhibit 10(h)]
Gordon B. Zacks
10(h) R. G. Barry Corporation 1988 Stock Option Plan Incorporated herein by reference to
(Reflects amendments through May 11, 1993) Registrant's Registration Statement on Form
S-8, filed August 18, 1993 (Registration
No. 33-67594) [Exhibit 4(r)]
10(i) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of incentive stock Registrant's 1995 Form 10-K [Exhibit 10(k)]
options pursuant to the R. G. Barry Corporation
1988 Stock Option Plan
10(j) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of non-qualified Registrant's 1995 Form 10-K [Exhibit 10(l)]
stock options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
10(k) Description of Incentive Bonus Program Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 28, 1991
(File No. 1-8769) [Exhibit 10(k)]
10(l) R. G. Barry Corporation Employee Stock Purchase Incorporated herein by reference to
Plan (Reflects amendments and revisions for Registrant's Registration Statement on Form
stock dividends and stock splits through S-8, filed August 18, 1993 (Registration
May 11, 1993) No. 33-67596) [Exhibit 4(r)]
</TABLE>
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<TABLE>
<CAPTION>
Exhibit No. Description Location
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<S> <C> <C>
10(m) R. G. Barry Corporation 1994 Stock Option Plan Incorporated herein by reference to
(Reflects stock splits through June 22, 1994) Registrant's Registration Statement on Form
S-8, filed August 24, 1994 (Registration
No. 33-83252) [Exhibit 4(q)]
10(n) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of incentive stock Registrant's 1995 Form 10-K [Exhibit 10(p)]
options pursuant to the R. G. Barry Corporation
1994 Stock Option Plan
10(o) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of non-qualified Registrant's 1995 Form 10-K [Exhibit 10(q)]
stock options pursuant to the R. G. Barry
Corporation 1994 Stock Option Plan
10(p) Executive Employment Agreement, effective as of Incorporated herein by reference to
January 4, 1998, between Registrant and Registrant's 1997 Form 10-K [Exhibit 10(p)]
Charles E. Ostrander
10(q) Executive Employment Agreement, effective as of Incorporated herein by reference to
January 4, 1998, between Registrant and Registrant's 1997 Form 10-K [Exhibit 10(q)]
Christian Galvis
10(r) Restricted Stock Agreement, effective as of Incorporated herein by reference to
January 4, 1998, between Registrant and Charles Registrant's 1997 Form 10-K [Exhibit 10(r)]
E. Ostrander
10(s) Restricted Stock Agreement, effective as of Incorporated herein by reference to
January 4, 1998, between Registrant and Registrant's 1997 Form 10-K [Exhibit 10(s)]
Christian Galvis
10(t) Agreement, effective as of January 4, 1998, Incorporated herein by reference to
between Registrant and Richard L. Burrell Registrant's 1997 Form 10-K [Exhibit 10(t)]
10(u) Agreement, effective as of January 4, 1998, Incorporated herein by reference to
between Registrant and Daniel D. Viren Registrant's 1997 Form 10-K [Exhibit 10(u)]
10(v) Agreement, effective as of January 4, 1998, Incorporated herein by reference to
between Registrant and Harry Miller Registrant's 1997 Form 10-K [Exhibit 10(v)]
10(w) R. G. Barry Corporation Deferred Compensation Incorporated herein by reference to
Plan As Amended and Restated (Effective as of Registrant's 1995 Form 10-K [Exhibit 10(v)]
September 1, 1995)
</TABLE>
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<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
10(x) R. G. Barry Corporation Stock Option Plan for Incorporated herein by reference to
Non-Employee Directors (Reflects share splits Registrant's 1997 Form 10-K [Exhibit 10(x)]
and amendments through February 19, 1998)
10(y) R. G. Barry Corporation 1997 Incentive Stock Incorporated herein by reference to
Plan Registrant's Registration Statement on Form
S-8, filed June 6, 1997 (Registration No.
333-28671) [Exhibit 4(k)]
10(z) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of incentive stock Registrant's 1997 Form 10-K [Exhibit 10(z)]
options pursuant to the R. G. Barry Corporation
1997 Incentive Stock Plan
10(aa) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of non-qualified Registrant's 1997 Form 10-K [Exhibit 10(aa)]
stock options pursuant to the R. G. Barry
Corporation 1997 Incentive Stock Plan
13 Registrant's Annual Report to Shareholders for Incorporated herein by reference to the
the fiscal year ended January 2, 1999 (Not financial statements portion of this Annual
deemed filed except for the portions thereof Report on Form 10-K beginning at page 18
which are specifically incorporated by
reference into this Annual Report on Form 10-K)
21 Subsidiaries of Registrant *
23 Consent of Independent Auditors *
24 Powers of Attorney *
27 Financial Data Schedule *
</TABLE>
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* Filed herewith
E-6
<PAGE> 1
Exhibit 10(d)
Employment Agreement,
dated July 1, 1998,
between R.G. Barry Corporation
and Gordon Zacks
<PAGE> 2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made this 1st day
of July, 1998, by and between R. G. Barry Corporation, an Ohio corporation (the
"Company"), and Gordon Zacks ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to continue Executive in its
employ and Executive desires to remain in the employ of the Company, holding the
offices of Chairman of the Board, President and Chief Executive Officer of the
Company, for an extended period in accordance with the terms and conditions of
this Agreement;
NOW, THEREFORE, in consideration of the premises and of their
mutual covenants expressed in this Agreement, the parties hereto make the
following agreement, intending to be legally bound hereby:
1. Term. The Company hereby agrees to continue Executive in
its employ, and Executive hereby agrees to remain in the employ of the Company,
in accordance with the terms and conditions hereof, for the period commencing on
July 1, 1998 (the "Commencement Date"), and ending on the second anniversary of
the Commencement Date (the "Original Term"), unless sooner terminated as
hereinafter set forth; provided, however, that the term of this Agreement shall
automatically be extended for one additional, one-year term (an "Extended Term")
unless at least 60 days prior to the expiration of the Original Term the Company
or Executive shall give notice to the other that it/he does not wish to extend
the term of this Agreement. The Original Term of Executive's employment under
this Agreement, together with any Extended Term, is hereinafter sometimes
referred to as the "Employment Term." Anything contained in this Agreement to
the contrary notwithstanding, in the event that a Change of Control of the
Company (as defined in Section 9) occurs or is publicly proposed (and such
proposal is not withdrawn) prior to the end of the Employment Term, as defined
in the immediately preceding sentence of this paragraph, the Employment Term
shall be automatically extended for an additional two-year period (an "Extended
Term") commencing on the date on which the Employment Term would otherwise have
terminated pursuant to this paragraph and expiring on the second anniversary of
such date.
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<PAGE> 3
2. Position and Duties. (a) During the Employment Term, (i)
Executive shall serve as the Chairman, President and Chief Executive Officer of
the Company, reporting only to the Company's Board of Directors (the "Board of
Directors" or the "Board") and his authority, duties and responsibilities shall
be at least commensurate in all material respects with those held, exercised and
assigned on the Commencement Date and (ii) Executive's principal office shall be
located in Central Ohio, although he shall be allowed to travel extensively for
the Company as he may determine.
(b) Excluding periods of vacation and sick leave to which
Executive is entitled, Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of the Company and, to
the extent necessary to discharge the responsibilities assigned to Executive
hereunder, to use Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. Executive may (i) serve on corporate, civic,
charitable or political boards or committees, (ii) fulfill speaking engagements
and (iii) manage personal investments, so long as such activities do not
interfere in any material respect with the performance of Executive's
responsibilities hereunder. It is expressly understood and agreed that, to the
extent any such activities shall have been conducted by Executive prior to the
Commencement Date, the continued conduct of such activities or the conduct of
activities similar in nature and scope thereto subsequent to the Commencement
Date shall not, for the purposes of this Agreement, be deemed to interfere in
any material respect with the performance of Executive's responsibilities
hereunder.
3. Compensation and Other Benefits. The terms of Executive's
compensation during the Employment Term shall be as follows:
(a) BASE SALARY. During the Employment Term, Executive shall
receive a minimum annual base salary of $490,000 (the "Base Salary"), to be paid
in equal installments in accordance with the Company's normal pay schedule for
salaried employees; said Base Salary may be increased at any time and from time
to time by the Company, and the Company shall cause its Board of Directors or an
appropriate committee thereof to review annually the performance of Executive
and the results of operations and financial condition of the Company, together
with prevailing economic conditions and other relevant factors, to determine
whether or not any increase above said minimum annual salary is appropriate; and
the highest rate of salary (on an annualized basis) paid to Executive by the
Company during the Employment Term (excluding any bonus) shall be deemed to be
the Base Salary for purposes of this Agreement.
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<PAGE> 4
(b) BENEFITS. During the Employment Term:
(i) The Company, at its sole expense, shall provide and
maintain a policy of insurance on Executive's life from an insurance company
that is acceptable to Executive providing for a death benefit of at least
$1,000,000, payable to one or more beneficiaries designated by Executive (or to
the beneficiaries designated by Executive's assignee, if any, of such policy)
or, if Executive (or his assignee, if any) fails to so designate a beneficiary,
to Executive's estate; provided, however, that at Executive's option, the
Company shall, in lieu of providing the aforesaid life insurance, pay to
Executive for each 12-month period during the Employment Term a cash payment of
$18,000. If the life insurance provided by the Company under this Section
3(b)(i) is a whole life insurance policy or policies, Executive shall be
entitled to the cash surrender value of such policy or policies and shall have
the right to cause the Company to transfer ownership of such policy or policies
to Executive or his designee.
(ii) In addition to the insurance described in
subsection (i) above, the Company, at its expense, shall provide and maintain a
split-dollar life insurance policy on Executive's life from an insurance company
acceptable to Executive providing for a death benefit payable to Executive's
beneficiaries or estate (or to the beneficiaries designated by Executive's
assignee, if any, of his interest under this subsection (ii)), in an amount that
is not less than $1,310,000, which is the amount of coverage provided to
Executive under that certain split-dollar insurance policy on Executive's life
in effect on the Commencement Date. The Company shall be obligated to pay the
Company's portion of the premiums on such split-dollar insurance policy and
shall pay to or at the direction of Executive a cash bonus in an amount equal to
Executive's (or his assignee's) portion of such insurance premiums (i.e., the
term cost of the life insurance protection under the policy) plus the amount of
Executive's personal income tax liability resulting from the payment of such
cash bonus.
(iii) Executive shall be entitled to receive paid
vacation time during each consecutive twelve (12) month period during the
Employment Term in accordance with the vacation policy of the Company for its
senior officers in effect on the Commencement Date.
(iv) Executive shall be entitled to receive such
perquisites, fringe benefits and reimbursement of expenses historically provided
by the Company to its Chairman, President and
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<PAGE> 5
Chief Executive Officer, including, without limitation, the exclusive use of a
new luxury automobile and reimbursement of his initiation fees, and dues and
assessments at a country club of his choosing.
(v) Executive shall be entitled to participate in the
Company's Salaried Employees' Pension Plan (the "Pension Plan"), Supplemental
Retirement Plan (the "Supplemental Plan") and Employee Stock Ownership Plan, as
any or all of the same may be amended from time to time, or any substitute or
successor plans.
(vi) During the Employment Term, Executive shall be
entitled to participate in the Company's Short-Term Incentive Plan (STIPS), as
the same may be amended from time to time, or any substitute or successor plan,
at a maximum annual level equal to 100% of his then-current Base Salary.
(vii) Executive shall be entitled to receive all other
employee benefits, including, without limitation, medical, dental, group life
(to the extent the coverage is superior to that provided for in Section 3(b)(i)
above) and accidental death insurance benefits as are or in the future may be
provided by the Company to its key employees.
(viii) The Board of Directors of the Company will
consider annually whether additional benefits should be provided to Executive,
including, without limitation, the grant of additional shares of restricted
stock of the Company or the implementation of other stock-based incentive plans.
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<PAGE> 6
4. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company and for which
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as Executive may have under any stock option or other agreements with the
Company. Amounts which are vested benefits or which Executive is otherwise
entitled to receive under any plan or program of the Company at or subsequent to
the Date of Termination (as defined in Section 5 hereof) shall be payable in
accordance with such plan or program.
5. Termination. (a) DEATH OR DISABILITY. Executive's
employment shall terminate automatically upon Executive's death. The Company may
terminate Executive's employment under this Agreement, after having established
Executive's Disability (pursuant to the definition of "Disability" set forth
below), by giving to Executive written notice of its intention to terminate
Executive's employment hereunder. In such a case, Executive's employment
hereunder shall terminate effective on the 30th day after receipt of such notice
(the "Disability Effective Date"), provided that within such 30-day period,
Executive shall not have returned to full-time performance of his duties. For
purposes of this Agreement, "Disability" means a disability, which, after the
expiration of more than 6 months after its commencement, is determined to be
total and permanent by a physician selected by the Company or its insurers and
reasonably acceptable to Executive or Executive's legal representative.
(b) CAUSE. The Company may terminate Executive's
employment for "Cause." For purposes of this Agreement, termination of
employment for the following reasons (and no other reason) shall constitute
"Cause": (i) dishonest and/or immoral conduct of Executive materially
detrimental to the Company, (ii) conviction of a felony, (iii) willful and
continued failure of Executive, after receipt of written notice from the Company
setting forth the specifics of such failure, to perform the duties of his
offices with the Company unless such failure is the result of ill health or
physical or mental disability or (iv) willful and gross misconduct of Executive
materially and demonstrably injurious to the Company.
(c) GOOD REASON. Executive's employment may be
terminated by Executive for Good Reason. For purposes of this Agreement, "Good
Reason" means:
(i) (A) The assignment to Executive of any
duties inconsistent in any respect with Executive's position
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<PAGE> 7
(including, without limitation, his status, office and title), authority, duties
or responsibilities as contemplated by Section 2 of this Agreement or (B) any
other action by the Company which results in a material diminution in such
position, authority, duties or responsibilities, other than an insubstantial and
inadvertent action which is remedied by the Company promptly after receipt of
notice thereof given by Executive;
(ii) Any reduction in Executive's Base Salary or
any material reduction in the extent of Executive's participation in the plans
referred to in Section 3 hereof or the extent of Executive's entitlement to the
employee benefits, expenses, fringe benefits or prerequisites referred to in
Section 3;
(iii) The assignment of Executive without his
consent to a Company office located beyond a radius of 50 miles from the
Company's principal office on the Commencement Date; or
(iv) Any other failure by the Company to comply
with any provision of this Agreement, other than an insubstantial and
inadvertent failure which is remedied by the Company promptly after receipt of
notice thereof given by Executive.
For purposes of this Section 5(c) any good faith determination
of "Good Reason" made by Executive shall be conclusive. In addition, for
purposes of this Agreement, a reduction of the kind described in clause (ii) of
this Section 5(c) shall be deemed to be an "Impermissible Reduction."
(d) NOTICE OF TERMINATION. Any termination of
Executive's employment hereunder by the Company or by Executive shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 16 of this Agreement. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date.
(e) DATE OF TERMINATION. The term "Date of
Termination," as used in this Agreement, means the date of receipt of the Notice
of Termination or any later date specified therein (which date shall be not more
than 15 days after the giving of such notice), as the case may be. If
Executive's employment is
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<PAGE> 8
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies Executive of such
termination.
6. Compensation Upon Termination of Employment or During
Disability. (a) DEATH. If Executive's employment shall be terminated by reason
of his death, the Company shall promptly make all payments which Executive's
spouse, beneficiaries or estate may be entitled to receive pursuant to any
pension or employee benefit plan, or life insurance policy maintained by the
Company. If the policy of life insurance described in Section 3(b)(ii) above is
not in force at the time of Executive's death for any reason, the Company shall
continue to pay Executive's full Base Salary at the rate in effect on the date
of his death on a monthly basis for a period of 60 months following Executive's
date of death to such person or persons as he shall have designated to the
Company or, if no such person shall have been designated, to his estate.
(b) DISABILITY. During any period during the
Employment Term that Executive fails to perform his duties hereunder as a result
of incapacity due to ill health or physical or mental disability ("Disability
Period"), Executive shall continue to receive the Base Salary for such period
until his employment is terminated for Disability pursuant to Section 5(a),
provided that payments of Base Salary shall be reduced by the sum of the
amounts, if any, payable to Executive at or prior to the time of any such Base
Salary payment under disability benefit plans of the Company and which were not
previously applied to reduce any payment of Base Salary. If Executive's
employment is terminated by reason of Executive's Disability, Executive shall
continue to receive after the Disability Effective Date his full Base Salary at
the rate then in effect under this Agreement (less any sums payable to Executive
under any disability benefit plan maintained by the Company) until Executive
reaches the age of 70. Such payments shall not be offset by Social Security
payments, if any. In addition, after any such termination of employment for
Disability, Executive (or, if applicable, his spouse, beneficiaries or estate)
shall receive all amounts to which any of them may be entitled under any
pension, deferred compensation plan or employee benefit plan maintained by the
Company or under any other agreement (said amounts to be paid in accordance with
the terms of any such plan or agreement).
(c) WITH CAUSE OR WITHOUT A GOOD REASON. If
Executive's employment shall be terminated by the Company during the Employment
Term for Cause or by Executive without Good Reason, the Company shall pay to
Executive his Base Salary through the Date of Termination at the rate then in
effect, and the Company shall have
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<PAGE> 9
no further obligation to Executive under this Agreement; provided, that the
Company shall not be relieved of its obligation to make any payments to which
Executive (or, if applicable, his spouse, beneficiaries or estate) are entitled
under any pension, deferred compensation or employee benefit plan or plans of
the Company or under any other agreement (which payments shall be made in
accordance with the terms of any such plan or agreement).
(d) WITHOUT CAUSE OR FOR GOOD REASON AFTER A CHANGE
OF CONTROL. If, during the Employment Term and following a Change of Control (as
defined in Section 9 of this Agreement), the Company shall terminate Executive's
employment other than for Cause or Disability, or the employment of Executive
shall be terminated by Executive for Good Reason:
(i) The Company shall pay to Executive in a lump
sum in cash within 10 days after the Date of Termination the aggregate of the
following amounts:
(A) If not theretofore paid, Executive's
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination;
(B) In consideration for services rendered
to the Company prior to the Date of Termination, an amount equal to the product
of (x) the Average Bonus (as defined in Section 6(f)) and (y) the fraction
obtained by dividing (i) the number of days between the Date of Termination and
the last day of the last full fiscal year ending prior to such date by (ii) 365;
(C) In consideration of Executive's
agreement to an extended noncompetition agreement as provided in Section 12(a),
the sum of $1,375,000;
(D) In consideration of Executive's
agreement to provide the consulting services described in Section 12(b), the sum
of $1,000,000; and
(E) In the case of compensation previously
deferred by Executive, all amounts of such compensation previously deferred and
not yet paid by the Company, together with all interest accrued thereon;
(ii) The Company shall, promptly upon submission
by Executive of supporting documentation, pay or reimburse to Executive all
costs and expenses paid or incurred by
- 9 -
<PAGE> 10
Executive which would have been payable under Section 3(b) hereof if Executive's
employment had not been terminated;
(iii) For a period ending on Executive's 70th
birthday, or until his earlier death, the Company, at its cost, shall maintain
in full force and effect, for the continued benefit of Executive and Executive's
spouse, all life, medical and dental insurance to which Executive and/or his
spouse was entitled immediately prior to the Date of Termination less any such
benefits provided to them by Medicare or similar government-funded health
insurance; provided that, in the event the participation by Executive or his
spouse in any Company employee benefit program is not possible under the terms
of such program, the Company, at its cost, shall arrange to provide Executive
and his spouse with benefits substantially similar to those which they were
entitled to receive under any such program immediately prior to the Date of
Termination (less any such benefits provided to them by Medicare or similar
government-funded health insurance).
(iv) All of Executive's executive perquisites
immediately prior to the Date of Termination shall be continued for three years
after the Date of Termination;
(v) Any stock option rights held by Executive
which were not fully exercisable on the Date of Termination shall immediately
become fully exercisable by Executive; and
(vi) After the Date of Termination, Executive
shall have no obligation to seek other employment, but shall have the right to
be otherwise employed, and any compensation of any type whatsoever received by
Executive in connection with such employment shall not be offset by the Company
against any of the obligations of the Company under this Section 6(d).
(e) WITHOUT CAUSE OR FOR GOOD REASON PRIOR TO A
CHANGE OF CONTROL. If, during the Employment Term and prior to a Change of
Control, the employment of Executive shall be terminated by the Company for any
reason other than for Cause or Disability, or the employment of Executive shall
be terminated by Executive for Good Reason, and Section 6(d) of this Agreement
shall not be applicable:
(i) The Company shall pay to Executive in a lump
sum in cash within 10 days after the Date of Termination the aggregate of the
following amounts:
- 10 -
<PAGE> 11
(A) If not theretofore paid, Executive's
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination;
(B) In the case of compensation previously
deferred by Executive, all amounts of such compensation previously deferred and
not yet paid by the Company together with all interest accrued thereon;
(C) An amount equal to the product of (x)
the Average Bonus (as defined in Section 6(f)) and (y) the fraction obtained by
dividing (i) the number of days between the Date of Termination and the last day
of the last full fiscal year ending prior to such date by (ii) 365;
(ii) Until the last day of the Employment Term
(as in effect immediately prior to the termination of employment), the Company
shall continue to pay Executive his Base Salary on a monthly basis at the rate
in effect immediately prior to the Date of Termination, plus an additional
monthly payment equal to one-twelfth of the Average Bonus (as defined in Section
6(f));
(iii) The Company shall, promptly upon
submission by Executive of supporting documentation, pay or reimburse to
Executive all costs and expenses paid or incurred by Executive which would have
been payable under Section 3(b) hereof if Executive's employment had not
terminated;
(iv) Any stock option rights held by Executive
which were not fully exercisable on the Date of Termination shall immediately
become fully exercisable by Executive;
(v) For a period ending on Executive's 70th
birthday, or until his earlier death, the Company, at its cost, shall maintain
in full force and effect, for the continued benefit of Executive and Executive's
spouse, all life, medical and dental insurance benefits to which Executive and
his spouse were entitled immediately prior to the Date of Termination; provided
that, in the event the participation by Executive or his spouse in any Company
employee benefit program is not possible under the terms of such program, the
Company, at its cost, shall arrange to provide Executive and his spouse with
benefits substantially similar to those which they were entitled to receive
under any such program immediately prior to the Date of Termination; and
(vi) After the Date of Termination, Executive
shall have no obligation to seek other employment, but shall have
- 11 -
<PAGE> 12
the right to be otherwise employed, and any compensation of any type whatsoever
received by Executive in connection with such employment shall not be offset by
the Company against any of the obligations of the Company under this Section
6(e).
(f) For purposes of this Section 6, the "Average
Bonus" is the average annual bonus paid to Executive for the last three full
fiscal years ending prior to the Date of Termination.
(g) Anything in this Section 6 to the contrary
notwithstanding, for purposes of calculating any amount payable to or for the
benefit of the Executive and/or his family pursuant to Section 6, the effect of
any Impermissible Reduction in amounts payable pursuant to Section 5 shall be
disregarded.
7. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment by way of mitigation of the amounts payable
to Executive under any of the provisions of this Agreement. Company agrees to
pay, to the full extent permitted by law, all legal fees and expenses which
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof, plus interest, compounded quarterly, on the total unpaid
amount determined to be payable under this Agreement, such interest to be
calculated at a rate equal to 2% in excess of the prime commercial lending rate
announced by The Huntington National Bank, Columbus, Ohio, or its successor, in
effect from time to time during the period of such nonpayment.
8. Certain Reduction of Payments by the Company.
Notwithstanding any other provisions in this Agreement or any other agreement,
plan or arrangement, if any payment or benefit received or to be received by
Executive, whether under the terms of this Agreement or any other agreement,
plan or arrangement with the Company or an affiliate of the Company (all such
payments and benefits being hereinafter referred to as "Total Payments"), would
be subject, in whole or in part, to taxes imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), then the Total Payments
shall be reduced to the extent necessary so that no portion of the Total
Payments shall be subject to the parachute excise tax (the "Excise Tax") imposed
by Section 4999 of the Code
- 12 -
<PAGE> 13
(after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in any other plan, arrangement or agreement).
Total Payments shall not include any amounts which are not considered a
"parachute payment" under Section 280G of the Code in the opinion of suitable
experts selected by the Company's Board of Directors and Executive. The Company
shall provide Executive with the calculation of the foregoing amounts and any
supporting materials reasonably necessary for Executive to evaluate the
calculations. Any reduction in the Total Payments in accordance with this
Section 8 shall be made in the following order:
(a) The payment under Section 6(d)(i)(B) of this
Agreement shall first be reduced (if necessary, to zero);
(b) The payment under Section 6(d)(i)(C) of this
Agreement shall next be reduced (if necessary, to zero);
(c) The payment under Section 6(d)(i)(D) of this
Agreement shall next be reduced (if necessary, to zero);
(d) The payments under Section 6(d)(i)(E) of this
Agreement shall next be reduced (if necessary, to zero);
(e) The payments (or calculated value) of the
benefits under Sections 6(d)(ii), (iii), (iv) and (v) of this Agreement shall
next be reduced (if necessary, to zero); and
(f) Any additional termination payments or benefits
provided outside this Agreement shall then be reduced as necessary.
No inference shall be drawn, however, that any of the payments
described in clauses (a) through (f) above constitute "parachute payments" under
Section 280G of the Code.
9. Change of Control. (a) For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred if: (i) any individual
(other than Executive), firm, corporation, partnership, joint venture or other
entity or any group (as the term "group" is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules thereunder on
the Commencement Date), other than any such entity or group in respect of which
Executive is a participant, shall hereafter acquire (or disclose the previous
acquisition of) beneficial ownership (as that term is defined in Section 13(d)
of the Exchange Act and the rules thereunder on the Commencement Date) of shares
of the outstanding stock of any class or classes of the Company which results in
such person, firm, corporation, partnership, joint venture, other entity
- 13 -
<PAGE> 14
or group possessing more than a majority of the total voting power of the
Company's outstanding voting securities ordinarily having the right to vote for
the election of directors of the Company; or (ii) as the result of, or in
connection with, any tender or exchange offer, merger or other business
combination, sale of assets or contested election of directors, or any
combination of the foregoing transactions ("Transaction"), the persons who were
directors of the Company immediately before the Transaction shall cease to
constitute a majority of the Board of Directors of the Company or any successor
to the Company.
(b) A Change of Control shall also be deemed to have
occurred for purposes of this Agreement if the Board of Directors of the Company
shall at any time declare that one or more events have occurred or are likely to
occur which, in their sole determination, create or pose the threat of a Change
of Control and which, for that reason, make it desirable and in the best
interests of the Company to invoke those provisions of this Agreement which
become effective on or after the occurrence of a Change of Control; provided,
however, that no Director of the Company who is a party to this Agreement or an
agreement with the Company similar to this Agreement shall participate in
considering or voting upon any such resolution.
10. Nomination to Board. During the term of Executive's
employment with the Company, the Company shall cause Executive to be nominated
to membership on the Board of Directors of the Company in all applicable proxy
solicitations made to shareholders.
11. Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
Executive during Executive's employment by the Company or any of its affiliated
companies and which shall not be public knowledge (other than by acts by
Executive or his representatives in violation of this Agreement). After
termination of Executive's employment with the Company, Executive shall not,
without the prior written consent of the Company, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 11 constitute a basis for deferring or withholding any amounts
otherwise payable to Executive under this Agreement.
12. Agreement Not to Compete. (a) Executive agrees that during
the Employment Term and for a period of two (2) years thereafter (five (5) years
thereafter if Executive's employment
- 14 -
<PAGE> 15
terminates under the circumstances described in Section 6(d)), he will not,
without the consent of the Company's Board of Directors, serve on the board of
directors of any corporation or other entity that is in competition with the
Company or any affiliate of the Company, nor allow the use of his name with
respect to any such corporation or entity, nor serve as an officer, employee,
consultant, representative or otherwise or have a substantial investment in any
such corporation or entity. In no event shall any asserted violation of the
provisions of this Section 12(a) constitute a basis for deferring or withholding
any amounts otherwise payable to Executive under this Agreement.
(b) In the event that Executive's employment
terminates under the circumstances described in Section 6(d), Executive agrees
that for a period of one (1) year he will provide consulting services to the
Company in the Central Ohio area at the request of the Company so long as he
shall not be required to spend more than six hours a month providing such
services and shall be reimbursed for all expenses incurred by him in providing
such consulting services. Such consulting services shall include (i) assisting
in the preservation of the Company's relationships with its suppliers and
customers and the attraction of new customers, (ii) assisting in keeping
available to the Company the employees of the Company, (iii) consulting on new
product proposals and (iv) providing general consulting services at the
reasonable request of the Company.
13. Retirement Benefits. In addition to any retirement
benefits to which Executive is entitled under any pension plan or other plan or
program provided by the Company and for which Executive may qualify and in
addition to any termination benefits or payments provided for in this Agreement,
upon any termination of Executive's employment with the Company (other than
termination for Cause (as defined in Section 5(b)), whether or not this
Agreement is then in effect, the Company shall provide Executive the following
retirement benefits:
(a) The Company shall continue the life insurance
benefits described in Sections 3(b)(i) and 3(b)(ii) until Executive has attained
the age of 70;
(b) For a period of five years following the date of
termination of Executive's employment with the Company, the Company shall make
available to Executive, at the Company's expense, Class A office space suitable
for Executive at the Company's headquarters in Pickerington, Ohio, or at a
different location selected by the
- 15 -
<PAGE> 16
Company and Executive within 10 miles of Executive's principal residence in
Ohio; and
(c) For a period of one year following the date of
termination of Executive's employment with the Company, the Company, at its
cost, will make available to Executive a full-time secretary, at the location
described in Section 13(b) above.
14. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be submitted to
arbitration by the American Arbitration Association in Columbus, Ohio, and the
determination of the American Arbitration Association shall be final and
absolute. The arbitration and the arbitrator shall be governed by the duly
promulgated Commercial Arbitration Rules of the American Arbitration Association
and the pertinent provisions of the laws of the State of Ohio relating to
arbitration. Any judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. Compensation and benefits
provided hereunder shall continue while any proceeding entered into pursuant to
this section is in progress. Arbitration and legal fees regarding disputes or
controversies arising under this Agreement shall be borne by the Company.
15. Successors; Binding Agreement. (a) The Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Executive to compensation and benefits and
other rights in the same amount and on the same terms as he would be entitled
hereunder if he had terminated his employment for Good Reason immediately after
a Change of Control, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 15 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees
- 16 -
<PAGE> 17
and legatees. If Executive should die while any amounts would still be payable
to him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
his devisee, legatee or other designee or, if there be no such designee, to his
estate.
16. Notices. All notices, requests, demands, and other
communications required or permitted under this Agreement shall be deemed to
have been given if delivered by hand to the address of the recipient or mailed
by first-class certified mail return receipt requested, to the party at the
following addresses:
If to Executive: Gordon Zacks
140 North Parkview
Bexley, Ohio 43209
If to the Company: R. G. Barry Corporation
13405 Yarmouth Rd., N. W.
Pickerington, Ohio 43147
Attention: Corporate Secretary
Either party to this Agreement may, by notice given in accordance with this
paragraph, designate a new address for notices, requests, demands and other
communications to such party.
17. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(c) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
- 17 -
<PAGE> 18
IN WITNESS WHEREOF, this Agreement has been duly executed on
behalf of the Company by an officer duly authorized in the premises and by
Executive on the date first above written.
EXECUTIVE: COMPANY:
R. G. BARRY CORPORATION
/s/ Gordon Zacks By: /s/ Richard L. Burrell
- ------------------------------ -------------------------------------
Gordon Zacks
Title: Senior Vice President - Finance
---------------------------------
- 18 -
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF R. G. BARRY CORPORATION
State or Other Jurisdiction of
Name Incorporation or Organization
- ---- --------------------------------
R. G. Barry International, Inc. Ohio
Barry de Mexico, S.A. de C.V. Mexico
R.G.B., Inc. Ohio
Barry de Acuna, S.A. de C.V. Mexico
Barry Juarez, S.A. de C.V. Mexico
Barry de Zacatecas, S.A. de C.V. Mexico
Vesture Corporation North Carolina
ThermaStor Technologies, Ltd., Ohio
LLC
R. G. Barry (Texas) LP Texas
Barry de la Republica Dominicana, Dominican Republic
S.A. de C.V.
<PAGE> 1
Exhibit 23
[LETTERHEAD OF KPMG LLP]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
R.G. Barry Corporation
We consent to incorporation by reference in Registration Statement Nos.
33-23567, 33-23568, 33-67594, 33-67596, 33-81820, 33-83252, 333-06875 and
333-28671 on Forms S-8 and S-3 of R.G. Barry Corporation of our reports
dated February 12, 1999, relating to the consolidated balance sheets of
R.G. Barry Corporation and subsidiaries as of January 2, 1999 and January
3, 1998, and the related consolidated statements of earnings, shareholders'
equity and cash flows and related financial statement schedules for each of
the fiscal years in the three-year period ended January 2, 1999, which
reports appear in the 1998 annual report on Form 10-K of R.G. Barry
Corporation.
/s/ KPMG LLP
Columbus, Ohio
March 30, 1999
<PAGE> 1
EXHIBIT 24
POWERS OF ATTORNEY
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 18th day of March, 1999.
/s/ Gordon Zacks
----------------------------------------
Gordon Zacks
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 18th day of March, 1999.
/s/ Richard L. Burrell
----------------------------------------
Richard L. Burrell
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 18th day of March, 1999.
/s/ Christian Galvis
----------------------------------------
Christian Galvis
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 11th day of March, 1999.
/s/ Charles E. Ostrander
----------------------------------------
Charles E. Ostrander
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 20th day of March, 1999.
/s/ Leopold Abraham II
----------------------------------------
Leopold Abraham II
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 13th day of March, 1999.
/s/ Philip G. Barach
----------------------------------------
Philip G. Barach
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 20th day of March, 1999.
/s/ William Giovanello
----------------------------------------
William Giovanello
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 26th day of March, 1999.
/s/ Harvey M. Krueger
----------------------------------------
Harvey M. Krueger
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer
and/or director of R. G. Barry Corporation, an Ohio corporation (the "Company"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
the Annual Report on Form 10-K for the fiscal year ended January 2, 1999, hereby
constitutes and appoints Richard L. Burrell and Michael S. Krasnoff as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
and documents related thereto, and to file the same, and any and all exhibits,
financial statements and schedules relating thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York Stock Exchange, and grants unto each of said attorneys-in-fact and agents,
and substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all things that each of said
attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 15th day of March, 1999.
/s/ Edward M. Stan
----------------------------------------
Edward M. Stan
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART 5 FINANCIAL DATA SCHEDULE FOR FORM 10-K R. G. BARRY CORPORATION
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 29,596
<SECURITIES> 0
<RECEIVABLES> 26,490
<ALLOWANCES> 11,578
<INVENTORY> 38,648
<CURRENT-ASSETS> 90,233
<PP&E> 41,697
<DEPRECIATION> 28,822
<TOTAL-ASSETS> 111,345
<CURRENT-LIABILITIES> 17,263
<BONDS> 10,714
<COMMON> 9,745
0
0
<OTHER-SE> 68,335
<TOTAL-LIABILITY-AND-EQUITY> 111,345
<SALES> 150,773
<TOTAL-REVENUES> 150,773
<CGS> 77,348
<TOTAL-COSTS> 77,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,996
<INCOME-PRETAX> 15,479
<INCOME-TAX> 5,712
<INCOME-CONTINUING> 9,767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,767
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 0.98
</TABLE>
