- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
-------------------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------------
Commission file number 0-18914
R&B, INC.
Incorporated pursuant to the Laws
of the Commonwealth of Pennsylvania
-------------------
IRS - Employer Identification No. 23-2078856
3400 East Walnut Street, Colmar, Pennsylvania 18915
(215) 997-1800
-------------------
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 |_|
As of November 10, 1998 the Registrant had 8,076,199 common shares, $.01 par
value, outstanding.
- --------------------------------------------------------------------------------
<PAGE>
R & B, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 26, 1998
Page
Part I -- FINANCIAL INFORMATION
Item 1.Consolidated Financial Statements (unaudited)
Statements of Income:
Thirteen Weeks Ended September 26, 1998 and
September 27, 1997 3
Thirty-nine Weeks Ended September 26, 1998 and
September 27, 1997 4
Balance Sheets....................................... 5
Statements of Cash Flows............................. 6
Notes to Financial Statements........................ 7
Item 2.Management's Discussion and
Analysis of Financial Condition and
Results of Operations............................. 9
Part II -- OTHER INFORMATION
Item 1.Legal Proceedings.................................... 14
Item 6.Exhibits and Reports on Form 8-K..................... 14
Signature .............................................. 15
Page 2 of 15
<PAGE>
PART I. FINANCIAL INFORMATION
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
For the Thirteen Weeks Ended
-----------------------------
September 26, September 27,
(in thousands, except per share data) 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $44,509 $40,817
Cost of goods sold 26,479 24,669
- -------------------------------------------------------------------------------------------
Gross profit 18,030 16,148
Selling, general and administrative expenses 13,057 11,525
- -------------------------------------------------------------------------------------------
Income from operations 4,973 4,623
Interest expense, net 1,040 974
- -------------------------------------------------------------------------------------------
Income before taxes 3,933 3,649
Provision for taxes 1,430 1,319
- -------------------------------------------------------------------------------------------
Net Income $ 2,503 $ 2,330
===========================================================================================
Earnings Per Share
Basic $0.30 $0.29
Diluted 0.30 0.29
===========================================================================================
Average Shares Outstanding
Basic 8,337 8,031
Diluted 8,438 8,031
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
Page 3 of 15
<PAGE>
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
For the Thirty-nine Weeks Ended
-----------------------------
September 26, September 27,
(in thousands, except per share data) 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $125,568 $115,075
Cost of goods sold 75,912 69,708
- -------------------------------------------------------------------------------------------
Gross profit 49,656 45,367
Selling, general and administrative expenses 37,047 33,527
- -------------------------------------------------------------------------------------------
Income from operations 12,609 11,840
Interest expense, net 3,063 3,129
- -------------------------------------------------------------------------------------------
Income before taxes 9,546 8,711
Provision for taxes 3,479 3,167
- -------------------------------------------------------------------------------------------
Net Income $ 6,067 $ 5,544
===========================================================================================
Earnings Per Share
Basic $0.73 $0.69
Diluted 0.72 0.69
===========================================================================================
Average Shares Outstanding
Basic 8,323 8,028
Diluted 8,424 8,028
===========================================================================================
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
Page 4 of 15
<PAGE>
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 26, December 27,
(in thousands, except share data) 1998 1997
- --------------------------------------------------- ----------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalent $15,666 $1,601
Accounts receivable, less allowance for doubtful
accounts and customer credits of $9,758 and $7,214 40,466 37,536
Inventories 50,430 38,264
Deferred income taxes 1,186 1,186
Prepaids and other current assets 2,178 1,461
- --------------------------------------------------- ----------------- -----------------
Total current assets 109,926 80,048
- --------------------------------------------------- ----------------- -----------------
Property, Plant and Equipment, net 19,508 16,382
Intangible Assets 31,401 29,747
Other Assets 3,485 2,530
- --------------------------------------------------- ----------------- -----------------
Total $164,320 $128,707
=================================================== ================= =================
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt $ 2,441 $6,611
Accounts payable 12,812 8,982
Accrued compensation 3,911 2,923
Other accrued liabilities 5,671 2,923
- --------------------------------------------------- ----------------- -----------------
Total current liabilities 24,835 21,439
Long-Term Debt 67,556 44,336
Deferred Income Taxes 1,770 1,770
Commitments and Contingencies
Shareholders' Equity:
Common stock, par value $.01; authorized
25,000,000 shares; issued 8,336,710 and 8,066,543 83 81
Additional paid-in capital 33,084 30,221
Cumulative translation adjustments 65 -
Retained earnings 36,927 30,860
Total shareholders' equity 70,159 61,162
- --------------------------------------------------- ----------------- -----------------
Total $164,320 $128,707
=================================================== ================= =================
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
Page 5 of 15
<PAGE>
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
For the Thirty-nine Weeks Ended
--------------------------------------
September 26, September 27,
(in thousands) 1998 1997
- -------------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $6,067 $5,544
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 3,762 3,316
Provision for doubtful accounts 485 298
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (2,438) (6,712)
Inventories (8,512) 2,451
Prepaids and other current assets (500) 145
Other assets (1,121) (268)
Accounts payable 2,564 3,850
Other accrued liabilities 2,883 1,666
- -------------------------------------------------------------- ------------------ -------------------
Cash provided by operating activities 3,190 10,290
- -------------------------------------------------------------- ------------------ -------------------
Cash Flows from Investing Activities:
Property, plant and equipment additions (4,008) (3,321)
Proceeds from sale/leaseback transaction 2,118 -
Business acquisitions, net of cash acquired (2,097) -
- -------------------------------------------------------------- ------------------ -------------------
Cash used in investing activities (3,987) (3,321)
- -------------------------------------------------------------- ------------------ -------------------
Cash Flows from Financing Activities:
ACTIVITIES: a
Net repayments of revolving credit (18,500) (3,450)
Repayments of term loans and capital lease obligations (26,833) (4,513)
Proceeds from senior notes 60,000 -
Proceeds from common stock issuances 195 279
- -------------------------------------------------------------- ------------------ -------------------
Cash provided by (used in) financing activities 14,862 (7,684)
- -------------------------------------------------------------- ------------------ -------------------
Net Increase (Decrease) in Cash and Cash Equivalents 14,065 (715)
Cash and Cash Equivalents, Beginning of Period 1,601 923
- -------------------------------------------------------------- ------------------ -------------------
Cash and Cash Equivalents, End of Period $ 15,666 $ 208
============================================================== ================== ===================
Supplemental Cash Flow Information
Cash paid for interest expense $2,363 $2,866
Cash paid for income taxes $ 467 $2,265
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
Page 6 of 15
<PAGE>
R&B, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 1998 AND
SEPTEMBER 27, 1997 (UNAUDITED)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. However, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the thirty-nine week period ended
September 26, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 26, 1998. For further information,
refer to the financial statements and footnotes thereto included in R&B, Inc.'s
(the "Company") Annual Report on Form 10-K for the year ended December 27, 1997.
2. Inventories
Inventories include the cost of material, freight, direct labor and
overhead utilized in the processing of the Company's products. Inventories were
as follows:
September 26, December 27,
(in thousands) 1998 1997
- ------------------- --------------- ---------------
Bulk product $27,407 $21,800
Finished product 19,346 12,737
Packaging materials 3,677 3,727
- ------------------- --------------- ---------------
Total $50,430 $38,264
=================== =============== ===============
3. Intangible Assets
Intangible assets consist of goodwill, patents and a non-compete
covenant. Goodwill is amortized over a period of 40 years with patents and the
non-compete covenant amortized over the specific life of each asset. At
September 26, 1998, goodwill was $30.1 million, patents were $1.1 million and
the non-compete covenant was $0.2 million. Amortization of these assets was $1.0
million and $0.8 million in the thirty-nine weeks of 1998 and 1997,
respectively.
4. Earnings Per Share
The company adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share" in 1997. In conformity with SFAS 128, the
Company has included basic and diluted earnings per share on the face of the
Statement of Income for each period presented. The difference between basic and
diluted average shares outstanding is the dilutive effect of stock options.
Page 7 of 15
<PAGE>
5. Long-Term Debt
In August 1998, the Company completed a private placement with a group
of three insurance companies of $60 million in 6.81% Senior Notes due August 21,
2008 (Notes) on an unsecured basis. The ten-year Notes bear a 6.81% fixed rate,
payable quarterly, with an initial four-year interest only period. Proceeds from
the Notes were used to pay down bank debt, fund the Champ and Allparts (see Note
6) acquisitions and provide working capital. The Notes are subject to certain
financial covenants including minimum net worth and maximum debt to capital
ratios.
Concurrent with closing on the Notes, the Company replaced its existing
bank facilities with a new $35 million, unsecured revolving credit agreement
from a syndicate of commercial banks including First Union and National City
Bank. The revolver has a term of five years and an interest rate equal to Libor
plus 75 basis points.
6. Subsequent Event
On October 28, 1998, the Company acquired the assets of Allparts, Inc.,
from JPE, Inc., for approximately $10.1 million in cash. Headquartered in
Louisiana, Missouri, Allparts is a leading supplier of automotive hydraulic
brake parts to the automotive aftermarket. Allparts has annual sales of
approximately $19 million. The Company will account for this acquisition using
the purchase method of accounting, which will result in the recording of
approximately $1 million in goodwill.
Page 8 of 15
<PAGE>
R&B, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Over the periods presented, the Company has focused its efforts on providing
an expanding array of new product offerings and strengthening its relationships
with its customers. To that end, the Company has made significant investments to
increase market penetration, primarily in the form of product development,
customer service, customer credits and allowances, and strategic acquisitions.
The Company calculates its net sales by subtracting credits and allowances
from gross sales. Credits and allowances include costs for co-operative
advertising, product returns, discounts given to customers who purchase new
products for inclusion in their stores, and the cost of competitors' products
that are purchased from the customer in order to induce a customer to purchase
new product lines from the Company. The credits and allowances are designed to
increase market penetration and increase the number of product lines carried by
customers by displacing competitors' products within customers' stores and
promoting consolidation of customers' suppliers.
The introduction of new products and product lines to customers may cause
significant fluctuations from quarter to quarter in the Company's results of
operations.
Over the periods presented, the Company has increased the percentage of
products sold to its major customers, in part due to consolidation within the
automotive aftermarket. As a general rule, sales to the Company's major
customers are at lower margins than sales to other customers.
Page 9 of 15
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items in the Company's
Consolidated Statements of Income.
<TABLE>
<CAPTION>
As a Percentage of Sales
---------------------------------------------------------------------
For the Thirteen Weeks Ended For the Thirty-nine Weeks Ended
--------------------------------- -----------------------------------
September 26, September 27, September 26, September 27,
1998 1997 1998 1997
- ----------------------- --------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 59.5 60.4 60.5 60.6
- ----------------------- --------------- ---------------- ---------------- ------------------
Gross profit 40.5 39.6 39.5 39.4
Selling, general and
administrative expenses 29.3 28.3 29.5 29.1
- ----------------------- --------------- ---------------- ---------------- ------------------
Income from operations 11.2 11.3 10.0 10.3
Interest expense, net 2.4 2.4 2.4 2.7
- ----------------------- --------------- ---------------- ---------------- ------------------
Income before taxes 8.8 8.9 7.6 7.6
Provision for taxes 3.2 3.2 2.8 2.8
- ----------------------- --------------- ---------------- ---------------- ------------------
Net income 5.6% 5.7% 4.8% 4.8% 5.5
======================= =============== ================ ================ ==================
</TABLE>
Thirteen Weeks Ended September 26, 1998 Compared to
Thirteen Weeks Ended September 27, 1997
Net sales increased to $44.5 million for the thirteen weeks ended
September 26, 1998 from $40.8 million for the same period in 1997, an increase
of 9.0%. The acquisition of Scan-Tech accounted for $3.6 million of this
increase and our MPI subsidiary provided a $2.2 million increase partially due
to demand created by the GM strike. These increases were offset by a $2.1
million decrease in all other sales primarily resulting from three events:
integrating the Champ acquisition, moving inventory between facilities, and the
installation of a new computer system.
Cost of goods sold for the thirteen weeks ended September 26, 1998
increased to $26.5 million from $24.7 million for the same period in 1997, an
increase of 7.3%. As a percent of net sales, cost of goods sold for the thirteen
weeks ended September 26, 1998 decreased to 59.5% from 60.4% for the same period
in 1997. This decrease was the result of sales mix and reduced product
acquisition costs.
Selling, general and administrative expenses for the thirteen weeks
ended September 26, 1998 increased to $13.1 million from $11.5 million for the
thirteen weeks ended September 27, 1997, an increase of 13.3%. As a percent of
net sales, selling, general and administrative expenses for the thirteen weeks
ended September 26, 1998 increased to 29.3% from 28.3% for the same period in
1997. This increase resulted from the same three factors that negatively
impacted net sales, namely, integrating the Champ acquisition, moving inventory
between facilities, and the installation of a new computer system.
Interest expense, net, remained relatively constant at $1.0 million for
the thirteen weeks ended September 26, 1998 and for the same period in 1997. As
a percent of net sales, interest expense, net, also remained constant at 2.4%
for the thirteen weeks ended September 26, 1998 and for the same period in 1997.
A provision for income taxes of $1.4 million was recorded for the
thirteen weeks ended September 26, 1998 and $1.3 million was recorded for the
thirteen weeks ended September 27, 1997. The Company's effective tax rate
increased slightly to 36.4% for the thirteen weeks ended September 26, 1998 from
36.1% for the same period in 1997 reflecting slightly higher effective state tax
rates.
Page 10 of 15
<PAGE>
Net income increased to $2.5 million for the thirteen weeks ended
September 26, 1998 from $2.3 million for the thirteen weeks ended September 27,
1997, an increase of 7.4%. As a percentage of net sales, net income decreased to
5.6% for the thirteen week period in 1998 from 5.7% for the same period in 1997.
Thirty-nine Weeks Ended September 26, 1998 Compared to
Thirty-nine Weeks Ended September 27, 1997
Net sales increased to $125.6 million for the thirty-nine weeks ended
September 26, 1998 from $115.1 million for the same period in 1997, an increase
of 9.1%. The acquisition of Scan-Tech accounted for $10.0 million of this
increase and our MPI subsidiary provided a $3.0 million increase partially due
to demand created by the GM strike. These increases were offset by a $2.5
million decrease in all other sales primarily resulting from three events:
integrating the Champ acquisition, moving inventory between facilities, and the
installation of a new computer system.
Cost of goods sold for the thirty-nine weeks ended September 26, 1998
increased to $75.9 million from $69.7 million for the same period in 1997, an
increase of 8.9%. As a percent of net sales, cost of goods sold for the
thirty-nine weeks ended September 26, 1998 decreased slightly to 60.5% from
60.6% for the same period in 1997. This decrease was the result of sales mix and
reduced product acquisition costs.
Selling, general and administrative expenses for the thirty-nine weeks
ended September 26, 1998 increased to $37.0 million from $33.5 million for the
thirty-nine weeks ended September 27, 1997, an increase of 10.5%. As a percent
of net sales, selling, general and administrative expenses for the thirty-nine
weeks ended September 26, 1998 increased to 29.5% from 29.1% for the same period
in 1997. This increase resulted from the same three factors that negatively
impacted net sales, namely, integrating the Champ acquisition, moving inventory
between facilities, and the installation of a new computer system.
Interest expense, net, remained relatively constant at $3.1 million for
the thirty-nine weeks ended September 26, 1998 and for the same period in 1997.
As a percentage of net sales, interest expense, net, decreased to 2.4% for the
thirty-nine week period in 1998 from 2.7% for the same period in 1997. This
decrease reflects the relatively constant average debt levels during the periods
compared to increased net sales.
A provision for income taxes of $3.5 million was recorded for the
thirty-nine weeks ended September 26, 1998 and $3.2 million was recorded for the
thirty-nine weeks ended September 27, 1997. The Company's effective tax rate
remained constant at 36.4% for both periods.
Net income increased to $6.1 million for the thirty-nine weeks ended
September 26, 1998 from $5.5 million for the thirty-nine weeks ended September
27, 1997, an increase of 9.4%. As a percentage of net sales, net income remained
constant at 4.8% for both periods.
Liquidity and Capital Resources
The Company has financed its growth primarily through cash flow from its
operations and borrowings under its credit facility. Working capital was $85.1
million as of September 26, 1998 and $60.5 million as of September 27, 1997. The
Company believes that the cash generated from operations and borrowings
available under its revolving credit facility will be sufficient to meet the
Company's working capital needs to fund expansion for the foreseeable future.
Net cash provided by operating activities was $3.2 million for the
thirty-nine weeks ended September 26, 1998 and $10.3 million for the thirty-nine
weeks ended September 27, 1997. These amounts represent net income plus
depreciation and amortization and changes in working capital. During 1998, the
most significant working capital changes were increases in inventories and
accounts receivable offset by increases in accounts payable and other accrued
liabilities. During 1997, the most significant changes were increases in
accounts receivable, accounts payable and other accrued liabilities offset
somewhat by a decrease in inventories.
Net cash used in investing activities amounted to $4.0 million for the
thirty-nine weeks ended September 26, 1998 and $3.3 million for the thirty-nine
weeks ended September 27, 1997. In 1998, the additions to property, plant and
equipment offset by $2.1 million in proceeds from a sale/leaseback transaction,
and the acquisitions of Scan-Tech
Page 11 of 15
<PAGE>
and Champ accounted for all of the cash used in investing activities. During
1997, the additions to property, plant and equipment accounted for all of the
cash used in investing activities.
Net cash provided by financing activities amounted to $14.9 million for
the thirty-nine weeks ended September 26, 1998 and net cash used in financing
activities amounted to $7.7 million for the thirty-nine weeks ended September
27, 1997. During 1998, the proceeds from the senior notes less the repayments of
the revolving credit facility, term loans and normal payments under capital
lease obligations accounted for substantially all of the funds provided. During
1997, cash was used to paydown a portion of the revolving credit facility and
the continued paydown of term loans and capital lease obligations.
The Acquisition of Scan-Tech. In January 1998, the Company acquired the
assets of Scan-Tech with the payment of cash consideration of $1.0 million and
the issuance of the Company's common stock valued at $2.7 million.
The Acquisition of Champ. In August 1998, the Company completed the
first of four stages of the acquisition of the Service Line Division from
Standard Motor Products by acquiring the inventory and selected assets of the
Champ Service Line for cash consideration of $1.1 million. The second stage was
completed in September 1998, when the inventory of the APS Service Line was
taken on consignment requiring no up front cash consideration.
6.81% Senior Notes due 2008. In August 1998, the Company completed a
private placement with a group of three insurance companies of $60 million in
6.81% Senior Notes due August 21, 2008 (Notes) on an unsecured basis. The
ten-year Notes bear a 6.81% fixed interest rate, payable quarterly, with an
initial four-year interest only period. Proceeds from the Notes were used to pay
down bank debt, fund the Champ and Allparts acquisitions and provide working
capital. The Notes are subject to certain financial covenants including minimum
net worth and maximum debt to capital ratios.
Concurrent with closing on the Notes, the Company replaced its existing bank
facilities with a new $35 million, unsecured revolving credit agreement from a
syndicate of commercial banks including First Union National Bank and National
City Bank. The revolver has a term of five years and an interest rate equal to
Libor plus 75 basis points.
Industrial Revenue Bonds. Construction of the Company's Warsaw, Kentucky
facility in 1990 was funded by the Bonds. The Bonds bear interest at an annual
rate of 4% payable monthly and require annual principal payments of $300,000 or
$350,000 in alternating years with the final payment due in July 2009.
Capitalized Leases. The Company's leases for its Pennsylvania and Georgia
facilities are recorded as capitalized leases in the Company's financial
statements. In 1998, the Company financed the purchase of its new computer
hardware and software with equipment lease financing arrangements from a
financial institution in the amount of $3.6 million. The lease is payable over
three years at $110,800 per month including interest imputed at 6.23%.
Subsequent Events
On October 5, 1998, the Company completed the third stage of the
acquisition of the Service Line Division from Standard Motor Products by
acquiring the inventory and selected assets of Pik-A-Nut for cash consideration
of $1.2 million. The final and smallest stage of this acquisition - the Everco
brass fittings - is expected to be completed around January 1, 1999.
On October 28, 1998, the Company acquired the assets of Allparts, Inc.
from JPE, Inc. for approximately $10.1 million in cash. Headquartered in
Louisiana, Missouri, Allparts is a leading supplier of automotive hydraulic
brake parts to the automotive aftermarket. Allparts has annual sales of
approximately $19 million. The transaction is expected to be non-dilutive.
Impact of Inflation
The Company has not generally been adversely affected by inflation. The
Company believes that price increases resulting from inflation generally could
be passed on to its customers, since prices charged by the Company are not set
by long-term contracts.
Page 12 of 15
<PAGE>
Year 2000 Compliance
The efficient operation of the Company's business is dependent in part
on its computer software programs and operating systems ("Programs"). The
Company has been evaluating its Programs to identify potential Year 2000
compliance problems. This evaluation has led to the selection and implementation
of a comprehensive enterprise resource planning package and related programs
("New System") which became operational during the second quarter of 1998. This
New System is used in several key areas of the Company's business including
inventory purchasing and management, production planning, forecasting, pricing,
sales, shipping and financial reporting and replaces the majority of the
Company's previous Programs. Those Programs not replaced by the New System are
also being evaluated for Year 2000 compliance and appropriate adjustments have
been or will be made to bring them into compliance either through modification
or replacement. The most significant of these are the Company's Human Resource,
Payroll and time keeping systems which are being replaced with a combination of
purchased software and third party services and are expected to become
operational by the beginning of 1999.
Based on present information, the Company believes that it will be able
to achieve Year 2000 compliance through a combination of installation of the New
System and modification to other Programs, however, no assurance can be given
that these efforts will be successful. The investment in capital expenditures to
implement the New System was approximately $3.7 million. The Company expects
that the expenses associated with the replacement and upgrade to the Human
Resource, Payroll and the time keeping systems will be approximately $0.5
million, and that the expenses associated with modification of other Programs
will not be material.
Further, in the event that any of the Company's significant suppliers or
customers do not successfully and timely achieve Year 2000 compliance, the
Company's business operations could be adversely affected.
Cautionary Statement Regarding Forward Looking Statements
Certain statements periodically made by or on behalf of the Company and
certain statements contained herein including statements in Management's
Discussion and Analysis of Financial Condition and Results of Operation and
certain other statements contained herein regarding matters that are not
historical fact are forward looking statements (as such term is defined in the
Securities Act of 1933), and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward looking statements. Factors that cause actual results to
differ materially include but are not limited to and those factors discussed in
"Business - Investment Considerations" included in the Company's Annual Report
on Form 10-K for the year ended December 27, 1997.
Page 13 of 15
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
In addition to commitments and obligation which arise in the ordinary
course of business, the Company is subject to various claims and legal actions
from time to time involving contracts, competitive practices, trademark rights,
product liability claims and other matters arising out of the conduct of the
Company's business.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K
None
Page 14 of 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
R & B, INC.
Date November 11, 1998 Richard Berman
Richard Berman
President
Date November 11, 1998 Malcolm Walter
Malcolm Walter
Chief Financial Officer and
Principal Accounting Officer
Page 15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> SEP-26-1998
<CASH> 15,666
<SECURITIES> 0
<RECEIVABLES> 50,224
<ALLOWANCES> (9,758)
<INVENTORY> 50,430
<CURRENT-ASSETS> 109,926
<PP&E> 35,837
<DEPRECIATION> (16,329)
<TOTAL-ASSETS> 164,320
<CURRENT-LIABILITIES> 24,835
<BONDS> 67,556
0
0
<COMMON> 83
<OTHER-SE> 70,076
<TOTAL-LIABILITY-AND-EQUITY> 164,320
<SALES> 125,568
<TOTAL-REVENUES> 125,568
<CGS> 75,912
<TOTAL-COSTS> 37,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,063
<INCOME-PRETAX> 9,546
<INCOME-TAX> 3,479
<INCOME-CONTINUING> 6,067
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,067
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.72
</TABLE>
