--------------------------------------------------------------------------------
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 23, 2000
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 1, 2000 the Registrant had 8,355,116 common shares, $.01 par
value, outstanding.
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Page 1 of 14
<PAGE>
R & B, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 23, 2000
Page
Part I -- FINANCIAL INFORMATION
Item 1.Consolidated Financial Statements (unaudited)
Statements of Income:
Thirteen Weeks Ended September 23, 2000 and
September 25, 1999.............................. 3
Thirty-nine Weeks Ended September 23, 2000 and
September 25, 1999.............................. 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.................................... 13
Item 6.Exhibits and Reports on Form 8-K..................... 13
Signature .............................................. 14
Page 2 of 14
<PAGE>
PART I. FINANCIAL INFORMATION
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
For the Thirteen Weeks Ended
-----------------------------
September 23, September 25,
(in thousands, except per share data) 2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $49,700 $59,495
Cost of goods sold 31,351 38,620
-------------------------------------------------------------------------------------------
Gross profit 18,349 20,875
Selling, general and administrative expenses 15,172 17,235
-------------------------------------------------------------------------------------------
Income from operations 3,177 3,640
Interest expense, net 1,322 1,717
-------------------------------------------------------------------------------------------
Income before taxes 1,855 1,923
Provision for taxes 644 663
-------------------------------------------------------------------------------------------
Net Income $ 1,211 $ 1,260
-------------------------------------------------------------------------------------------
Earnings Per Share
Basic $0.14 $0.15
Diluted 0.14 0.15
-------------------------------------------------------------------------------------------
Average Shares Outstanding
Basic 8,428 8,392
Diluted 8,510 8,462
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
Page 3 of 14
<PAGE>
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
For the Thirty-nine Weeks Ended
-----------------------------
September 23, September 25,
(in thousands, except per share data) 2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $152,185 $183,459
Cost of goods sold 96,591 115,624
-------------------------------------------------------------------------------------------
Gross profit 55,594 67,835
Selling, general and administrative expenses 44,915 54,329
-------------------------------------------------------------------------------------------
Income from operations 10,679 13,506
Interest expense, net 4,658 5,229
-------------------------------------------------------------------------------------------
Income before taxes 6,021 8,277
Provision for taxes 2,101 2,886
-------------------------------------------------------------------------------------------
Net Income $ 3,920 $ 5,391
-------------------------------------------------------------------------------------------
Earnings Per Share
Basic $0.47 $0.64
Diluted 0.46 0.64
-------------------------------------------------------------------------------------------
Average Shares Outstanding
Basic 8,420 8,369
Diluted 8,509 8,418
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
Page 4 of 14
<PAGE>
<TABLE>
R&B, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 23, December 25,
(in thousands, except share data) 2000 1999
--------------------------------------------------- ----------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 2,899 $ 1,467
Accounts receivable, less allowance for doubtful
accounts and customer credits of $9,336 and $8,764 41,267 49,979
Inventories 55,185 70,272
Deferred income taxes 3,162 4,574
Prepaids and other current assets 3,591 2,543
--------------------------------------------------- ----------------- -----------------
Total current assets 106,104 128,835
--------------------------------------------------- ----------------- -----------------
Property, Plant and Equipment, net 24,836 22,919
Intangible Assets 31,671 33,212
Other Assets 3,194 3,038
--------------------------------------------------- ----------------- -----------------
Total $165,805 $188,004
--------------------------------------------------- ----------------- -----------------
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt $ 2,948 $ 11,910
Accounts payable 12,803 12,867
Accrued compensation 3,114 2,820
Other accrued liabilities 4,563 4,626
--------------------------------------------------- ----------------- -----------------
Total current liabilities 23,428 32,223
Long-Term Debt 68,428 85,283
Deferred Income Taxes 2,372 2,264
Commitments and Contingencies
Shareholders' Equity:
Common stock, par value $.01; authorized
25,000,000 shares; issued 8,508,916 and 8,393,796 85 84
Additional paid-in capital 33,811 33,517
Cumulative translation adjustments (1,053) (181)
Retained earnings 38,734 34,814
Total shareholders' equity 71,577 68,234
--------------------------------------------------- ----------------- -----------------
Total $165,805 $188,004
--------------------------------------------------- ----------------- -----------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
Page 5 of 14
<PAGE>
<TABLE>
R&B, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
For the Thirty-nine Weeks Ended
--------------------------------------
September 23, September 25,
(in thousands) 2000 1999
--------------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 3,920 $ 5,391
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation and amortization 5,826 5,524
Provision for doubtful accounts 451 653
Provision for deferred income taxes 1,548 -
Changes in assets and liabilities:
Accounts receivable 7,955 (2,480)
Inventories 14,334 ( 16,557)
Prepaids and other current assets (1,099) (868)
Other assets (173) (1,705)
Accounts payable 234 5,648
Other accrued liabilities 310 (114)
--------------------------------------------------------------- ------------------ -------------------
Cash provided by (used in) operating activities 33,306 (4,508)
--------------------------------------------------------------- ------------------ -------------------
Cash Flows from Investing Activities:
Property, plant and equipment additions (6,500) (5,919)
Cash (used in) investing activities (6,500) (5,919)
--------------------------------------------------------------- ------------------ -------------------
Cash Flows from Financing Activities:
Net (repayment) proceeds of revolving credit (26,852) 12,297
Repayments of term loans and capital lease obligations (341) (1,228)
Proceeds from capital lease obligations 1,524 -
Proceeds from common stock issuances 295 379
--------------------------------------------------------------- ------------------ -------------------
Cash (used in) provided by financing activities (25,374) 11,448
--------------------------------------------------------------- ------------------ -------------------
Net Increase in Cash and Cash Equivalents 1,432 1,021
Cash and Cash Equivalents, Beginning of Period 1,467 915
--------------------------------------------------------------- ------------------ -------------------
Cash and Cash Equivalents, End of Period $ 2,899 $ 1,936
--------------------------------------------------------------- ------------------ -------------------
Supplemental Cash Flow Information
Cash paid for interest expense $ 4,572 $ 4,931
Cash paid for income taxes $ 1,135 $ 3,027
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
Page 6 of 14
<PAGE>
R&B, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 23, 2000
AND SEPTEMBER 25, 1999 (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 23, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 30, 2000. 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 25, 1999.
2. Restructuring Charges
In the fourth quarter of fiscal 1999, the Company recorded a
restructuring charge of $11.4 million ($7.5 million after tax or $0.90 per
share) to reflect costs primarily related to inventory write downs associated
with the elimination of a significant number of underperforming products, as
well as the closing of a warehouse and production facility in Carrollton,
Georgia, and a work force reduction of 158 people. A total of $9.8 million,
representing inventory write downs, was charged to cost of sales and $1.6
million was charged to selling, general and administrative expenses. There were
no significant changes to the plan in fiscal 2000. During the first nine months
of fiscal 2000, the Company disposed of approximately $4.4 million in inventory
related to the restructuring, completed the planned workforce reduction, and
closed the Company's warehouse and production facility in Carrollton, Georgia.
The following summarizes the restructuring charge and activity through September
23, 2000:
<TABLE>
<CAPTION>
Employee Facility
Inventory Termination Shutdown
(in thousands) Disposals Benefits Costs Total
--------- ----------- --------- -------
<S> <C> <C> <C> <C>
Initial Charge $ 9,800 $ 475 $ 1,125 $11,400
Costs Incurred - 1999 - (124) (300) (424)
Balance at December 25, 1999 9,800 351 825 10,976
Costs Incurred - 2000 (4,398) (235) (174) (4,807)
Balance at September 23, 2000 $ 5,402 $ 116 $ 651 $ 6,169
</TABLE>
3. 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 23, December 25,
(in thousands) 2000 1999
------------------- --------------- ---------------
Bulk product $15,536 $20,665
Finished product 35,599 45,136
Packaging materials 4,050 4,471
------------------- --------------- ---------------
Total $55,185 $70,272
------------------- --------------- ---------------
Page 7 of 14
<PAGE>
4. Intangible Assets
Intangible assets consist primarily of goodwill which is amortized over
periods of 10 to 40 years. Total accumulated amortization as of September 23,
2000 was $7.3 million. Amortization expense of these assets was $0.4 million in
the third quarter of 2000 and 1999, and $1.2 million for the thirty-nine week
periods ended September 23, 2000 and September 25, 1999.
5. Earnings Per Share
Earnings per share is computed under Statement of Financial Accounting
Standards No. 128, "Earnings Per Share". The Company has included basic and
diluted earnings per share on the face of the Statements of Income for each
period presented. Weighted average shares for "diluted" earnings per share
includes the assumption of the exercise of all potentially dilutive securities
("in the money" stock options).
Page 8 of 14
<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 and customer credits and allowances.
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 Company may experience significant fluctuations from quarter to quarter
in its results of operations due to the timing of orders placed by the Company's
customers. Generally, the second and third quarters have the highest level of
customer orders, but the timing of the introduction of new products and product
lines to customers may cause significant fluctuations from quarter to quarter.
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 23, September 25, September 23, September 25,
2000 1999 2000 1999
----------------------- --------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 63.1 64.9 63.5 63.0
----------------------- --------------- ---------------- ---------------- ------------------
Gross profit 36.9 35.1 36.5 37.0
Selling, general and
administrative expenses 30.5 29.0 29.5 29.6
----------------------- --------------- ---------------- ---------------- ------------------
Income from operations 6.4 6.1 7.0 7.4
Interest expense, net 2.7 2.9 3.0 2.9
----------------------- --------------- ---------------- ---------------- ------------------
Income before taxes 3.7 3.2 4.0 4.5
Provision for taxes 1.3 1.1 1.4 1.6
----------------------- --------------- ---------------- ---------------- ------------------
Net income 2.4% 2.1% 2.6% 2.9%
----------------------- --------------- ---------------- ---------------- ------------------
</TABLE>
Thirteen Weeks Ended September 23, 2000 Compared to Thirteen Weeks Ended
September 25, 1999
Net sales decreased to $ 49.7 million for the thirteen weeks ended
September 23, 2000 from $59.5 million for the same period in 1999, a decrease of
16.5%. The decline in sales is the result of continued consolidation in the
automotive aftermarket, inventory adjustments by our customers and the Company's
strategic decision to eliminate unprofitable products. A portion of the sales
decline was also attributable to the lift support business that was sold in the
first quarter of 2000. Net sales in fiscal 1999 from this program were
approximately $13 million. During the third quarter of 2000 the Company began
shipping its "Pik-a-Nut" brand of hardware and general fasteners to Wal-Mart.
Third quarter 2000 revenues from this initiative offset the sales decline from
the sale of the lift support business.
Cost of goods sold for the thirteen weeks ended September 23, 2000
decreased to $31.4 million from $38.6 million for the same period in 1999, a
decrease of 18.7%. The cost of goods sold decline is primarily attributable to
Page 9 of 14
<PAGE>
the lower sales levels recorded in the third quarter of 2000. As a percentage of
net sales, gross profit for the thirteen weeks ended September 23, 2000
increased to 36.9% from 35.1% for the thirteen weeks ended September 25, 1999.
The increase in gross profit percentage is the result of the sale of the
Company's lower-margin lift support inventory in the first quarter of 2000 and
savings achieved as a result of the restructuring plan announced at the end of
fiscal 1999.
Selling, general and administrative expenses for the thirteen weeks
ended September 23, 2000 decreased to $15.2 million from $17.2 million for the
thirteen weeks ended September 25, 1999, a decrease of 11.6%. The decrease in
selling, general and administrative costs in the third quarter of 2000 was
primarily the result of lower sales levels and cost savings realized from a cost
reduction and restructuring plan initiated by the Company at the end of fiscal
1999. The net cost savings in the three months ended September 23, 2000 were
partially offset by start up costs associated with a program to provide hardware
and general use fasteners to a Wal-Mart.
Interest expense, net, decreased to $1.3 million for the thirteen weeks
ended September 23, 2000 from $1.7 million for the thirteen weeks ended
September 25, 1999. This decrease resulted from lower borrowing levels in the
current year.
Provisions for income taxes were $0.6 million for the thirteen weeks
ended September 23, 2000 and $0.7 million for the same period in 1999. The
Company's effective tax rate increased to 34.7% in 2000 from 34.5% in 1999 due
to slightly higher state tax provisions in the current year.
Thirty-nine Weeks Ended September 23, 2000 Compared to Thirty-nine Weeks Ended
September 25, 1999
Restructuring Charges - In the fourth quarter of fiscal 1999, the
Company recorded a restructuring charge of $11.4 million ($7.5 million after tax
of $0.90 per share) to reflect costs primarily related to inventory write downs
associated with the elimination of a significant number of underperforming
products, as well as the closing of a warehouse and production facility in
Carrollton, Georgia, and a work force reduction of 158 people. A total of $9.8
million, representing inventory write downs, was charged to cost of sales and
$1.6 million was charged to selling, general and administrative expenses. There
were no significant changes to the plan in fiscal 2000. During the first nine
months of 2000, the Company disposed of approximately $4.4 million in inventory
related to the restructuring, completed the planned workforce reduction and
closed the Company's warehouse and production facility in Carrollton, Georgia.
Sale of Lift Support Inventory - During the first quarter of fiscal
2000, the Company sold all of its inventory and certain other assets related to
its lift support product line as a result of a strategic decision to eliminate
this product line. Results for the thirty-nine weeks ended September 23, 2000
include non-recurring revenues and gross profit of $5.5 million and $1.6
million, respectively attributable to the sale of the inventory and related
assets. The first quarter 2000 gain on the sale was $1.6 million ($1.1 million
after tax or $0.13 per share).
Net sales decreased to $152.2 million for the thirty-nine weeks ended
September 23, 2000 from $183.5 million for the same period in 1999, a decrease
of 17.1%. The decline in sales is the result of continued consolidation in the
automotive aftermarket, inventory adjustments by our customers and the Company's
strategic decision to eliminate unprofitable products. The Company estimates
that sales in the nine months ended September 23, 3000 were reduced by
approximately $18.0 million as a result of it launching fewer but more
profitable new initiatives and its 1999 decision to eliminate unprofitable
products in its core business. A portion of the sales decline was also
attributable to the lift support business that was sold in the first quarter of
2000. Net sales in fiscal 1999 from this program were approximately $13 million.
During the third quarter of 2000 the Company began shipping its "Pik-a-Nut"
brand of hardware and general use fasteners to Wal-Mart. Third quarter 2000
revenues from this initiative offset the sales decline from the sale of the lift
support business.
Cost of goods sold for the thirty-nine weeks ended September 23, 2000
decreased to $96.6 million from $115.6 million for the same period in 1999, a
decrease of 16.4%. As a percent of net sales, gross profit for the thirty- nine
weeks ended September 23, 2000 decreased to 36.5% from 37.0 % for the
thirty-nine weeks ended September 25, 1999. The reduction in gross profit
percentage is primarily the result of a lower gross profit on the non-recurring
lift support line sale in the first quarter of fiscal 2000.
Selling, general and administrative expenses for the thirty-nine weeks
ended September 23, 2000 decreased to $44.9 million from $54.3 million for the
thirty-nine weeks ended September 25, 1999, a decrease of 17.3%. As a
Page 10 of 14
<PAGE>
percent of net sales, selling, general and administrative expenses decreased
slightly to 29.5% in 2000 from 29.6% in 1999. However, actual selling, general
and administrative expenses as a percentage of net sales before lift support
sale revenue (which had no such costs attributable to it) were 30.6% in the nine
months ended September 23, 2000. This increase from 1999's level of 29.6% is
primarily attributable to the decline in sales, as the Company was not able to
reduce fixed selling, general and administrative expenses adequately to offset
the sales decline. In addition, the Company incurred start up costs in the nine
months ended September 23, 2000 associated with a program to provide hardware
and general use fasteners to Wal-Mart.
Interest expense, net, decreased to $4.7 million for the thirty-nine
weeks ended September 23, 2000 from $5.2 million for the thirty-nine weeks ended
September 25, 1999. This decrease resulted from lower borrowing levels in the
current year.
Provisions for income taxes of $2.1 million for the thirty-nine weeks
ended September 23, 2000 and $2.9 million for the same period in 1999. The
Company's effective tax rate in both periods was 34.9%.
Liquidity and Capital Resources
The Company has financed its growth through the combination of cash flow
from its operations, issuance of senior notes and borrowings under its credit
facilities and industrial revenue bonds. Working capital was $82.7 million as of
September 23, 2000 and $96.6 million as of December 25, 1999. The Company
believes that the cash generated from operations and borrowings under its
revolving credit facility will be sufficient to meet the Company's working
capital needs and to fund expansion for the foreseeable future.
Net cash provided by operating activities of $33.3 million for the
thirty-nine weeks ended September 23, 2000 compared to net cash used in
operating activities of $4.5 million in the comparable period in 1999. During
2000, net income, non-cash provisions for depreciation, amortization, doubtful
accounts and deferred taxes as well as lower accounts receivable and inventory
levels and increases in accounts payable and other liabilities provided $34.9
million in positive cash flow. These increases were partially offset by $1.6
million in cash used to increase prepaid expenses and other assets. During 1999,
net income, increases in accounts payable and non-cash provisions for
depreciation, amortization and doubtful accounts provided $17.2 million in
positive cash flow, however these increases were more than offset by $21.7
million in cash used primarily to fund increases in accounts receivable and
inventory.
Net cash used in investing activities amounted to $6.5 million for the
thirty-nine weeks ended September 23, 2000 and $5.9 in 1999. In both periods,
additions to property, plant and equipment were the primary uses of cash.
Net cash used in financing activities was $25.4 million for the
thirty-nine weeks ended September 23, 2000 compared to net cash provided by
financing activities of $11.4 million in the comparable period in 1999. During
2000, cash generated from operating activities net of investing activities was
used to reduce borrowing levels. In addition, the Company received proceeds from
a capital lease obligation of $1.5 million. During 1999, revolving credit
facility borrowings provided $12.3 million in cash which was used to fund cash
used in operating and investing activities.
Senior Notes. In August 1998, the Company completed a private placement of $60
million in 6.81% Senior Notes due August 21, 2008 on an unsecured basis. The
ten-year Notes bear a 6.81 percent fixed interest rate, payable quarterly, with
an initial four-year interest only period.
Revolving Credit Facility. In connection with the Notes, the Company amended its
$35 million revolving credit facility with First Union National Bank and
National City Bank. As amended, the commitment for the line was extended for a
five-year term on an unsecured basis with interest at Libor plus 125 basis
points. Proceeds from the Notes were used, among other things, to pay down the
term debt portions of the bank credit facilities previously advanced to the
Company by the bank syndicate.
In May 2000, the Company amended the revolving credit facility. The
terms of the amended agreement include revisions to certain debt coverage
covenants, required the Company to obtain $1.0 million in new financing and
provides for mandatory reductions in the facility to $20.0 million and $15.0
million by December 31, 2000 and June 30, 2001, respectively. In addition, the
amendment provides for an increase in the facility's interest rate to a maximum
of Libor plus 300 basis points. Upon an occurrence of an Event of Default, as
defined in the loan agreement, the banks, at their option, may require a lien on
substantially all of the Company's assets. The Company satisfied its
Page 11 of 14
<PAGE>
requirement to obtain $1.0 million in new financing by securing a $1.0 million
subordinated loan from Richard and Steven Berman, the President and Executive
Vice President of the Company, respectively. The subordinated loan bears
interest at prime plus 100 basis points with interest only payments during the
term of the loan. The loan is due on April 30, 2002 unless repaid earlier in
accordance with the terms of the amended revolving credit facility. Borrowings
outstanding under the revolving credit facility amounted to $1.5 million at
September 23, 2000. The Company believes that the amended facility together with
cash generated from operations will provide sufficient funding to meet the
Company's working capital needs for the foreseeable future.
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 July, 2009. Bond
borrowings amounted to $3.0 million at September 23, 2000.
Capitalized Leases. The Company's leases for its Pennsylvania and
Georgia facilities are recorded as capitalized leases in the Company's financial
statements. In addition, the Company has entered into three sale/leaseback
transactions relating to computer hardware and software. The aggregate amount
outstanding under all capital leases amounted to $5.1 million at September 23,
2000.
Foreign Currency Fluctuations. Approximately 35% of the Company's
products are purchased from a variety of foreign countries. The products
generally are purchased through purchase orders with the purchase price
specified in U.S. dollars. Accordingly, the Company does not have exposure to
fluctuation in the relationship between the dollar and various foreign
currencies between the time of execution of the purchase order and payment for
the product. However, to the extent that the dollar decreased in value in
relation to foreign currencies in the future, the price of the product in
dollars for new purchase orders may increase. The Company attempts to lessen the
impact of these currency fluctuations by resourcing its purchases to other
countries.
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.
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; such as
statements regarding litigation; 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 those factors
discussed in the Company's Annual Report on Form 10-K under "Business
-Investment Considerations."
Quantitative and Qualitative Disclosure about Material Risk
The Company's market risk is the potential loss arising from adverse
changes in interest rates. With the exception of the Company's revolving credit
facility, long-term debt obligations are at fixed interest rates and denominated
in U.S. dollars. The Company manages its interest rate risk by monitoring trends
in interest rates as a basis for determining whether to enter into fixed rate or
variable rate agreements. Under the terms of the Company's revolving credit
facility, a change in either the lender's base rate of LIBOR would affect the
rate at which the Company could borrow funds thereafter. The Company believes
that the effect of any such change would be minimal.
Although the Company continues to evaluate derivative financial
instruments to manage foreign currency exchange rate changes, the Company does
not currently hold derivatives for managing these risks of for trading purposes.
Page 12 of 14
<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 13 of 14
<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 3, 2000 Richard Berman
--------------------------- -----------------
Richard Berman
President
Date November 3, 2000 Mathias J. Barton
--------------------------- ------------------
Mathias J. Barton
Chief Financial Officer
and Principal Accounting
Officer
Page 14 of 14
