--------------------------------------------------------------------------------
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 June 24, 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 July 28, 2000 the Registrant had 8,307,721 common shares, $.01 par value,
outstanding.
--------------------------------------------------------------------------------
<PAGE>
R & B, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 24, 2000
Page
Part I -- FINANCIAL INFORMATION
Item 1.Consolidated Financial Statements (unaudited)
Statements of Income:
Thirteen Weeks Ended June 24, 2000 and
June 26, 1999 3
Twenty-six Weeks Ended June 24, 2000 and
June 26, 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............................ 8
Part II -- OTHER INFORMATION
Item 1.Legal Proceedings.................................... 13
Item 6.Exhibits and Reports on Form 8-K..................... 13
Signatures.................................................. 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
------------------------------
June 24, June 26,
(in thousands, except per share data) 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $ 49,239$ $ 68,018
Cost of goods sold 30,603 42,743
--------------------------------------------------------------------------------------------
Gross profit 18,636 25,275
Selling, general and administrative expenses 14,819 19,193
--------------------------------------------------------------------------------------------
Income from operations 3,817 6,082
Interest expense, net 1,425 1,806
--------------------------------------------------------------------------------------------
Income before taxes 2,392 4,276
Provision for taxes 854 1,496
--------------------------------------------------------------------------------------------
Net Income $ 1,538 $ 2,780
============================================================================================
Earnings Per Share:
Basic $0.18 $0.33
Diluted $0.18 $0.33
--------------------------------------------------------------------------------------------
Average Shares Outstanding:
Basic 8,421 8,368
Diluted 8,506 8,437
--------------------------------------------------------------------------------------------
</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 Twenty-six Weeks Ended
------------------------------
June 24, June 26,
(in thousands, except per share data) 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $ 102,485 $ 123,964
Cost of goods sold 65,240 77,004
--------------------------------------------------------------------------------------------
Gross profit 37,245 46,960
Selling, general and administrative expenses 29,743 37,094
--------------------------------------------------------------------------------------------
Income from operations 7,502 9,866
Interest expense, net 3,336 3,512
--------------------------------------------------------------------------------------------
Income before taxes 4,166 6,354
Provision for taxes 1,457 2,223
--------------------------------------------------------------------------------------------
Net Income $ 2,709 $ 4,131
============================================================================================
Earnings Per Share:
Basic $0.32 $0.49
Diluted $0.32 $0.49
--------------------------------------------------------------------------------------------
Average Shares Outstanding:
Basic 8,417 8,358
Diluted 8,508 8,406
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
Page 4 of 14
<PAGE>
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 24, December 25,
(in thousands, except share data) 2000 1999
--------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Assets (unaudited)
Current Assets:
Cash and cash equivalents $ 2,527 $ 1,467
Accounts receivable, less allowance for doubtful
accounts and customer credits of $8,934 and $8,764 43,775 49,979
Inventories 58,370 70,272
Deferred income taxes 3,651 4,574
Prepaids and other current assets 7,096 2,543
--------------------------------------------------- ----------------- -----------------
Total current assets 115,419 128,835
--------------------------------------------------- ----------------- -----------------
Property, Plant and Equipment, net 22,550 22,919
Intangible Assets 32,384 33,212
Other Assets 3,120 3,038
--------------------------------------------------- ----------------- -----------------
Total $ 173,473 $188,004
=================================================== ================= =================
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt $ 3,338 $ 11,910
Accounts payable 16,044 12,867
Accrued compensation 2,714 2,820
Other accrued liabilities 6,965 4,626
--------------------------------------------------- ----------------- -----------------
Total current liabilities 29,061 32,223
Long-Term Debt 71,024 85,283
Deferred Income Taxes 2,435 2,264
Commitments and Contingencies
Shareholders' Equity:
Common stock, par value $.01; authorized
25,000,000 shares; issued 8,421,319 and 8,393,796 84 84
Additional paid-in capital 33,603 33,517
Cumulative translation adjustments (257) (181)
Retained earnings 37,523 34,814
Total shareholders' equity 70,953 68,234
--------------------------------------------------- ----------------- -----------------
Total $ 173,473 $188,004
=================================================== ================= =================
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
Page 5 of 14
<PAGE>
R&B, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
For the Twenty-six Weeks Ended
--------------------------------------
June 24, June 26,
(in thousands) 2000 1999
-------------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,709 $ 4,131
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization 3,817 3,398
Provision for doubtful accounts 248 377
Provision for deferred income taxes 1,094
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 5,956 (10,785)
Inventories 11,902 (10,814)
Prepaids and other current assets (4,553) (1,420)
Other assets ( 82) (1,440)
Accounts payable 3,101 7,264
Other accrued liabilities 2,233 (29)
-------------------------------------------------------------- ------------------ -------------------
Cash provided by (used in) operating activities 26,425 (9,318)
-------------------------------------------------------------- ------------------ -------------------
Cash Flows from Investing Activities:
Property, plant and equipment additions (2,620) (4,543)
-------------------------------------------------------------- ------------------ -------------------
Cash (used in) investing activities (2,620) (4,543)
-------------------------------------------------------------- ------------------ -------------------
Cash Flows from Financing Activities:
ACTIVITIES:
Net (repayment) proceeds from revolving credit (22,500) 15,697
Repayment of term loans and capitalized lease obligations (1331) (973)
Proceeds from subordinated loan 1,000 -
Proceeds from common stock issuances 86 379
-------------------------------------------------------------- ------------------ -------------------
Cash (used in) provided by financing activities (22,745) 15,103
-------------------------------------------------------------- ------------------ -------------------
Net Increase in Cash and Cash Equivalents 1,060 1,242
Cash and Cash Equivalents, Beginning of Period 1,467 915
-------------------------------------------------------------- ------------------ -------------------
Cash and Cash Equivalents, End of Period $ 2,527 $ 2,157
============================================================== ================== ===================
Supplemental Cash Flow Information
Cash paid for interest expense $ 3,281 $ 3,113
Cash paid for income taxes $ 110 $ 2,901
</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 TWENTY-SIX WEEKS ENDED JUNE 24, 2000 AND JUNE 26,1999 (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 twenty-six week period ended June
24, 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 six months
of fiscal 2000, the company disposed of approximately $3.5 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 June 24,
2000:
<TABLE>
<CAPTION>
Employee Facility
Inventory Termination Shutdown
Disposals Benefits Costs
---------------- --------------- --------------
(in thousands) 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 (3,531) (235) (107) (3,873)
------------------------------------ ---------------- --------------- -------------- ----------------
Balance at June 24, 2000 $6,269 $ 116 $ 718 $ 7,103
------------------------------------ ---------------- --------------- -------------- ----------------
</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:
June 24, December 25,
(in thousands) 2000 1999
------------------- -------------- --------------
Bulk product $16,129 $20,665
Finished product 38,014 45,136
Packaging materials 4,227 4,471
------------------- -------------- --------------
Total $58,370 $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 June 24, 2000 was $6.9
million. Amortization expense of these assets was $0.4 million in the second
quarter of 2000 and 1999, and $0.8 million for the twenty-six week period ended
June 24, 2000 and June 26, 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, 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 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 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>
Percentage of Net Sales
--------------------------------------------------------------------
For the Thirteen Weeks Ended For the Twenty-six Weeks Ended
-------------------------------- ----------------------------------
June 24, June 26, June 24, June 26,
2000 1999 2000 1999
--------------------------- --------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 62.2% 62.8% 63.7% 62.1%
--------------------------- --------------- ---------------- ---------------- -----------------
Gross profit 37.8% 37.2% 36.3% 37.9%
administrative expenses 30.1% 28.2% 29.0% 29.9%
--------------------------- --------------- ---------------- ---------------- -----------------
Interest expense, net 2.9% 2.7% 3.3% 2.9%
--------------------------- --------------- ---------------- ---------------- -----------------
Income before taxes 4.8% 6.3% 4.0% 5.1%
Provision for taxes 1.7% 2.2% 1.4% 1.8%
--------------------------- --------------- ---------------- ---------------- -----------------
Net income 3.1% 4.1% 2.6% 3.3%
=========================== =============== ================ ================ =================
</TABLE>
Thirteen Weeks Ended June 24, 2000 Compared to
Thirteen Weeks Ended June 26, 1999
Net sales decreased to $49.2 million for the thirteen weeks ended June 24, 2000
from $68.0 million for the same period in 1999, a decrease of 27.6%. The decline
is attributable to lower sales levels in the company's core business of hard-to-
find parts and fasteners as a result of the flat automotive aftermarket, the
Company's efforts to eliminate
Page 9 of 14
<PAGE>
unprofitable products in its core business and to launch fewer, but more
profitable new sales initiatives. In addition, approximately one-fifth of the
decline is attributable to the sale of the Company's lift support inventory in
the first quarter of 2000.
Cost of goods sold for the thirteen weeks ended June 24, 2000 decreased to $30.6
million from $42.7 million for the same period in 1999, a decrease of 28.4%.
The cost of goods sold decline is primarily attributable to the lower sales
levels recorded in the second quarter of 2000. As a percent of net sales, gross
profit for the thirteen weeks ended June 24, 2000 increased to 37.8% from 37.2%
for the thirteen weeks ended June 26, 1999. The increase in gross profit
percentage is primarily the result of the sale of the Company's lower-margin
lift support inventory in the first quarter of 2000.
Selling, general and administrative expenses for the thirteen weeks ended June
24, 2000 decreased to $14.8 million from $19.2 million for the thirteen weeks
ended June 26, 1999, a decrease of 22.8%. The decrease in selling, general and
administrative costs in the second 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
savings were partially offset by approximately $0.3 million in start up costs in
the three months ended June 24, 2000 associated with a program to provide
hardware and general use fasteners to a major non-automotive retailer.
Interest expense, net, decreased to $1.4 million for the thirteen weeks ended
June 24, 2000 from $1.8 million for the thirteen weeks ended June 26, 1999.
This decrease resulted from lower borrowing levels under the Company's
Revolving CreditFacility in the current year.
Provision for income taxes were $0.9 million for the thirteen weeks ended
June 24, 2000 and $1.5 million for the same period in 1999. The Company's
effective tax rate increased to 35.7% in 2000 from 35.0% in 1999 due to higher
state tax provisions in the current year.
Twenty-six Weeks Ended June 24, 2000 Compared to
Twenty-six Weeks Ended June 26, 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
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 six
months of 2000, the Company disposed of approximately $3.5 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 twenty-six weeks ended July 24, 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 $102.5 million for the twenty-six weeks ended
June 24, 2000 from $124.0 million for the same period in 1999, a decrease of
17.3%. This decline is attributable to lower sales levels in the company's core
business of hard-to-find parts and fasteners as a result of the flat automotive
aftermarket, the Company's efforts to eliminate unprofitable products in its
core business and to launch fewer, but more profitable new sales initiatives.
Cost of goods sold for the twenty-six weeks ended June 24, 2000
decreased to $65.2 million from $77.0 million for the same period in 1999, a
decrease of 15.3%. As a percent of net sales, gross profit for the twenty-six
weeks ended June 24, 2000 decreased to 36.3% from 37.9% for the twenty-six weeks
ended June 26, 1999. The reduction in gross profit percentage is the result of
the non-recurring lift support line sale in the first quarter of fiscal 2000 and
continued selling price pressures which negatively impacted gross profit in the
Company's core business of hard-to-find parts and fasteners.
Selling, general and administrative expenses for the twenty-six weeks
ended June 24, 2000 decreased to $29.7 million from $37.1 million for the
twenty-six weeks ended June 26, 1999, a decrease of 19.8%. As a percent of
net sales, selling, general and administrative expenses decreased to 29.0%
in 2000 from 29.9% in 1999. The percentage decrease is attributable to the
revenues from the lift support line sale which had no selling, general and
administrative expenses
Page 10 of 14
<PAGE>
attributable to them. Selling, general and administrative expenses as a
percentage of net sales before lift support sale revenue were 30.7% in the six
months ended June 24, 2000. This increase from 1999's level of 29.9% 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 approximately $0.4 million
in start up costs sale in the six months ended June 24, 2000 associated with a
program to provide hardware and general use fasteners to a major non-automotive
retailer.
Interest expense, net, decreased to $3.3 million for the twenty-six
weeks ended June 24, 2000 from $3.5 million for the twenty-six weeks ended June
26, 1999. This decrease resulted from lower borrowing levels under the Company's
Revolving Credit Facility in the current year.
Provisions for income taxes were $1.5 million for the twenty-six weeks ended
June 24, 2000 and $2.2 million for the same period in 1999. The Company's
effective tax rate in both periods was 35.0% as higher state tax provisions in
the current year offset a lower tax rate recorded on the gain on the lift
support line sale in 2000.
Liquidity and Capital Resources
The Company has financed its growth through the combination of cash flow from
its operations, issuance of senior notes, borrowings under its credit
facilities and industrial revenue bonds. Working capital was $86.4 million as
of June 24, 2000 and $95.6 million as of December 25, 1999. The Company
believes that 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 was $26.4 million for the twenty-six
weeks ended June 24, 2000 compared to net cash used in operating activities
of $9.3 million in the comparable period in 1999.
During 2000, net income, non-cash provisions for
depreciation, amortization and deferred taxes as well as lower accounts
receivable and inventory levels and increases in accounts payable and other
liabilities provided $31.1 million in positive cash flow. These increases were
partially offset by $4.7 million in cash used primarily to fund increases in
other current assets. During 1999, net income, depreciation and amortization and
an increase in accounts payable provided the majority of the $15.2 million in
positive cash flow, however, these increases were more than offset by $24.5
million in cash used related primarily to fund increases in accounts receivable
and inventories
Net cash used in investing activities amounted to $2.6 million for the
twenty-six weeks ended June 24, 2000 and $4.5 million in the comparable period
in 1999. In both periods, additions to property, plant and equipment were the
primary uses of cash.
Net cash used in financing activities was $22.7 million for the twenty-six weeks
ended June 24, 2000 compared to net cash provided by financing activities of
$15.1 million in the comparable period in 1999. During 2000, cash generated
from operating activities net of investing activities was used to reduce
borrowing levels. During 1999, revolving credit facility borrowings provided
$15.7 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 paydown 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 $6.0 million at June
24, 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 in July, 2009. Bond
borrowings amounted to $3.1 million at June 24, 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, in 1999 and 1998, the Company entered into three
sale/leaseback transactions relating to computer hardware and software. The
aggregate amount outstanding under all capital leases amounted to $3.3 million
at June 24, 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 decreases in value 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 Market 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 or 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 or 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 August 3, 2000 Richard N. Berman
-----------------
Richard N. Berman
President
Date August 3, 2000 Mathias J. Barton
-----------------
Mathias J. Barton
Chief Financial Officer and
Principal Accounting Officer
Page 14 of 14
