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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 1-8769
R. G. BARRY CORPORATION
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(Exact name of Registrant as specified in its charter)
Ohio 31-4362899
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13405 Yarmouth Road N.W., Pickerington, Ohio 43147
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 864-6400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Shares, Par Value $1.00 New York Stock Exchange
Series I Junior Participating New York Stock Exchange
Class A Preferred Share Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the Registrant's most recently completed second fiscal
quarter: $45,593,940 as of June 28, 2002.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 9,808,175 common shares, $1.00
par value, as of March 17, 2003.
[Continuation of facing page.]
Documents Incorporated by Reference:
(1) Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 28, 2002, are incorporated by reference
into Parts I and II of this Annual Report on Form 10-K.
(2) Portions of the Registrant's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on May 8, 2003, are
incorporated by reference into Part III of this Annual Report on Form
10-K.
Index to Exhibits begins on Page E-1.
PART I
ITEM 1. BUSINESS.
GENERAL
R. G. Barry Corporation ("R. G. Barry") was incorporated under Ohio law in
1984. R. G. Barry's principal executive offices are located at 13405 Yarmouth
Road N.W., Pickerington, Ohio 43147, and its telephone number is (614) 864-6400.
R. G. Barry's common shares are listed on the New York Stock Exchange under the
symbol "RGB."
R. G. Barry maintains an Internet website at www.rgbarry.com (this uniform
resource locator, or URL, is an inactive textual reference only and is not
intended to incorporate R. G. Barry's website into this Annual Report on Form
10-K). R. G. Barry makes available free of charge on or through its website, its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as soon as reasonably practicable after R. G. Barry electronically files
such material with, or furnishes it to, the Securities and Exchange Commission
(the "SEC").
R. G. Barry and its subsidiaries, R. G. B., Inc., Barry de Mexico, S. A. de
C.V., Barry de Acuna, S. A. de C.V., Barry de Zacatecas, S. A. de C.V.,
Procesadora de Nuevo Laredo, S. A., Barry Comfort de Mexico, S. A., Barry
Distribution Center de Mexico, S. A., ThermaStor Technologies, Ltd., R. G. Barry
(Texas) LP, R. G. Barry International, Inc., R. G. Barry Holdings, Inc., R. G.
Barry (France) Holdings, Inc., Escapade, S.A., Fargeot et Compagnie, S.A., and
Vesture Corporation (R. G. Barry and its subsidiaries are referred to
collectively as the "Company"), manufacture and market comfort footwear as well
as products that use thermal retention technology to preserve and/or transport
temperature-sensitive or perishable commodities such as food.
During the fiscal year ended December 28, 2002, the Company had three
operating segments: the Barry Comfort North America group, which includes at-
and around-the-home comfort footwear products manufactured and sold in North
America; the Barry Comfort Europe group, which includes at-and around-the-home
comfort footwear products sold in Europe and footwear products sold by Fargeot;
and the Thermal group, which includes thermal retention technology products.
Financial information on the Company's segments for the three years ended
December 28, 2002, is presented in Note (14) of the Notes to Consolidated
Financial Statements on pages 34, 35 and 36 of R. G. Barry's Annual Report to
Shareholders for the fiscal year ended December 28, 2002, which financial
information is incorporated herein by this reference.
CHANGES IN THE BARRY COMFORT NORTH AMERICA GROUP BUSINESS
Two major drivers of change continue to directly impact the Company's at-
and around-the-home comfort footwear business. The first is globalization and
the second is retail consolidation. The confluence of these forces has created a
very competitive marketplace in which more and more suppliers are chasing fewer
and fewer customers. The Company's focus for more than two years has been on
moving the Company's core comfort footwear business from a slow-to-market,
capacity-driven orientation, to a fast-to-market, product-design, market-driven
focus.
The 2003 fiscal year represents the final year of the Company's three-year
strategic plan. During 2002, the Company completed that portion of the strategic
plan related to repositioning activities in lower
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cost locations, except for the closing of the Company's Goldsboro, North
Carolina distribution center which will be closed in early 2003.
In October 2001, the Company announced a decision to close the sole molding
operations in San Angelo, Texas and relocate those activities to Nuevo Laredo,
Mexico. This shift was completed during the first half of the 2002 fiscal year.
On January 7, 2002, R. G. Barry announced that it had been granted
accelerated elimination of United States and Mexican tariffs on slippers under
the North American Free Trade Agreement ("NAFTA"). The 15% tariff on slippers
made in Mexico and sold in the United States was eliminated effective January 1,
2002. Without such elimination, the tariff on Mexican-manufactured slippers
would have been phased out under NAFTA over six years at the rate of 2.5% per
year with tariffs eliminated in their entirety on January 1, 2008. R. G. Barry
had applied in 2001 to the Office of the United States Trade Representative for
early elimination of the tariffs under procedures established under NAFTA. The
accelerated elimination of the tariffs allowed the Company to relocate cutting
and molding operations from the United States to Mexico and to significantly
reduce costs and lead times.
After receiving accelerated elimination of the NAFTA tariffs in January
2002, the Company announced the transfer of cutting subassembly operations from
Laredo, Texas to Nuevo Laredo, Mexico and in a coordinated move, announced the
significant reduction of sewing operations in Nuevo Laredo, Mexico. The Company
completed the transfer of these operations during the first half of the 2002
fiscal year. In conjunction with the relocation of all of the Company's
remaining U.S. manufacturing operations to Nuevo Laredo, the Company closed its
San Angelo and Laredo, Texas manufacturing facilities in the first half of 2002.
In March 2002, the Company opened a new state-of-the-art, quick-response
replenishment distribution center in Nuevo Laredo, Mexico. The Company believes
that this distribution capability coupled with its Mexican manufacturing
capacity, will give the Company a time advantage in the management of the
automatic demand pull replenishment (EDI) component of the business over
competitors who source products solely from the Orient. The EDI business
presently accounts for approximately one-third of the Company's net sales, and
the Company expects this business to grow significantly over the next few years.
In the fourth quarter of the 2002 fiscal year, the Company announced a
decision to close its Goldsboro, North Carolina distribution center in early
2003.
Further information concerning the restructuring changes which occurred in
the Barry Comfort North America group in the 2002 fiscal year as well as in the
2001 and 2000 fiscal years is presented in Note (15) of the Notes to
Consolidated Financial Statements on pages 36 and 37 of R. G. Barry's Annual
Report to Shareholders for the fiscal year ended December 28, 2002, which
information is incorporated herein by this reference.
CHANGES IN THE BARRY COMFORT EUROPE GROUP BUSINESS
In January 2003, the Company announced that it had entered into a five-year
licensing agreement for the sales, marketing and sourcing of its soft washable
slipper brands in Europe with a subsidiary of the privately-held British comfort
footwear and apparel firm GBR Limited.
The GBR Limited subsidiary has been granted a license to sell, source and
distribute the Company's various brands of at- and around-the-home comfort
footwear in all channels of distribution in the United Kingdom, The Republic of
Ireland, France and through selected customers in specific other
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European countries in exchange for royalty payments on net sales. The Company
will close its Wales distribution center and Paris sales office during the first
half of 2003 and transfer responsibility for its French sales force and all
selling, marketing and financial administration functions in Europe to the GBR
Limited subsidiary. The Company will retain title to all of its patents and
trademarks for products sold under the licensing agreement.
The Company's French subsidiary, Fargeot et Compagnie, S.A., is not part of
the licensing agreement with GBR Limited. The Company will continue to maintain
and operate its Fargeot footwear operations in southern France. Fargeot et
Compagnie, S.A. generally serves smaller independent retailers and export
markets with a style of footwear that is different from the Company's
traditional comfort footwear products. Fargeot's products generally are not
washable as opposed to the Company's footwear for at- and around-the-home.
Further information concerning the restructuring charges announced for the
Barry Comfort Europe group is presented in Note (15) of the Notes to
Consolidated Financial Statements on pages 36 and 37 of R. G. Barry's Annual
Report to Shareholders for the fiscal year ended December 28, 2002, which
information is incorporated herein by this reference.
CHANGES IN THE THERMAL GROUP BUSINESS
Through its Vesture Corporation subsidiary, the Company manufactures and
markets thermal retention technology products incorporating the Company's
MICROCORE* technologies. The Thermal products business is a segment of the
Company's business which, for the past several years, the Company has not
operated profitability. The Company is actively exploring several options which
it expects will curb the losses incurred by Vesture Corporation.
PRINCIPAL PRODUCTS
The Company designs, manufactures and markets specialized comfort footwear
for men, women and children. The Company is in the business of responding to
consumer demand for comfortable footwear combined with attractive appearance.
The Company believes it is the world's largest manufacturer of comfort footwear
for at- and around-the-home.
The Company also designs, manufactures and markets products which use
thermal retention technology to preserve and/or transport temperature-sensitive
or perishable commodities.
BARRY COMFORT NORTH AMERICA/BARRY COMFORT EUROPE
Historically, the Company's primary products have been foam-soled, soft,
washable slippers for men, women and children. The Company developed and
introduced women's Angel Treads*, the world's first foam-soled, soft, washable
slipper, in 1947. Since that time, the Company has introduced additional
slipper-type brand lines for men, women and children designed to provide
comfort, softness and washability. These footwear products are sold, for the
most part, under various brand names including Angel Treads*, Barry Comfort(TM),
Dearfoams*, Dearfoams* for Kids, Dearfoams* for Men, EZfeet*, Fargeot, Madye's*,
Snug Treds*, Soft Notes*, Sole(TM), Terrasoles(TM) and ZiZi(TM). The Company has
also at times marketed slipper-type footwear under licensed trademarks. See
"TRADEMARKS AND LICENSES."
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*Hereinafter denotes a trademark of the Company registered in the United States
Department of Commerce Patent and Trademark Office.
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The Company's foam-soled footwear lines have fabric uppers made of terry
cloths, velours, fleeces, satins, nylons and other washable materials, as well
as uppers made of suede and other man-made materials. Different brand lines are
marketed for men, women and children with a variety of styles, colors and
ornamentation.
The marketing strategy for the Company's slipper-type brand lines has been
to expand counter and floor space for these products by creating and marketing
brand lines to different portions of the consumer market. Retail prices for the
Company's footwear normally range from approximately $5 to $30 per pair,
depending on the style of footwear, type of retail outlet and retailer mark-up.
The Company also manufactures and markets the Soft Notes* foam cushioned
casual slipper line. The Company believes that this brand line is a bridge
between slippers and casual footwear. The marketing strategy with respect to
this product emphasizes the fashion, comfort and versatility provided by the
Soft Notes* foam cushioned casual slippers.
The Company believes that many consumers of its slippers are loyal to the
Company's brand lines, usually own more than one pair of slippers and have a
history of repeat purchases. Substantially all of the slipper brand lines are
displayed on a self-selection basis in see-through packaging at the point of
purchase and have appeal to the "impulse" buyer. The Company believes that many
of the slippers are purchased as gifts for others during the Christmas season,
with approximately 70% of sales occurring in the second half of the year
compared to approximately 30% in the first half of the year.
Many styles of slipper-type footwear have become standard in the Company's
brand lines and are in demand year after year. For some of these styles, the
most significant changes made in response to fashion changes are in
ornamentation, fabric and/or color. The Company often introduces new, updated
styles of slippers with a view toward enhancing the fashion appeal and freshness
of its products. The Company anticipates that it will continue to introduce new
styles in future years in response to fashion changes.
It is possible to fit most consumers of the Company's slipper-type footwear
within a range of four to six sizes. This allows the Company to carry lower
levels of inventories in these slipper lines compared to other footwear
manufacturers.
In 2002, the Company introduced the Zizi(TM) brand of at- and
around-the-home footwear, sandals and casual shoes. The Zizi(TM) brand and its
derivative brands are targeted to women in the 18 to 30 age range. Zizi(TM) will
be sold in the woman's shoe departments of better department stores. This line
was tested in Fall/Winter 2002 exclusively at Nordstrom, and the Company expects
to roll out Zizi(TM) and its derivative brands nationally in 2003.
Terrasoles(TM) is a footwear concept targeted toward adult women who
currently wear old shoes at home. These women define comfort as firm, secure
footing, not the soft, yielding comfort of our slippers. Their lifestyles are
such that they are in and out of the house frequently, but they do not want to
frequently change footwear. Terrasoles(TM) offer promise as a
fashion-appropriate, affordable alternative to old shoes.
THERMAL
The Company's MICROCORE* thermal retention technology consists of a family
of patented or proprietary technologies which, when energized with heat or cold,
act as reservoirs that release heat or cold at a constant temperature for
extended periods of time. The Company currently markets pizza carriers that
utilize the MICROCORE* thermal technology. The Company has also applied its
thermal
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retention technology in consumer products, such as heated seat cushions,
heated slippers and hand-warmers, and in personal self-care products, such as
heated booties, neck packs and shoulder packs. In recent years, the Company has
de-emphasized the development, marketing and sale of consumer products utilizing
thermal retention technologies, and currently is not actively engaged in the
development, marketing and sale of these consumer products and, in 2001,
discontinued its efforts to sell personal self-care products.
In 2001, the Company made a strategic decision to focus on the commercial
application of MICROCORE* patented thermal retention technology, either hot or
cold, to preserve and/or transport temperature-sensitive or perishable
commodities. Presently, the Company's primary focus is on products used to
transport pizza. The Company's pizza delivery systems are designed to keep pizza
hot at oven temperatures for an extended time period so that pizza marketers may
deliver pizza to a home oven-hot, dry and crisp. The Company continues in
various stages of testing future delivery systems with pizza chains. The Company
has also worked with other prepared food providers on potential delivery systems
to meet their unique needs.
As noted in the section captioned "CHANGES IN THE THERMAL GROUP BUSINESS"
above, the Company is actively exploring several options which it expects will
curb the losses incurred in the Thermal group business.
MARKETING
The Company's slipper-type brand lines are sold to traditional department
stores, promotional department stores, national chain department stores and
specialty stores; through mass merchandising channels of distribution such as
discount stores, warehouse clubs, drug and variety chain stores, and
supermarkets; and to independent retail establishments. The Company markets
these products primarily through Company salespersons and, to a lesser extent,
through independent sales representatives. The Company does not finance its
customers' purchases.
Each spring and autumn and at other times during the year, new designs and
styles are presented to buyers representing the Company's retail customers at
regularly scheduled showings. Company designers also produce new styles and
experimental designs throughout the year which are evaluated by the Company's
sales and marketing personnel. Buyers for department stores and other large
retail customers attend the spring and autumn showings. Company salespersons
regularly visit retail customers. The Company also regularly makes catalogs
available to its current and potential customers and periodically follows up
with current and potential customers by telephone. In addition, the Company
participates in trade shows, both regionally and nationally.
The Company has maintained a sales office in New York City to which buyers
for department stores and other large retail customers have made periodic
visits. This sales office will be closed in 2003. The Company intends to make
more use of visits to customer locations by Company salespersons and will rent
showroom space in New York City during the spring and autumn showings.
During the 2002 and 2001 Christmas selling seasons, the Company provided
approximately 500 temporary merchandisers to service the retail selling floor of
department stores and chain stores nationally. The Company believes that this
point-of-sale management of the retail selling floor, combined with computerized
EDI systems the Company maintained with the stores, put the Company in a
position to optimize its comfort footwear business during the fourth quarter.
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Sales during the last six months of each year have historically been
greater than during the first six months. The Company's inventory is largest in
early autumn in order to accommodate the retailers' fall and Christmas selling
seasons.
The Company advertises principally in the print media and these promotional
efforts are often conducted in cooperation with customers. The Company's
products are displayed at the retail-store level on a self-selection and
gift-purchase basis.
The Company also markets its comfort footwear products in Canada, Mexico
and several other countries around the world. In the 2002 fiscal year, the
Company's European net sales comprised approximately 8% of its consolidated net
sales, while European, Mexican and Canadian net sales combined to represent 11%
of consolidated net sales. In the 2001 fiscal year, the Company's European net
sales comprised approximately 8% of its consolidated net sales, while European,
Mexican and Canadian net sales combined to represent 9% of consolidated net
sales. Financial information for the three years ended December 28, 2002 for the
geographic areas in which the Company operates is presented in Note (14) of the
Notes to Consolidated Financial Statements on pages 34, 35, and 36 of R. G.
Barry's Annual Report to Shareholders for the fiscal year ended December 28,
2002, which financial information is incorporated herein by this reference.
AS DISCUSSED ABOVE IN THE SECTION CAPTIONED "CHANGES IN THE BARRY COMFORT
EUROPE GROUP BUSINESS," in January 2003, the Company entered into a five-year
licensing agreement with a subsidiary of GBR Limited for the sales, marketing
and sourcing of the Company's soft washable slipper brands in all channels of
distribution in the United Kingdom, Ireland, France and through selected
customers in specific other European countries. The Company will receive royalty
payments on net sales. The Company had previously worked with GBR Limited
through a strategic alliance formed in 2000 to sell comfort footwear products in
the United Kingdom and Ireland. Under that distributorship-like arrangement, the
Company had shifted responsibility for marketing, selling, planning and
financial administration for its products in the United Kingdom and Ireland to
the new company formed in the alliance.
The Company markets its thermal retention commercial products directly to
prospective customers through Company personnel.
RESEARCH AND DEVELOPMENT
Most of the Company's research efforts are undertaken in connection with
the design and consumer appeal of new styles of slipper-type footwear and
thermal retention products. During the 2002, 2001 and 2000 fiscal years, the
amounts spent by the Company in connection with the research and design of new
products and the improvement or redesign of existing products were approximately
$3.2 million, $3.1 million and $2.7 million, respectively. Substantially all of
the foregoing activities were Company-sponsored. Approximately 50 employees are
engaged full time in research and product design.
MATERIALS
The principal raw materials used by the Company in the manufacture of its
slipper and thermal retention product brand lines are textile fabrics, threads,
foams and other synthetic products. All are available from a wide range of
suppliers. The Company has experienced no difficulty in obtaining raw materials
from suppliers and anticipates no future difficulty.
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TRADEMARKS AND LICENSES
Approximately 96% of the Company's sales are represented by brand items
sold under trademarks owned by the Company. The Company is the holder of many
trademarks which identify its products. The trademarks which are most widely
used by the Company include: (a) Angel Treads*, Barry Comfort(TM), Dearfoams*,
Dearfoams* for Kids, Dearfoams* for Men, EZfeet*, Fargeot, Madye's*, Snug
Treds*, Soft Notes*, and Sole(TM), Terrasoles(TM) and ZiZi(TM). in the Company's
Barry Comfort businesses; and (b) MICROCORE*, POWERTECH* and Vesture,* in the
Company's Thermal business. The Company believes that its products are
identified by its trademarks and, thus, its trademarks are of significant value.
Each registered trademark has a duration of 20 years and is subject to an
indefinite number of renewals for a like period upon appropriate application.
The Company intends to continue the use of each of its trademarks and to renew
each of its registered trademarks.
The Company has also sold comfort footwear under various names as licensee
under license agreements with the owners of those names. In the 2002 fiscal
year, net sales under the Liz Claiborne**, Claiborne** and Villager** labels
pursuant to the license agreement described below represented less than 3% of
the Company's consolidated net sales. In the 2001 fiscal year, net sales under
the Liz Claiborne**, Claiborne**, and Villager** labels represented less than 2%
of the Company's consolidated net sales. For the 2000 fiscal year, less than 1%
of the Company's consolidated net sales were represented by footwear sold under
these or other licensed names.
In November 2000, R. G. Barry entered into a license agreement with a
subsidiary of Liz Claiborne, Inc. which allows R. G. Barry to manufacture and
market slippers under the Liz Claiborne**, Claiborne** and Villager** labels. R.
G. Barry's Liz Claiborne** Slippers for Women and Claiborne** Slippers for Men
are and will be sold in upper-tier department stores and specialty retailers
nationwide. The first collections of Liz Claiborne** Slippers for Women became
available to the trade in March 2001, for Fall 2001 delivery. Claiborne**
slippers for men are expected to be introduced in Fall 2003. The Liz Claiborne**
Slippers for Women initially have been sold within the United States and Canada,
although the licensor may, in its discretion, grant R. G. Barry the right to
distribute these slippers in other foreign countries. The initial term of the
license agreement continues through December 31, 2005, and is renewable for an
additional five-year term if the net sales of slippers bearing the Liz
Claiborne**, Claiborne** and Villager** labels for the year immediately
preceding the last year of the initial term equal or exceed a specified level.
The licensor has the right to terminate the license agreement if minimum
specified net sales levels are not achieved for two consecutive years.
The Company has also manufactured comfort footwear for customers which sell
the footwear under their own private labels. These sales represented less than
2% of the Company's consolidated net sales during the 2002 fiscal year.
CUSTOMERS
The customers of the Company which accounted for more than 10% of the
Company's consolidated net sales in the 2002 and 2001 fiscal years were Wal-Mart
Stores, Inc. and J.C. Penney Company, Inc., both Barry Comfort North America
customers. Wal-Mart Stores, Inc. accounted for 26% and 22% of consolidated net
sales in 2002 and 2001, respectively, and J. C. Penney Company, Inc. accounted
for 11% and 10% of consolidated net sales in 2002 and 2001, respectively. The
only customer
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** Denotes a trademark of the licensor registered in the United States
Department of Commerce Patent and Trademark Office.
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of the Company which accounted for more than 10% of the Company's
consolidated net sales in the 2000 fiscal year was Wal-Mart Stores, Inc., which
accounted for 21%.
BACKLOG OF ORDERS
The Company's backlogs of orders at the close of the 2002 and 2001 fiscal
years were approximately $3.0 million and $6.6 million, respectively. The
Company anticipates that a large percentage of the unfilled sales orders as of
the end of the 2002 fiscal year will be filled during the current fiscal year.
The Company's backlog of unfilled sales orders is often largest after the
spring and autumn showings of the Company. For example, the Company's
approximate backlog of unfilled sales orders following the conclusion of such
showings during the last two years was: August 2002 -- $61 million; August 2001
- -- $50 million; February 2002 -- $9 million; and February 2001 -- $8 million.
The Company's backlog of unfilled sales orders reflects the seasonal nature of
the Company's sales - approximately 70% of such sales occur during the second
half of the year as compared to approximately 30% during the first half of the
year.
INVENTORY
While some styles of the Company's slipper-type brand lines change little
from year to year, the Company has also introduced, and intends to continue to
introduce, new, updated styles in an effort to enhance the comfort and fashion
appeal of its products. As a result, the Company anticipates that some of its
slipper styles will continue to change from season to season, particularly in
response to fashion changes. Historically, the Company has had a limited and
manageable exposure to obsolete inventory. However, in 2000, as a result of the
Company's aggressive effort to lower inventory levels, the Company sold a
sizeable amount of obsolete and out-of-season inventory in a short period of
time for little or no profit. During the 2002 and 2001 fiscal years, the level
of obsolete inventory remained at manageable levels and the Company believes it
will be able to control the level of obsolete inventory in the future.
The accelerated elimination of the NAFTA tariffs should allow the Company
in the foreseeable future to keep its company-owned plant manufacturing costs
competitive with products produced offshore while taking advantages of the
benefits of manufacturing in the Company's own North American plants.
Nevertheless, the Company intends to continue its ongoing plans to reduce its
company-owned capacity to a level supported by demand visibility and to
outsource the balance from Chinese and other foreign contract suppliers. The
Company plans to import approximately one-third of its product needs from China
and other Asian countries by the end of 2003. Early in 2001, the Company opened
a representative office in Hong Kong, which is responsible for procuring
outsourced products from the Far East. This supply strategy is expected to
reduce inventory risks and markdowns by allowing the Company to better plan
inventory purchases in line with customers' demands.
COMPETITION
The Company operates in the portion of the footwear industry providing
comfort footwear for at- and around-the-home. The Company believes that it is a
small factor in the highly competitive footwear industry. The Company also
believes that it is the world's largest manufacturer of comfort footwear for at-
and around-the-home. The Company also operates in an area where it provides
portable warmth and cold through its line of thermal retention technology
products. The Company competes primarily on the basis of the value, quality and
comfort of its products, service to its customers, and its marketing expertise.
The Company knows of no reliable published statistics which indicate its current
relative
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position in the footwear or any other industry or in the portion of the footwear
industry providing comfort footwear for at and around the home or its current
relative position in the thermal retention product industry. However, the
Company believes that it serves approximately 40% of the U.S. slipper market.
MANUFACTURING, SALES AND DISTRIBUTION FACILITIES
The Company has five manufacturing facilities. The Company operates sewing
plants in Nuevo Laredo, Ciudad Acuna, and Zacatecas, Mexico. During the 2001
fiscal year, the Company operated a cutting plant in Laredo, Texas and a sole
molding operation in San Angelo, Texas. As discussed above in the section
captioned "CHANGES IN THE BARRY COMFORT NORTH AMERICA GROUP BUSINESS", these
operations were relocated to Nuevo Laredo, Mexico during the 2002 fiscal year.
The Company produces thermal retention products at its manufacturing facilities
in Asheboro, North Carolina. The Company is actively exploring several options
that will curb the losses at its Vesture Corporation subsidiary which may
include ceasing manufacturing operations at the Asheboro facilities.
The Company maintains sales offices in New York City, New York and Paris,
France and a sourcing representative office in Hong Kong. As discussed above,
the Company plans to close the sales offices in New York and Paris during the
first half of 2003. The Company also operates distribution centers in Asheboro
and Goldsboro, North Carolina; San Angelo and Laredo, Texas; Rhymney, Gwent,
Wales; and Thiviers, France. The Company opened a new distribution center in
Nuevo Laredo, Mexico during the first half of the 2002 fiscal year, replacing
the distribution center in Laredo, Texas with one closer to its manufacturing
facilities. The distribution centers in Goldsboro, North Carolina and Wales will
be closed during the first half of 2003.
Please also see the discussion of the Company's supply strategy in
"INVENTORY".
The Company's principal manufacturing, sales and distribution facilities
are described more fully in ITEM 2. PROPERTIES.
EFFECT OF ENVIRONMENTAL REGULATION
Compliance with federal, state and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had a material effect on the Company's
capital expenditures, earnings or competitive position. The Company believes
that the nature of its operations has little, if any, environmental impact. The
Company, therefore, anticipates no material capital expenditures for
environmental control facilities for its current fiscal year or for the
foreseeable future.
EMPLOYEES
At the close of the 2002 fiscal year, the Company employed approximately
2,300 persons worldwide.
ITEM 2. PROPERTIES.
The Company owns its corporate headquarters and executive offices located
at 13405 Yarmouth Road N.W. in Pickerington, Ohio, containing approximately
55,000 square feet as well as a warehouse facility in Goldsboro, North Carolina,
containing approximately 170,000 square feet. The warehouse facility in
Goldsboro will be closed during the first half of 2003. The Company intends to
sell or lease the Goldsboro facility to a third party.
-11-
The Company leases space aggregating approximately 1 million square feet at
an approximate aggregate annual rental of $3.1 million. The following table
describes the Company's principal leased properties:
Approximate Approximate Lease
Location Use Square Feet Annual Rental Expires Renewals
- -------- --- ----------- ------------- ------- --------
Empire State Building Sales Office 4,300 $115,000 2003 None
New York City, N.Y. (1)
2800 Loop 306 Shipping, Distribution 145,800 $166,000 (2) 2005 10 years
San Angelo, Texas Center
Distribution Center Shipping, Distribution 172,800 $465,000 (2) 2007 15 years
San Angelo, Texas Center
Cesar Lopez de Lara Manufacturing, Office 90,200 $300,000 (2) 2004 None
Ave.
Nuevo Laredo, Mexico
Ciudad Acuna Manufacturing, Office 64,700 $302,000 (2) 2004 5 years
Industrial Park
Ciudad Acuna, Mexico
Manhattan Avenue Shipping, Distribution 144,000 $675,000 (2) 2012 None
Nuevo Laredo, Mexico Center
Bob Bullock Loop Warehouse, Office 165,000 $386,000 (2) 2004 1 term of 5
Laredo, Texas years
Bob Bullock Loop Warehouse, Storage 76,000 $191,000 (2) 2006 5 years
Laredo, Texas
Industrial Zone Manufacturing 26,200 $ 48,000 2003 1 term of 5
Zacatecas, Mexico years
Industrial Zone Manufacturing 25,800 $ 58,000 2005 3 terms-5
Zacatecas, Mexico years each
120 E. Pritchard St. Manufacturing, Office, 57,500 $ 96,000 (2) 2003 None
Asheboro, North Carolina (3) Shipping, Distribution
Center
8000 Interstate Administrative Office 11,000 $211,000 2007 None
Highway 10 West
San Antonio, Texas
Rhymney, Gwent, Wales (4) Shipping, Distribution 8,000 $ 21,000 Month-to-Month N/A
Center
-12-
Approximate Approximate Lease
Location Use Square Feet Annual Rental Expires Renewals
- -------- --- ----------- ------------- ------- --------
West Gate Tower Sourcing Representative 1,300 $ 28,700 2003 None
7 Wing Hong Street Office
Lai Chi Kok, Kowloon
Hong Kong
- ---------
(1) This sales office will be closed during the first half of 2003.
(2) Net lease.
(3) In December 2001, the former owners of Vesture Corporation acquired this
property and are leasing the property to the Company.
(4) This distribution center will be closed during the first half of 2003.
The Company believes that all of the buildings owned or leased by it are
well maintained, in good operating condition, and suitable for their present
uses.
ITEM 3. LEGAL PROCEEDINGS.
On October 19, 2001, the Vesture subsidiary of R. G. Barry received a
charge that its MICROCORE* pizza delivery system infringed on two United States
Patents, U.S. Patent Nos. 6,232,585 and 6,274,856 (the "Patents") owned by
Thermal Solutions, Inc. ("Thermal Solutions") and licensed to CookTek, Inc.
("CookTek"). After receiving the charge of infringement, Vesture and its counsel
evaluated the Patents and reached the conclusion that the Patents were not
infringed. To protect its rights, on November 2, 2001, Vesture filed an action
in the United States District Court for the Middle District of North Carolina
(Civil Action No. 1:01CV01006 (the "North Carolina Action")) seeking a
declaratory judgment that the Patents are not infringed by Vesture and an order
enjoining and restraining Thermal Solutions and CookTek from further charges of
infringement, or acts of enforcement based on the Patents against Vesture and
Vesture's actual and prospective customers. Vesture also sought damages for
CookTek's and Thermal Solutions' unfounded charges of infringement and sales
lost as a result of those charges. After the North Carolina Action was filed,
Thermal Solutions and CookTek filed suit against Vesture on November 9, 2001, in
the United States District Court for the District of Kansas (Civil Action No.
01-2537-JWL (the "Kansas Action")), alleging infringement of the Patents.
Because the North Carolina Action was filed first, it had priority. The Kansas
Action was voluntarily dismissed by Thermal Solutions and CookTek on December 6,
2001, in favor of the North Carolina Action, where they counterclaimed for
infringement of the Patents.
R. G. Barry believes that the patent infringement allegations against
Vesture are without merit and intends to defend vigorously against them.
However, R. G. Barry does not believe it is feasible to predict the outcome of
the North Carolina Action. The timing of the final resolution of North Carolina
Action is also uncertain.
-13-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table lists the names and ages of the executive officers of
R. G. Barry as of March 17, 2003, the positions with R. G. Barry presently held
by each executive officer and the business experience of each executive officer
during the past five years. Unless otherwise indicated, each individual has had
his principal occupation for more than five years. Executive officers serve at
the discretion of the Board of Directors and in the case of Messrs. Zacks,
Galvis and Viren, pursuant to employment agreements.
Position(s) Held with R. G. Barry and
Name Age Principal Occupation(s) for Past Five Years
- ---- --- -------------------------------------------
Gordon Zacks 70 Chairman of the Board and Chief Executive Officer since 1979,
President from 1992 to February 1999 and since August 2002 and a
Director since 1959, of R. G. Barry
Christian Galvis 61 Executive Vice President - Operations and a Director since 1992,
President - Operations of Barry Comfort Group since 1998, and Vice
President - Operations from 1991 to 1992, of R. G. Barry
Thomas F. Couglin 46 Executive Vice President - Sales & Marketing since August 2002 and
Executive Vice President - Sales from April to August 2002, of R.
G. Barry; Senior Vice President - Sales from 1998 to April 2002,
and Vice President - National Accounts from 1996 to 1998, of
Springs Industries, Inc., a home textiles manufacturing company
Daniel D. Viren 56 Senior Vice President - Finance and Chief Financial Officer since
June 2000, Secretary and Treasurer since October 2000, Senior Vice
President - Administration from 1992 to July 1999, Assistant
Secretary from 1994 to July 1999, and a Director since 2001, of
R. G. Barry; Senior Vice President and Chief Financial Officer of
Metatec International, Inc., an international information
distribution company, from July 1999 to June 2000
Donald G. Van Steyn 58 Vice President - Chief Information Officer since May 2000, Vice
President - Information Systems/Services from 1996 to May 2000 and
Director of Information Services from 1988 to 1996, of R. G. Barry
Harry Miller 60 Vice President-Human Resources of R. G. Barry since 1993
-14-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information called for in Item 201(a) through (c) of Regulation S-K is
incorporated herein by reference to page 8 of R. G. Barry's Annual Report to
Shareholders for the fiscal year ended December 28, 2002.
No disclosure is required under Item 701 of Regulation S-K.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for in this Item 6 is incorporated herein by
reference to pages 6 and 7 of R. G. Barry's Annual Report to Shareholders for
the fiscal year ended December 28, 2002.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The information called for in this Item 7 is incorporated herein by
reference to pages 9 through 19 of R. G. Barry's Annual Report to Shareholders
for the fiscal year ended December 28, 2002.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of December 28, 2002, R. G. Barry and its subsidiaries were not party to
any market risk sensitive instruments which would require disclosure under Item
305 of Regulation S-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheets of R. G. Barry and its subsidiaries as of
December 28, 2002 and December 29, 2001, the related Consolidated Statements of
Operations, of Shareholders' Equity and Comprehensive Income and of Cash Flows
for each of the fiscal years in the three-year period ended December 28, 2002,
the related Notes to Consolidated Financial Statements and the Independent
Auditors' Report, appearing on pages 20 through 38 of R. G. Barry's Annual
Report to Shareholders for the fiscal year ended December 28, 2002, are
incorporated herein by reference. Quarterly Financial Data set forth on page 8
of R. G. Barry's Annual Report to Shareholders for the fiscal year ended
December 28, 2002, are also incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for in this Item 10 is incorporated herein by
reference to R. G. Barry's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 8, 2003,
-15-
under the captions "ELECTION OF DIRECTORS," "COMPENSATION OF EXECUTIVE OFFICERS
AND DIRECTORS--Employment Contracts and Termination of Employment and Change in
Control Arrangements." In addition, information concerning R. G. Barry's
executive officers is included in the portion of Part I of this Annual Report on
Form 10-K entitled "Supplemental Item. Executive Officers of the Registrant."
No disclosure is required under Item 405 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for in this Item 11 is incorporated herein by
reference to R. G. Barry's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 8, 2003, under the caption
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS." Such incorporation by
reference shall not be deemed to specifically incorporate by reference the
information referred to in Item 402(a)(8) of Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information called for in this Item 12 regarding security ownership of
certain beneficial owners and management is incorporated herein by reference to
R. G. Barry's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 8, 2003, under the captions "SHARE OWNERSHIP" and
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS - Summary of Cash and Other
Compensation, - Equity Compensation Plan Information, - Directors' Compensation
and - Employment Contracts and Termination of Employment and Change in Control
Arrangements."
The information called for in this Item 12 regarding securities authorized
for issuance under equity compensation plans is incorporated herein by reference
to R. G. Barry's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 8, 2003, under the caption "COMPENSATION OF
EXECUTIVE OFFICERS AND DIRECTORS - Equity Compensation Plan Information."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for in this Item 13 is incorporated herein by
reference to R. G. Barry's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 8, 2003, under the captions "SHARE
OWNERSHIP," "ELECTION OF DIRECTORS" and "COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS."
ITEM 14. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures.
Based on an evaluation of the Company's disclosure controls and procedures
conducted within 90 days of the filing date of this Annual Report on Form 10-K,
carried out under the supervision and with the participation of the Company's
management, including the Company's principal executive officer and principal
financial officer, as contemplated by Rule 13a-15 under the Securities Exchange
Act of 1934, as
-16-
amended, the Company's principal executive officer and principal financial
officer have concluded that such disclosure controls and procedures are
effective to ensure that material information relating to the Company and its
consolidated subsidiaries is made known to them, particularly during the period
for which this periodic report has been prepared.
(b) Changes in Internal Controls.
There were no significant changes made in the Company's internal disclosure
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation performed pursuant to Rule 13a-15 under
the Securities Exchange Act of 1934, as amended, referred to above.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
For a list of all financial statements incorporated by reference in
this Annual Report on Form 10-K, see "Index to Financial Statements
and Financial Statement Schedules" at page 25.
(a)(2) Financial Statement Schedules.
For a list of all financial statement schedules included in this
Annual Report on Form 10-K, see "Index to Financial Statements and
Financial Statement Schedules" at page 25.
(a)(3) Exhibits.
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For list of these exhibits, see "Index to Exhibits" beginning
at page E-1.
(b) Reports on Form 8-K
On October 22, 2002, R. G. Barry filed a Current Report on Form 8-K,
dated that same day, including a press release announcing that R. G.
Barry had revised downward its revenue and earnings forecast for 2002
and expected to report a loss for the full year.
On November 1, 2002, R. G. Barry filed a Current Report on Form 8-K,
dated that same day, including a press release reporting a small third
quarter profit and reiterating that R. G. Barry expected to report a
loss for the full year.
On January 9, 2003, R. G. Barry filed a Current Report on Form 8-K,
dated that same day, reporting that on December 27, 2002, R. G. Barry
had entered into a new $32.0 million secured Revolving Credit
Agreement with The Huntington National Bank to refinance the unsecured
Revolving Credit Agreement between R. G. Barry and Huntington dated
March 12, 2001, as amended on February 22, 2002 and September 23,
2002.
(c) Exhibits
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits" beginning
at page E-1.
-17-
(d) Financial Statement Schedules
Financial Statement Schedules included with this Annual Report on Form
10-K are attached hereto. See "Index to Financial Statements and
Financial Statement Schedules" at page 25.
-18-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
R. G. Barry Corporation
Dated: March 28, 2003
By: /s/ Daniel D. Viren
-----------------------------------------
Daniel D. Viren,
Senior Vice President-Finance,
Secretary and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the 28th day of March, 2003.
Name Capacity
- ---- --------
* Chairman of the Board, Chief Executive
- ------------------------------- Officer, President and Director
Gordon Zacks
* Executive Vice President - Operations,
- ------------------------------- President - Operations of Barry Comfort
Christian Galvis Group and Director
/s/ Daniel D. Viren Senior Vice President - Finance, Secretary
- ------------------------------- and Treasurer (Chief Financial and
Daniel D. Viren Principal Accounting Officer) and Director
Director
- -------------------------------
Philip G. Barach
* Director
- -------------------------------
Harvey M. Krueger
* Director
- -------------------------------
Roger E. Lautzenhiser
Director
- -------------------------------
Janice Page
* Director
- -------------------------------
Edward M. Stan
* Director
- -------------------------------
Harvey A. Weinberg
-19-
- --------------
* By Daniel D. Viren pursuant to Powers of Attorney executed by the directors
and executive officers listed above, which Powers of Attorney have been filed
with the Securities and Exchange Commission.
/s/ Daniel D. Viren
- -------------------------------
Daniel D. Viren
-20-
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Gordon Zacks, certify that:
1. I have reviewed this annual report on Form 10-K of R. G. Barry
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
-21-
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Dated: March 28, 2003 By: /s/ Gordon Zacks
----------------------------------------
Gordon Zacks, Chairman of the Board,
Chief Executive Officer and President
-22-
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Daniel D. Viren, certify that:
1. I have reviewed this annual report on Form 10-K of R. G. Barry
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
-23-
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Dated: March 28, 2003 By: /s/ Daniel D. Viren
-----------------------------------------
Daniel D. Viren,
Senior Vice President - Finance,
Secretary and Treasurer
(Chief Financial Officer)
-24-
R. G. BARRY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 28, 2002
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
PAGE(S) IN ANNUAL REPORT TO
DESCRIPTION OF FINANCIAL STATEMENTS (ALL OF WHICH ARE ARE SHAREHOLDERS FOR THE
INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FISCAL YEAR ENDED
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002) DECEMBER 28, 2002
Consolidated Balance Sheets at December 28, 2002 and December 29, 2001....................... 20
Consolidated Statements of Operations for the years ended December 28, 2002,
December 29, 2001 and December 30, 2000............................................. 21
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the
years ended December 28, 2002, December 29, 2001 and
December 30, 2000................................................................... 21
Consolidated Statements of Cash Flows for the years ended
December 28, 2002, December 29, 2001 and December 30, 2000.......................... 22
Notes to Consolidated Financial Statements................................................... 23 - 37
Independent Auditors' Report................................................................. 38
ADDITIONAL FINANCIAL DATA
The following additional financial data should be read in conjunction with
the Consolidated Financial Statements of R. G. Barry Corporation and its
subsidiaries included in the Annual Report to Shareholders for the fiscal year
ended December 28, 2002. Schedules not included with this additional financial
data have been omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.
Additional Financial Data:
Independent Auditor's Report on Financial Statement Schedules:
Included at page 26 of this Annual Report on Form 10-K
Schedules for the fiscal years ended December 28, 2002, December 29,
2001 and December 30, 2000:
Schedule 2--Valuation and Qualifying Accounts: Included at
pages 27 through 29 of this Annual Report on Form 10-K
-25-
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholders
R. G. Barry Corporation:
Under date of February 28, 2003 we reported on the consolidated balance sheets
of R. G. Barry Corporation and subsidiaries as of December 28, 2002 and December
29, 2001, and the related consolidated statements of operations, shareholders'
equity and comprehensive income and cash flows for each of the fiscal years in
the three-year period ended December 28, 2002, as contained in the fiscal 2002
annual report to shareholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form 10-K
for the fiscal year 2002. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedules as listed in the accompanying index. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
Columbus, Ohio /s/ KPMG LLP
February 28, 2003
-26-
SCHEDULE 2
R. G. BARRY CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
December 28, 2002
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------- ------------------ ----------------- ---------------
ADDITIONS
BALANCE AT CHARGED TO ADJUSTMENTS BALANCE AT
BEGINNING COSTS AND AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ----------------------------------------------------------------- ------------------ ----------------- ---------------
Reserves deducted from accounts receivable:
Allowance for doubtful receivables $ 302,000 132,000 -- 1 434,000
Allowance for returns 8,743,000 10,182,000 8,743,000 2 10,182,000
Allowance for promotions 8,574,000 9,648,000 8,574,000 3 9,648,000
-------------- ------------------ ----------------- ---------------
$17,619,000 19,962,000 17,317,000 20,264,000
============== ================== ================= ===============
Notes:
1. Write-off uncollectible accounts.
2. Represents 2002 sales returns reserved for in fiscal 2001.
3. Represents 2002 promotions expenditures committed to and reserved for
in fiscal 2001.
-27-
SCHEDULE 2
R. G. BARRY CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
December 29, 2001
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------ --------------- ---------------- ---------------
ADDITIONS
BALANCE AT CHARGED TO ADJUSTMENTS BALANCE AT
BEGINNING COSTS AND AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------------------------ --------------- ---------------- ---------------
Reserves deducted from accounts receivable:
Allowance for doubtful accounts $ 384,000 54,000 136,000 1 302,000
Allowance for returns 5,077,000 8,743,000 5,077,000 2 8,743,000
Allowance for promotions 8,680,000 8,574,000 8,680,000 3 8,574,000
--------------- --------------- ---------------- ---------------
$14,141,000 17,371,000 13,893,000 17,619,000
=============== =============== ================ ===============
Notes:
1. Write-off uncollectible accounts.
2. Represents 2001 sales returns reserved for in fiscal 2000.
3. Represents 2001 promotions expenditures committed to and reserved for
in fiscal 2000.
-28-
SCHEDULE 2
R. G. BARRY CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
December 30, 2000
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------- ----------------- --------------- ----------------- ---------------
ADDITIONS
BALANCE AT CHARGED TO ADJUSTMENTS BALANCE AT
BEGINNING COSTS AND AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ----------------------------------------------- ----------------- --------------- ----------------- ---------------
Reserves deducted from accounts receivable:
Allowance for doubtful receivables $ 289,000 246,000 151,000 1 384,000
Allowance for returns 11,200,000 5,077,000 11,200,000 2 5,077,000
Allowance for promotions 9,293,000 8,680,000 9,293,000 3 8,680,000
----------------- --------------- ----------------- ---------------
$20,782,000 14,003,000 20,644,000 14,141,000
================= =============== ================= ===============
Notes:
1. Write-off uncollectible accounts.
2. Represents 2000 sales returns reserved for in fiscal 1999.
3. Represents 2000 promotions expenditures committed to and reserved for
in fiscal 1999.
-29-
R. G. BARRY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 28, 2002
INDEX TO EXHIBITS
Exhibit No. Description Location
----------- ----------- --------
2.1 Stock Purchase Agreement, dated July 22, 1999, Incorporated herein by reference to
between Mr. Thierry Civetta, Mr. Michel Exhibit 2.1 to Registrant's Quarterly
Fargeot, FCPR County Natwest Venture France, Report on Form 10-Q for the fiscal quarter
SCA Capital Prive-Investissements, Hoche ended October 2, 1999 (File No. 1-8769)
Investissements, and SA Capital Prive, parties
of the first part, and R. G. Barry Corporation
("Registrant") and Escapade, S.A., parties of
the second part
3.1 Articles of Incorporation of Registrant (as Incorporated herein by reference to
filed with Ohio Secretary of State on March 26, Exhibit 3(a)(i) to Registrant's Annual
1984) Report on Form 10-K for the fiscal year
ended December 31, 1988 (File No. 0-12667)
("Registrant's 1988 Form 10-K")
3.2 Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant Authorizing the Exhibit 3(a)(i) to Registrant's 1988 Form
Series I Junior Participating Class B Preferred 10-K
Shares (as filed with the Ohio Secretary of State on
March 1, 1988)
3.3 Certificate of Amendment to the Articles of Incorporated herein by reference to
Registrant (as filed with the Ohio Secretary of Exhibit 3(a)(i) to Registrant's 1988 Form
State on May 9, 1988) 10-K
3.4 Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with the Exhibit 3(b) to Registrant's Annual Report
Ohio Secretary of State on May 22, 1995) on Form 10-K for the fiscal year ended
December 30, 1995 (File No. 1-8769)
("Registrant's 1995 Form 10-K")
3.5 Certificate of Amendment to Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with the Exhibit 3(c) to Registrant's 1995 Form 10-K
Ohio Secretary of State on September 1, 1995)
E-1
Exhibit No. Description Location
----------- ----------- --------
3.6 Certificate of Amendment to Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with the Exhibit 4(h)(6) to Registrant's
Ohio Secretary of State on May 30, 1997) Registration Statement on Form S-8, filed
June 6, 1997 (Registration No. 333-28671)
3.7 Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant Authorizing Exhibit 3(a)(7) to Registrant's Annual
Series I Junior Participating Class A Preferred Report on Form 10-K for the fiscal year
Shares (as filed with the Ohio Secretary of ended January 3, 1998 (File No. 1-8769)
State on March 10, 1998) ("Registrant's 1997 Form 10-K")
3.8 Articles of Incorporation of Registrant Incorporated herein by reference to
(reflecting amendments through March 10, 1998) Exhibit 3(a)(8) to Registrant's 1997 Form
[for purposes of SEC reporting compliance only 10-K
-- not filed with the Ohio Secretary of State]
3.9 Regulations of Registrant, as amended Incorporated herein by reference to
Exhibit 3(b) to Registrant's Annual Report
on Form 10-K for the fiscal year ended
January 2, 1988 (File No. 0-12667)
4.1 Revolving Credit Agreement, made and entered Incorporated herein by reference to
into to be effective on December 27, 2002, by Exhibit 99.1 to Registrant's Current Report
and between Registrant and The Huntington on Form 8-K, dated and filed January 9,
National Bank 2003 (File No. 1-8769) ("Registrant's
January 2003 Form 8-K")
4.2 Revolving Credit Note, dated December 27, 2002, Incorporated herein by reference to
issued by Registrant to The Huntington National Exhibit 99.2 to Registrant's January 2003
Bank Form 8-K
4.3 Security Agreement, dated December 27, 2002, Incorporated herein by reference to
executed by Registrant in favor of The Exhibit 99.3 to Registrant's January 2003
Huntington National Bank, as collateral agent Form 10-K
for The Huntington National Bank and
Metropolitan Life Insurance Company
4.4 Conditional Consent Agreement, made as of Incorporated herein by reference to
December 27, 2002, by and among Registrant and Exhibit 99.4 to Registrant's January 2003
Metropolitan Life Insurance Company Form 10-K
E-2
Exhibit No. Description Location
----------- ----------- --------
4.5 Note Agreement, dated July 5, 1994, between Incorporated herein by reference to
Registrant and Metropolitan Life Insurance Exhibit 4(t) to Registrant's Registration
Company Statement on Form S-3, filed July 21, 1994
(Registration No. 33-81820)
4.6 Letter, dated July 16, 1999, from Metropolitan Incorporated herein by reference to
Life Insurance Company to Registrant in respect Exhibit 4.2 to Registrant's Quarterly
of loan agreement dated July 5, 1994 Report on Form 10-Q for the fiscal quarter
ended July 3, 1999 (File No. 1-8769)
4.7 Rights Agreement, dated as of February 19, Incorporated herein by reference to Exhibit
1998, between Registrant and The Bank of New 4 to Registrant's Current Report on
York, as Rights Agent Form 8-K, dated March 13, 1998 and filed
March 16, 1998 (File No. 1-8769)
4.8 Loan Agreement, dated as of January 21, 2000, Incorporated herein by reference to Exhibit
among Banque Tarneaud, S.A., Banque Nationale 4 to Registrant's Quarterly Report on Form
de Paris, and Escapade, S.A. 10-Q for the fiscal quarter ended April 1,
2000 (File No. 1-8769)
9.1 Zacks-Streim Voting Trust and amendments thereto Incorporated herein by reference to Exhibit
9 to Registrant's Annual Report on
Form 10-K for the fiscal year ended
January 2, 1993 (File No. 1-8769)
9.2 Documentation related to extension of term of Incorporated herein by reference to Exhibit
the Voting Trust Agreement for the Zacks-Streim 9(b) to Registrant's 1995 Form 10-K
Voting Trust
*10.1 R. G. Barry Corporation Associates' Retirement Incorporated herein by reference to Exhibit
Plan (As Amended and Restated Effective January 10.1 to Registrant's Annual Report on Form
1, 1997) 10-K for the fiscal year ended December 29,
2001 ("Registrant's 2001 Form 10-K") (File
No. 1-8769)
*10.2 Amendment No. 1 to the R. G. Barry Corporation **
Associates' Retirement Plan (amended and
restated effective January 1, 1997, and
executed on December 31, 2001)
E-3
Exhibit No. Description Location
----------- ----------- --------
*10.3 Amendment No. 2 to the R. G. Barry Corporation **
Associates' Retirement Plan (amended and
restated effective January 1, 1997, and
executed on December 31, 2001) for the Economic
Growth and Tax Relief Reconciliation Act of 2001
*10.4 R. G. Barry Corporation Supplemental Retirement Incorporated herein by reference to
Plan Effective January 1, 1997 Exhibit 10.2 to Registrant's Annual Report
on Form 10-K for the fiscal year ended
January 1, 2000 (File No. 1-8769)
("Registrant's January 2000 Form 10-K")
*10.5 Amendment No. 1 to the R. G. Barry Corporation Incorporated here in by reference to
Supplemental Retirement Plan Effective January Exhibit 10.3 to Registrant's January 2000
1, 1997 (Executed effective as of May 12, 1998) Form 10-K
*10.6 Amendment No. 2 to the R. G. Barry Corporation Incorporated herein by reference to Exhibit
Supplemental Retirement Plan Effective January 10.4 to Registrant's January 2000 Form 10-K
1, 1997 (Executed effective as of
January 1, 2000)
*10.7 Employment Agreement, dated July 1, 2001, Incorporated herein by reference to Exhibit
between Registrant and Gordon Zacks 10.5 to Registrant's 2001 Form 10-K
*10.8 Agreement, dated September 27, 1989, between Incorporated herein by reference to Exhibit
Registrant and Gordon Zacks 28.1 to Registrant's Current Report on Form
8-K dated October 11, 1989, filed October 12,
1989 (File No. 0-12667)
*10.9 Amendment No. 1, dated as of October 12, 1994, Incorporated herein by reference to
between Registrant and Gordon Zacks Exhibit 5 to Amendment No. 14 to Schedule
13D, dated January 27, 1995, filed by
Gordon Zacks on February 13, 1995
*10.10 Amended Split-Dollar Insurance Agreement, dated Incorporated herein by reference to Exhibit
March 23, 1995, between Registrant and 10(h) to Registrant's 1995 Form 10-K
Gordon B. Zacks
E-4
Exhibit No. Description Location
----------- ----------- --------
*10.11 R. G. Barry Corporation 1988 Stock Option Plan Incorporated herein by reference to Exhibit
(Reflects amendments through May 11, 1993) 4(r) to Registrant's Registration Statement
on Form S-8, filed August 18, 1993
(Registration No. 33-67594)
*10.12 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with the grant of incentive stock 10(k) to Registrant's 1995 Form 10-K
options pursuant to the R. G. Barry Corporation
1988 Stock Option Plan
*10.13 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with the grant of non-qualified 10(1) to Registrant's 1995 Form 10-K
stock options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
*10.14 Annual Incentive Program (in effect beginning Incorporated herein by reference to Exhibit
with fiscal year ended December 29, 2001) 10.13 to Registrant's December 2000 Form 10-K
*10.15 R. G. Barry Corporation Employee Stock Purchase Incorporated herein by reference to Exhibit 4(r)
Plan (Reflects amendments and revisions for to Registrant's Registration Statement
stock dividends and stock splits through on Form S-8, filed August 18, 1993
May 11, 1993) (Registration No. 33-67596)
*10.16 R. G. Barry Corporation 1994 Stock Option Plan Incorporated herein by reference to Exhibit
(Reflects stock splits through June 22, 1994) 4(q) to Registrant's Registration Statement
on Form S-8, filed August 24, 1994
(Registration No. 33-83252)
*10.17 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with the grant of incentive stock 10.16 to Registrant's December 2000 Form
options pursuant to the R. G. Barry Corporation 10-K
1994 Stock Option Plan
*10.18 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with the grant of non-qualified 10.17 to Registrant's December 2000 Form
stock options pursuant to the R. G. Barry 10-K
Corporation 1994 Stock Option Plan
*10.19 Executive Employment Agreement, effective as of Incorporated herein by reference to Exhibit
January 4, 1998, between Registrant and 10(q) to Registrant's 1997 Form 10-K
Christian Galvis
E-5
Exhibit No. Description Location
----------- ----------- --------
*10.20 Restricted Stock Agreement, effective as of Incorporated herein by reference to Exhibit
January 4, 1998, between Registrant and 10(s) to Registrant's 1997 Form 10-K
Christian Galvis
*10.21 R. G. Barry Corporation Deferred Compensation Incorporated herein by reference to Exhibit
Plan As Amended and Restated (Effective as of 10(v) to Registrant's 1995 Form 10-K
September 1, 1995)
*10.22 Amendment No. 1 to the R. G. Barry Corporation Incorporated herein by reference to Exhibit
Deferred Compensation Plan (Effective as of 10.23 to Registrant's January 2000 Form 10-K
March 1, 1997)
*10.23 Amendment No. 2 to the R. G. Barry Corporation Incorporated herein by reference to Exhibit
Deferred Compensation Plan (Effective as of 10.21 to Registrant's 2001 Form 10-K
December 1, 1999)
*10.24 Amendment No. 3 to the R. G. Barry Corporation **
Deferred Compensation Plan (Effective as of
December 1, 1999)
*10.25 R. G. Barry Corporation Stock Option Plan for Incorporated herein by reference to Exhibit
Non-Employee Directors (Reflects share splits 10(x) to Registrant's 1997 Form 10-K
and amendments through February 19, 1998)
*10.26 R. G. Barry Corporation 1997 Incentive Stock Incorporated herein by reference to Exhibit
Plan (Reflects amendments through May 13, 1999) 10 to Registrant's Registration Statement
on Form S-8, filed June 18, 1999
(Registration No. 333-81105)
*10.27 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with the grant of incentive stock 10.24 to Registrant's December 2000 Form
options pursuant to the R. G. Barry Corporation 10-K
1997 Incentive Stock Plan
*10.28 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with the grant of non-qualified 10.25 to Registrant's December 2000 Form
stock options pursuant to the R. G. Barry 10-K
Corporation 1997 Incentive Stock Plan
*10.29 R. G. Barry Corporation 2002 Stock Incentive Incorporated herein by reference to Exhibit
Plan 10 to Registrant's Registration Statement
on Form S-8, filed June 14, 2002
(Registration No. 333-90544)
E-6
Exhibit No. Description Location
----------- ----------- --------
*10.30 Form of Stock Option Agreement used in **
connection with grant of incentive stock
options pursuant to the R. G. Barry Corporation
2002 Stock Incentive Plan
*10.31 Form of Stock Option Agreement used in **
connection with grant of non-qualified stock
options pursuant to the R. G. Barry Corporation
2002 Stock Incentive Plan
*10.32 Restricted Stock Agreement, dated as of May 13, Incorporated herein by reference to
1999, between Registrant and Gordon Zacks Exhibit 10.1 to Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter
ended July 3, 1999 (File No. 1-8769)
*10.33 Restricted Stock Agreement, effective as of Incorporated herein by reference to Exhibit 10
March 23, 2000, between Registrant and to Registrant's Quarterly Report on Form 10-Q
Christian Galvis for the fiscal quarter ended April 1, 2000
(File No. 1-8769)
*10.34 Employment Agreement, effective February 19, Incorporated herein by reference to Exhibit
2001, between Registrant and William Lenich 10.28 to Registrant's December 2000 Form
10-K
*10.35 Employment Separation Agreement **
and Mutual Release of Claims, dated August 19,
2002, between Registrant and William Lenich
*10.36 Executive Employment Agreement, effective as of Incorporated herein by reference to Exhibit
June 5, 2000, between Registrant and Daniel D. 10.29 to Registrant's December 2000 Form
Viren 10-K
*10.37 Change in Control Agreement, effective as of Incorporated herein by reference to Exhibit
January 4, 2001, between Registrant and Harry 10.30 to Registrant's December 2000 Form
Miller 10-K
*10.38 Change in Control Agreement, effective as of Incorporated herein by reference to Exhibit
January 4, 2001, between Donald Van Steyn and 10.31 to Registrant's December 2000 Form
Registrant 10-K
*10.39 Consulting Services Agreement, effective as of Incorporated herein by reference to Exhibit
January 1, 2000, between Registrant and 10.32 to Registrant's December 2000 Form
Florence Zacks Melton 10-K
E-7
Exhibit No. Description Location
----------- ----------- --------
*10.40 Agreement, dated February 7, 1952, as amended Incorporated herein by reference to Exhibit
by Agreement of Amendment dated September 18, 10.33 to Registrant's December 2000 Form
1961, a Second Amendment dated April 15, 1968 10-K
and a Third Amendment dated October 31, 2000,
between Registrant and Florence Zacks Melton
*10.41 Stock Option Agreements, dated February 19, Incorporated herein by reference to Exhibit
2001, between Registrant and William Lenich 10.34 to Registrant's 2001 Form 10-K
*10.42 Stock Option Agreement (Other Option Grant), Incorporated herein by reference to Exhibit
dated December 26, 2001, between Registrant and 10.35 to Registrant's 2001 Form 10-K
William Lenich
10.43 Agreement, dated July 11, 2001, between Incorporated herein by reference to Exhibit
Registrant and S. Goldberg & Co., Inc. 10(b) to Registrant's Current Report on
Form 8-K, dated January 7, 2002 and filed
January 8, 2002 (File No. 1-8769)
10.44 Stock Option Agreement, effective as of August 7, Incorporated herein by reference to Exhibit
2000, between Registrant and Howard Eisenberg 10.2 to Registrant's Registration Statement
on Form S-8, filed September 20, 2002
(Registration No. 333-99891)
10.45 Stock Option Agreement, effective as of July 2, Incorporated herein by reference to
2001, between Registrant and Richard DeCamp Exhibit 10.3 to Registrant's Registration
Statement on Form S-8, filed September 20, 2002
(Registration No. 333-99891)
10.46 License Agreement, effective as of January 7, **
2003, among Registrant,
R. G. Barry International, Inc., Barry (G.B.R.
Limited) and GBR Limited
13.1 Registrant's Annual Report to Shareholders for Incorporated herein by reference to the
the fiscal year ended December 28, 2002 (Not financial statements portion of this Annual
deemed filed except for the portions thereof Report on Form 10-K beginning at page 25
which are specifically incorporated by
reference into this Annual Report on Form 10-K)
21.1 Subsidiaries of Registrant **
E-8
Exhibit No. Description Location
----------- ----------- --------
23.1 Consent of Independent Certified Public **
Accountants
24.1 Powers of Attorney Executed by Directors and **
Executive Officers of Registrant
99.1 Certification Pursuant to Title 18, United **
States Code, Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
- ------------
* Management contract or compensatory plan or arrangement.
** Filed herewith