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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2005
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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 001-08769
R. G. BARRY CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
OHIO 31-4362899
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
13405 Yarmouth Road NW, Pickerington, Ohio 43147
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
614-864-6400
------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year,
if changed since last report)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes ( ) No (X)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Shares, $1 Par Value, Outstanding as of April 30, 2005 - 9,836,602
Index to Exhibits at page 22
- Page 1 -
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 2, 2005 January 1, 2005
------------- ---------------
(unaudited)
-----------
(in thousands)
ASSETS:
Cash $ 1,310 958
Accounts receivable (less allowances of
$9,094 and $12,095, respectively) 9,701 10,141
Inventory 21,196 20,192
Prepaid expenses 1,377 1,791
-------- --------
Total current assets 33,584 33,082
-------- --------
Property, plant and equipment, at cost 13,577 13,705
Less accumulated depreciation and amortization 10,978 10,987
-------- --------
Net property, plant and equipment 2,599 2,718
-------- --------
Other assets 3,242 3,292
-------- --------
$ 39,425 39,092
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term notes payable 8,158 4,901
Current installments of long-term debt 1,359 1,721
Accounts payable 5,429 5,200
Accrued expenses 5,009 6,387
-------- --------
Total current liabilities 19,955 18,209
-------- --------
Accrued retirement costs and other 15,083 15,426
Long-term debt, excluding current installments 384 479
-------- --------
Total liabilities 35,422 34,114
-------- --------
Shareholders' equity:
Preferred shares, $1 par value per share Authorized 3,775 Class A shares,
225 Series I Junior Participating Class A Shares,
and 1,000 Class B Shares, none issued -- --
Common shares, $1 par value per share
Authorized 22,500 shares; issued and outstanding 9,836 and 9,836 shares
(excluding treasury shares of 910 and 912) 9,836 9,836
Additional capital in excess of par value 12,836 12,851
Deferred compensation -- (19)
Accumulated other comprehensive loss (4,059) (3,981)
Accumulated deficit (14,610) (13,709)
-------- --------
Net shareholders' equity 4,003 4,978
-------- --------
$ 39,425 39,902
======== ========
- Page 2 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended
April 2, 2005 April 3, 2004
------------- -------------
(unaudited)
-----------
(in thousands,
except per share amounts)
Net sales $ 16,990 $ 18,430
Cost of sales 10,162 12,917
-------- --------
Gross profit 6,828 5,513
Selling, general and
administrative expenses 7,400 11,197
Restructuring and asset
impairment charges 241 8,282
-------- --------
Operating loss (813) (13,966)
Other income 45 45
Interest expense, net (85) (241)
-------- --------
Loss from operations, before
income tax and minority interest (853) (14,162)
Income tax (expense) benefit (48) 2
Minority interest in income of
consolidated subsidiaries, net of
tax -- 1
-------- --------
Net loss $ (901) $(14,159)
======== ========
Net loss per common share
Basic $ (0.09) $ (1.44)
======== ========
Diluted $ (0.09) $ (1.44)
======== ========
Average number of common
shares outstanding
Basic 9,837 9,839
======== ========
Diluted 9,837 9,839
======== ========
- Page 3 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirteen Weeks Ended
April 2, 2005 April 3, 2004
------------- -------------
(unaudited)
-----------
(in thousands)
Cash flows from operating activities:
Net loss $ (901) $(14,159)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization of
property, plant and equipment 171 417
Asset impairment loss -- 6,263
Amortization of deferred compensation 3 57
Changes in:
Accounts receivable, net 382 (3,965)
Inventory (1,137) 916
Prepaid expenses and other 464 1,435
Accounts payable 245 (2,279)
Accrued expenses (1,369) (930)
Accrued retirement costs and other, net (343) 283
-------- --------
Net cash used in continuing operations (2,485) (11,962)
-------- --------
Net cash used in discontinued operations -- (401)
-------- --------
Net cash used in operating activities (2,485) (12,363)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (67) (41)
Cash flows from financing activities:
Proceeds from short-term notes, net 3,305 25,322
Repayments of short-term bank notes -- (10,204)
Proceeds from shares issued and other -- 2
Repayment of long-term debt (412) (2,537)
-------- --------
Net cash provided by financing activities 2,893 12,583
-------- --------
Effect of exchange rates on cash 11 1
-------- --------
Net increase in cash 352 180
Cash at the beginning of the period 958 2,012
-------- --------
Cash at the end of the period $ 1,310 $ 2,192
======== ========
Supplemental cash flow disclosures:
Interest paid $ 66 $ 210
======== ========
Income taxes paid, net $ 0 $ 15
======== ========
- Page 4 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q
for the periods ended April 2, 2005 and April 3, 2004
(in thousands, except per share data)
1. The accompanying unaudited consolidated financial statements include the
accounts of R.G. Barry Corporation and its subsidiaries ("the Company") and
have been prepared in accordance with the Unites States of America ("U.S.")
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by U.S. generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
consisting of normal recurring accruals considered necessary for a fair
presentation have been included. Operating results for the three months
ended April 2, 2005 are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 2005 (fiscal 2005). For
further information, refer to the consolidated financial statements and
notes thereto included in the Annual Report on Form 10-K of R.G. Barry
Corporation for the fiscal year ended January 1, 2005 (fiscal 2004).
2. The Company operates on a fifty-two or fifty-three week annual fiscal year,
ending annually on the Saturday nearest December 31st. Fiscal 2005 and
fiscal 2004 are both fifty-two week years.
3. The Company has various stock option plans, under which the Company has
granted incentive stock options and nonqualified stock options exercisable
for periods of up to 10 years from the date of grant at prices not less
than fair market value of the underlying common shares at the date of
grant. In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure, an
amendment of SFAS No. 123. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123, Accounting for
Stock-Based Compensation, to require prominent disclosures in annual and
interim financial statements about the method of accounting for stock-based
compensation and the effect in measuring compensation expense.
The Company has elected to use the intrinsic value method, in accordance
with the provisions of SFAS No. 123, as amended by SFAS No. 148, to apply
the current accounting rules under Accounting Principles Board ("APB")
Opinion No. 25 and related interpretations, including FASB Interpretation
No. 44 (Accounting for Certain Transactions Involving Stock Compensation,
an interpretation of APB No. 25) in accounting for employee stock options.
Accordingly, the Company has presented the disclosure only information as
required by SFAS No. 123. Had the Company elected to recognize compensation
expense based on the fair value of the options granted at the grant date as
prescribed by SFAS No. 123, the Company's net loss would approximate the
pro forma amounts indicated below for the periods noted:
- Page 5 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q for
the periods ended April 2, 2005 and April 3, 2004 - continued
(in thousands, except per share data)
April 2, 2005 April 3, 2004
------------- -------------
Net loss:
As reported $ (901) $ (14,159)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all
awards, net of related tax effect $ (83) $ (143)
Pro forma $ (984) $ (14,302)
Net loss per share:
Basic - as reported $ (0.09) $ (1.44)
Basic - pro forma $ (0.10) $ (1.44)
Diluted - as reported $ (0.09) $ (1.44)
Diluted - pro forma $ (0.10) $ (1.44)
Using the Black-Scholes option pricing model, the per-share,
weighted-average fair value of stock options granted during 2005 and 2004,
was $1.90 and $1.20, respectively, on the date of grant. The assumptions
used in estimating the fair value of the options as of April 2, 2005, and
April 3, 2004 were:
April 2, 2005 April 3, 2004
------------- -------------
Expected dividend yield 0% 0%
Expected volatility 60% 60%
Risk-free interest rate 3.75% 3.00%
Expected life-ISO grants 5 years 6 years
Expected life-nonqualified grants 3 - 5 years 2 - 8 years
4. Income tax (expense) benefit for the periods ended April 2, 2005 and April
3, 2004 consist of:
2005 2004
---- ----
Foreign tax (expense) benefit $ (48) $ 2
Income tax (expense) benefit for the periods ended April 2, 2005 and April
3, 2004 differed from the amounts computed by applying the U. S. federal
income tax rate of 34 percent to pretax loss as a result of the following:
2005 2004
---- ----
Computed "expected" tax:
U. S. Federal $ 347 $ 4,821
Valuation allowance (347) (4,821)
Foreign and other, net (48) 2
----- -------
Total $ (48) $ 2
===== =======
- Page 6 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q for
the periods ended April 2, 2005 and April 3, 2004 - continued
(in thousands, except per share data)
On June 8, 2004, the Company received a "30-day letter" from the Internal
Revenue Service ("IRS") proposing certain adjustments which, if sustained,
would result in an additional tax obligation approximating $4,000 plus
interest. The proposed adjustments relate to the years 1998 through 2002.
Substantially all of the proposed adjustments relate to the timing of
certain deductions taken during that period. On July 7, 2004, the Company
submitted to the IRS a letter protesting the proposed adjustments and
reiterating its position. In March 2005, the IRS requested and the Company
consented to an extension of the statute of limitations to December 31,
2006. The Company intends to vigorously contest the proposed adjustments.
In the opinion of management, the resolution of these matters is not
expected to have a material effect on the Company's financial position or
results of operations.
5. Basic net loss per common share has been computed based on the weighted
average number of common shares outstanding during each period. Diluted net
loss per common share is based on the weighted average number of
outstanding common shares during the period, plus, when their effect is
dilutive, potential common shares consisting of certain common shares
subject to stock options and the employee stock purchase plan. Diluted net
loss per common share for the thirteen weeks ended April 2, 2005 and April
3, 2004 does not include the effect of potential common shares due to the
antidilutive effect of these instruments, resulting from the net losses
incurred during the periods noted.
6. Inventory by category for the Company consists of the following:
April 2, January 1,
-------- ----------
2005 2005
---- ----
Raw materials $ 1,031 $ 1,031
Work in process 66 202
Finished goods 20,099 18,959
-------- --------
Total inventory $ 21,196 $ 20,192
======== ========
Inventory is presented net of raw materials write-downs of $54 as of April
2, 2005 and $42 as of January 1, 2005, respectively, and finished goods
write-downs of $209 as of April 2, 2005 and $1,515 as of January 1, 2005,
respectively. Write-downs, recognized as a part of cost of sales were, $92
and $166 for the first quarter 2005 and 2004, respectively.
7. Restructuring and asset impairment charges - The Company recorded
restructuring and asset impairment charges as a result of certain actions
taken to reduce costs and improve operating efficiencies. During the first
quarter of 2005, these actions mainly represented minor continuing
occupancy costs on the Company's leased facilities and other minor
liquidation costs both of which were related to the prior year's
restructuring plan as described in R.G. Barry's Annual Report to
Shareholders for the fiscal year ended January 1, 2005, under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - New Business Model", which is incorporated by reference into
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operation" of R.G. Barry Corporation's Annual report on Form
10-K for the fiscal year ended January 1, 2005. As shown next and
consistent with prior reporting periods, the restructuring and asset
impairment charges have been recorded as a component of the Company's
operating expense.
- Page 7 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q for
the periods ended April 2, 2005 and April 3, 2004 - continued
(in thousands, except per share data)
Non-Cash
As of Write-Offs As of
Jan. 1, Charges Estimate and April 2,
2005 in 2005 Adjustments Paid in 2005 2005
---- ------- ----------- ------------ ----
Employee separations $ 927 54 (35) 628 318
Other exit costs -- 185 -- 185 --
Noncancelable lease costs 1,732 37 -- 378 1,391
------ ------ ------- ------ ------
Total restructuring costs $2,659 $ 276 $ ( 35) $1,191 $1,709
====== ====== ======= ====== ======
The Company recorded restructuring and asset impairment charges of $8,282
during the first quarter of 2004, related to the major initiatives
undertaken in that year to reduce costs and improve operating efficiencies.
8. Segment Information - The Company primarily markets comfort footwear for
at- and around-the-home. The Company considers "Barry Comfort" at- and
around-the-home comfort footwear groups in North America and in Europe as
its two operating segments. The accounting policies of the operating
segments are substantially similar, except that the disaggregated
information has been prepared using certain management reports, which by
their very nature require estimates. In addition, certain items from these
management reports have not been allocated between the operating segments,
including such items as costs of certain administrative functions and
current and deferred income tax expense or benefit, and deferred tax assets
or liabilities.
Barry Comfort
Thirteen weeks ended North
April 2, 2005 America Europe Total
------- ------ -----
Net sales $ 13,885 $ 3,105 $ 16,990
Gross profit 6,385 443 6,828
Depreciation and
Amortization 151 20 171
Restructuring and asset
impairment charges 241 -- 241
Interest expense 70 15 85
Pre tax earnings (loss) (994) 141 (853)
Purchases of property, plant
and equipment 29 38 67
Total assets devoted $ 34,983 $ 4,442 $ 39,425
======== ======== ========
Barry Comfort
Thirteen weeks ended North
April 3, 2004 America Europe Total
------- ------ -----
Net sales $ 15,517 $ 2,913 $ 18,430
Gross profit 5,216 297 5,513
Depreciation and
Amortization 355 62 417
Restructuring and asset
impairment charges 8,282 -- 8,282
Interest expense 230 11 241
Pre tax earnings (loss) (14,197) 35 (14,162)
Purchases of property, plant
and equipment 35 6 41
Total assets devoted $ 52,154 $ 4,204 $ 56,358
======== ======== ========
- Page 8 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q for
the periods ended April 2, 2005 and April 3, 2004 - continued
(in thousands, except per share data)
9. Employee Retirement Plans - The Company uses a measurement date of
September 30 in making the required pension computations on an annual
basis. In 2005, the Company has potential pension related payments of
$1,359 for unfunded, nonqualified supplemental retirement plans as well as
for payments anticipated for the 2004 year and 2005 quarterly estimated
contributions into the funded, qualified associate retirement plan. The
Company's application for deferral of the lump sum 2003 payment due in
September 2004 of $747 was approved by the IRS in 2004, and accordingly
that payment has been deferred to 2005. During the first quarter of 2005,
the Company made payments of $148 and $145 under its nonqualified
supplemental and qualified retirement plans, respectively.
Effective April 1, 2004, the retirement plans were frozen, resulting in a
curtailment loss of $1,128 during the first quarter of 2004, and the
elimination of additional service costs after the first quarter of 2004.
The components of net periodic benefit cost for the retirement plans were:
Thirteen weeks ended
April 2, 2005 April 3, 2004
------------- -------------
Service cost $ -- $ 214
Interest cost 549 559
Expected return on plan assets (462) (497)
Net amortization 65 128
Curtailment loss -- 1,128
----- -------
Total pension expense $ 152 $ 1,532
===== =======
10. Related party transactions - The Company and its non-executive chairman
("chairman") previously entered into an agreement pursuant to which the
Company is obligated for up to two years after the death of the chairman to
purchase, if the estate elects to sell, up to $4,000 of the Company's
common shares, at their fair market value. To fund its potential obligation
to purchase such common shares, the Company purchased a $5,000 life
insurance policy on the chairman; in addition, the Company maintains
another policy insuring the life of the chairman. The cumulative cash
surrender value of the policies approximates $2,200, which is included in
other assets in the accompanying consolidated balance sheets. Effective
March 2004 and continuing through April 2, 2005, the Company has borrowed
against the cash surrender value of these policies.
In addition, for a period of 24 months following the chairman's death, the
Company will have a right of first refusal to purchase any common shares of
the Company owned by the chairman at the time of his death if his estate
elects to sell such common shares. The Company would have the right to
purchase such common shares on the same terms and conditions as the estate
proposes to sell such common shares.
The Company has a royalty agreement with the mother of the chairman,
providing the Company with the exclusive right to manufacture and sell
various slipper styles and other product designs created and owned by her,
including future styles and designs. Under the agreement, the Company
agreed to pay a royalty to her of 1% of the net sales of products utilizing
her designs. The royalty agreement terminates five years after her death.
- Page 9 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q for
the periods ended April 2, 2005 and April 3, 2004 - continued
(in thousands, except per share data)
During 2004, the Company engaged The Meridian Group ("Meridian"), whose
services included assisting the Company in the development of its new
business model, restructuring its financing resources, and identifying
auction firms to market and sell its equipment in Mexico. The Company's
President and Chief Executive Officer is currently on leave from Meridian,
and his spouse is the President and sole owner of Meridian. The fees
incurred were at Meridian's customary rates for providing such services,
and the Company believes the fees were consistent with the market price for
such services. During the fourth quarter of 2004 and through the first
quarter of 2005, the Company has not engaged the services of Meridian.
11. Contingent Liabilities - The Company has been named as defendant in various
lawsuits arising from the ordinary course of business. In the opinion of
management, the resolution of these matters is not expected to have a
material adverse effect on the Company's financial position or results of
operations.
- Page 10 -
R. G. BARRY CORPORATION AND SUBSIDIARIES
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------------
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995:
Some of the information in this Quarterly Report on Form 10-Q contains
forward-looking statements that involve substantial risks and uncertainties. You
can identify these statements by forward-looking words such as "may," "will,"
"expect," "anticipate," "believe," "estimate," or similar words. These
statements, which are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995, are based upon our current
plans and strategies and reflect our current assessment of the risks and
uncertainties related to our business. You should read statements that contain
forward-looking statements carefully because they (1) discuss our future
expectations; (2) contain projections of our future results of operations or of
our future financial condition; or (3) state other "forward-looking"
information. The risk factors described below, as well as any other cautionary
language in this Quarterly Report on Form 10-Q, give examples of the types of
uncertainties that may cause our actual performance to differ materially from
the expectations we describe in our forward-looking statements. You should know
that if the events described in this section and elsewhere in this Quarterly
Report on Form 10-Q occur, they could have a material adverse effect on our
business, operating results and financial condition.
- --------------------------------------------------------------------------------
The following are the most significant risk factors in our business.
RISK FACTORS
o The Company's ability to continue sourcing products from outside North
America without negatively impacting delivery times or product quality
under its new business model.
o The ability of the Company to meet certain minimum covenants regarding its
financial condition and financial performance requirements as described in
the CIT ABL Facility, discussed below under "CIT Facilities". While we
believe we can continue to comply with such covenants in 2005, our ability
to do so assumes that (i) the cost benefits of our new business model
continue in 2005; (ii) we experience no major loss of customers or a major
loss of business from existing customers; and the Company continues to be
able to source products without incurring substantial unplanned costs.
o The Company's ability to maintain its inventory levels in accordance with
its plans and achieve adequate levels of working capital.
o The continued demand for the Company's products by its customers and
consumers, especially during the critical holiday season.
o The ability of the Company to successfully compete on quality, fashion,
service, selection, and price.
o The Company's ability to successfully manage the impact on our product cost
that may result from a potential material change in the valuation of the
Chinese currency.
o The ability of the Company to finalize the exiting of certain lease
obligations related to our distribution facilities in Nuevo Laredo, Mexico
and Laredo, Texas and our former office in San Antonio, Texas without
incurring substantial unplanned costs or experiencing unforeseen
difficulties.
o The Company's ability to resolve its dispute with the IRS, as described in
Note 4 of the Notes to Consolidated Financial Statements, without incurring
substantial liability.
o The impact of competition on the Company's market share.
o The ability of the Company to retain key executives and successfully manage
a succession plan for members of its senior management.
- Page 11 -
INTRODUCTION
The following discussion and analysis is intended to provide investors and
others with information we believe is necessary to understand the Company's
financial condition, changes in financial condition, results of operations and
cash flows. This discussion and analysis should be read in conjunction with the
Company's consolidated financial statements, the notes to the consolidated
financial statements and other information found in this Quarterly Report on
Form 10-Q.
CRITICAL ACCOUNTING POLICIES AND USE OF SIGNIFICANT ESTIMATES
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires that we make certain estimates. These
estimates can affect our reported revenues, expenses and results of operations,
as well as the reported values of certain of our assets and liabilities. We make
these estimates after gathering as much information from as many resources, both
internal and external, as are available to us at the time. After reasonably
assessing the conditions that exist at the time, we make these estimates and
prepare our consolidated financial statements accordingly. These estimates are
made in a consistent manner from period to period, based upon historical trends
and conditions and after review and analysis of current events and
circumstances. We believe these estimates reasonably reflect the current
assessment of the financial impact of events that may not become known with
certainty until some time in the future.
A summary of the critical accounting policies requiring management estimates
follows:
(a) We recognize revenue when goods are shipped from our warehouse and other
third-party distribution locations, at which point our customers take ownership
and assume risk of loss. In certain circumstances, we sell products to customers
under special arrangements, which provide for return privileges, discounts,
promotions and other sales incentives. At the time we recognize revenue, we
reduce our measurement of revenue by an estimated cost of potential future
returns and allowable retailer promotions and incentives, recognizing as well a
corresponding reduction in our reported accounts receivable. These estimates
have traditionally been sensitive to and dependent on a variety of factors
including, but not limited to, quantities sold to our customers and the related
selling and marketing support programs; channels of distribution; retail sale
rates; acceptance of the styling of our product by consumers; overall economic
environment; consumer confidence; and other similar factors.
Allowances for returns established were approximately $3.1 million and $6.0
million at the end of the first quarter 2005 and the first quarter 2004,
respectively, and $4.1 million at the end of fiscal year 2004. Furthermore,
allowances for promotions and other sales incentives established at the end of
the first quarter 2005 and the first quarter 2004 were approximately $6.0
million and $5.9 million, respectively, and $8.0 million at the end of fiscal
year 2004. The quarter-on-quarter decrease of $2.9 million of return allowances
is mainly due to the change in our business model, which includes a more
customer-specific sell-in approach compared to a year ago. The slight
quarter-on-quarter increase in the promotions and sales incentives allowance
also reflects our continuing initiatives of being more responsive to our
customers by assisting in promoting goods in season and attempting to reduce
returns accordingly. During the first quarter 2005 and the first quarter 2004,
we recorded approximately $150 thousand and $0, respectively, as the sales value
of merchandise returned by our customers, and $4.0 million for fiscal year 2004.
Charges to earnings for the first quarter 2005 and same period in 2004 for
consumer promotion activities undertaken with our customers were $1.2 million
and $2.1 million, respectively, and $10.7 million for fiscal year 2004. As our
business model is further implemented in 2005, and given the continuously
changing retail environment, and our short experience with the new operating
model, it is possible that allowances for returns, promotions and other sales
incentives, and the related charges reported in our consolidated results of
operations for these activities could be different than those estimates noted
above.
- Page 12 -
(b) We value inventories using the lower of cost or market, based upon
the first-in, first-out ("FIFO") costing method. We evaluate our inventories for
any impairment in realizable value in light of our prior selling season, the
overall economic environment, and our expectations for the upcoming selling
seasons, and we record the appropriate write-downs under the circumstances. At
the end of the first quarter 2005 and the first quarter 2004, we estimated that
the FIFO cost of our inventory exceeded the estimated net realizable value of
that inventory by $263 thousand and $2.6 million, respectively, as compared with
a similar estimate of $1.6 million at year-end 2004. The significant decrease
from quarter to quarter is mainly due to our decision made in the first quarter
of 2004 to exit manufacturing activities in Mexico. This decision resulted in a
significant reserve against the value of our raw material investment to position
it for liquidation through auctioning completed in August 2004. Inventory
write-downs, recognized as part of cost of sales for continuing operations,
amounted to $92 thousand, $166 thousand and $2.1 million during the first
quarter 2005, the first quarter 2004, and the fiscal year 2004, respectively. As
noted above, given our short experience with the new business model and
considering the ever-changing retail landscape, it is possible that our
estimates to represent our inventory at the net realizable value could be
different than those reported in previous periods.
(c) We make an assessment of the amount of income taxes that will
become currently payable or recoverable for the just concluded period, and what
deferred tax costs or benefits will become realizable for income tax purposes in
the future, as a result of differences between results of operations as reported
in conformity with U.S. generally accepted accounting principles, and the
requirements of the income tax codes existing in the various jurisdictions where
we operate. In evaluating the future benefits of our deferred tax assets, we
examine our capacity for refund of federal income taxes due to our net operating
loss carry-forward position, and our projections of future profits. As a result
of our cumulative losses, we have determined that it is uncertain when, and if,
the deferred tax assets will have realizable value in future years. We
established a valuation allowance against the value of those deferred assets and
a reserve of approximately $21.3 million was recorded at the end of fiscal year
2004. Should our profits improve in future periods, such that those deferred
items become realizable as deductions in future periods, we will recognize that
benefit by reducing our reported tax expense in the future periods, once that
realization becomes assured.
(d) We accounted for our previous financing agreement with CIT
Commercial Services, Inc. ("CIT"), described below under "CIT Facilities," as a
financing facility, in recognizing and recording trade receivables. For
financial statement purposes, the factoring of receivables under the previous
CIT financing arrangement is not considered a sale of receivables. As such, the
amounts advanced by CIT are considered short-term loans and are included within
short-term notes payable on our consolidated balance sheet. The CIT ABL
Facility, described below under "CIT Facilities" as well, is a committed type
financing arrangement, has replaced the previous CIT financing arrangement, and
does not include factoring of receivables.
(e) We make estimates of the future costs associated with restructuring
plans related to operational changes announced during the year. Estimates are
based upon the anticipated costs of employee separations; an analysis of the
impairment in the value of any affected assets; anticipated future costs to be
incurred in settling remaining lease obligations, net of any anticipated
sublease revenues; and other costs associated with the restructuring plans. At
the end of the first quarter of 2005 and the first quarter 2004, we had an
accrued balance of approximately $1.7 million and $557 thousand, respectively,
relating to the estimated future costs of closing or reorganizing certain
operations. At the end of fiscal year 2004, we had an accrued balance of $2.7
million for similar restructuring and reorganization activities under way at
that time. Should the actual costs of restructuring activities exceed our
estimates, the excess costs will be recognized in the following period.
Conversely, should the costs of restructuring be less than the amounts
estimated, future periods would benefit by that difference. (See also Note 7 of
the Notes to Consolidated Financial Statements for additional information
concerning restructuring and asset impairment charges.)
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(f) We review the carrying value of our long-lived assets held and used
and long-lived assets to be disposed of whenever events or changes in
circumstances indicate that the carrying value of the assets may not be
recoverable. This review is performed using estimates of future cash flows. If
the carrying value of the assets is considered impaired, an impairment charge is
recorded for the amount by which the carrying value of the asset exceeds its
fair value. Fair value is determined using the present value of estimated net
cash flows or comparable market values. Assets to be disposed of are reported at
the lower of book or fair market value, less costs of disposal. We recorded
asset impairment charges of approximately $0, $6.3 million, and $7.1 million
during the first quarter 2005, the first quarter 2004 and fiscal year 2004,
respectively. The significant decrease in asset impairment charges from quarter
period 2005 to 2004 is reflective of the actions taken related to the closure of
our manufacturing and distribution facilities in Mexico and Laredo, Texas
announced during the first quarter of 2004.
(g) There are other accounting policies that also require management's
judgment. We follow these policies consistently from year to year and period to
period. For an additional discussion of all of our significant accounting
policies, please see Notes (1) (a) through (v) of the Notes to Consolidated
Financial Statements in our 2004 Annual Report to Shareholders, which was
incorporated by reference into "Item 8 - Financial Statements and Supplementary
Data" of our Annual Report on Form 10-K for the fiscal year ended January 1,
2005.
Actual results may vary from these estimates as a consequence of activities
after the period-end estimates have been made. These subsequent activities will
have either a positive or negative impact upon the results of operations in a
period subsequent to the period when we originally made the estimate.
RECENTLY ISSUED ACCOUNTING STANDARDS
In late 2004, the FASB issued SFAS No. 151, Inventory Costs - an Amendment of
ARB No. 43, Chapter 4, and SFAS No. 153, Exchanges of Non-monetary Assets, an
amendment of APB Opinion 29. Both standards go into effect for fiscal years
beginning after July 15, 2005. We do not anticipate that the implementation of
either standard will have a material impact on the results of operations or
financial condition of our company. SFAS No. 151 provides specific definition to
the term "abnormal costs", as used in previous accounting standards in inventory
reporting under Accounting Research Bulletin 43. Such abnormal costs, with
specific definitions now provided under the standard, must be recognized in
period expense and not included in the valuation of inventory. SFAS No. 153
modifies APB Opinion No. 129 to require the use of fair value of assets
exchanged involved in an exchange of productive use assets, and limits the
exception to the use of fair value only to situations involving asset exchanges
that do not have commercial substance.
SFAS No. 123 (Revised 2004), Share-Based Payments ("SFAS No. 123R") supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS
No. 95, Statement of Cash Flows. SFAS No. 123R must be adopted no later than the
first interim reporting period of our first fiscal year beginning on or after
June 15, 2005. We expect to adopt SFAS 123R on January 1, 2006. This standard
will incorporate into reported results a measure of expense for share based
compensation. This standard effectively requires the same reporting approach for
all companies in this area. We, under this standard, have alternative
implementation options as to how to present prior period information, either as
restated results on prior interim periods, and/or restatement of prior years, or
by reference to prior period proforma footnote disclosures. We intend to
implement this standard prospectively with reference to prior period proforma
disclosures.
REFINING OUR BUSINESS MODEL IN 2005
During 2004, we successfully developed and began implementing our new business
model, financially reengineered our company, and executed significant changes in
our operations during the course of that year. Refinement of our new business
model in 2005 and beyond will be anchored primarily on three central points:
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o Continuing meeting or exceeding the expectations of our retailing partners
and consumers with fresh, innovative, thinking and a line-up of great
products;
o Continuing to enhance the image of our Dearfoams(R)family of brands; and
o Continuing to improve our order fulfillment and inventory management
processes through the use of improved forecasting tools.
As part of the refinement of our new business model, we have entered into a
two-year, asset-based lending facility (the "CIT ABL Facility") with CIT.
Further details of the CIT ABL Facility are provided in the section immediately
below.
CIT FACILITIES
On March 31, 2005, we entered into the CIT ABL Facility, which replaced our
previous financing arrangement with CIT. The CIT ABL Facility is a two-year
committed facility under which CIT is obligated to advance us funds so long as
we comply with the CIT ABL Facility, including satisfying covenants requiring
that we meet various financial condition and financial performance requirements.
Under the CIT ABL Facility, we are required to meet various financial covenants
including: (a) minimum Tangible Net Worth at the end of each fiscal quarter of
2005 and 2006; (b) negative Earnings Before Income Taxes, Depreciation, and
Amortization (excluding certain extraordinary or nonrecurring gains and losses)
for the two fiscal quarters ended June 30, 2005, not exceeding a specified
level; (c) Minimum Net Availability at the end of each fiscal year beginning in
2005; and (d) a minimum Fixed Charge Coverage Ratio test at the end of fiscal
2005 and each 12-month period ending at the end of each fiscal quarter
thereafter. The foregoing capitalized terms are defined in the CIT ABL Facility.
We have met the only financial covenant, minimum Tangible Net Worth, that was
applicable to the first quarter of 2005 under the CIT ABL Facility. We currently
believe we can meet all financial covenants under the CIT ABL Facility for the
remainder of fiscal year 2005.
The CIT ABL Facility provides us with advances in a maximum amount equal to the
lesser of (a) $35 million or (b) a Borrowing Base (as defined in the CIT ABL
Facility). The Borrowing Base is determined by the agreement and is based
primarily on the sum of (i) the amount of 80% of the receivables due under the
factoring agreement, if any, and 80% of our total eligible accounts receivable;
(ii) the amount of our eligible inventory; (iii) a $3.5 million overformula
availability during our peak borrowing season from April through October; and
(iv) a $4.0 million allowance on our eligible intellectual property from January
1 to October 31. The CIT ABL Facility includes a $3 million subfacility for
CIT's guarantee of letters of credit to be issued by letter of credit banks.
This amount is counted against the maximum borrowing amount noted above.
Interest on the CIT ABL Facility is initially at a rate per annum equal to the
JPMorgan Chase Bank prime rate plus 1%. In the event we satisfy various
requirements as of the end of fiscal 2005, the rate per annum may be reduced to
the JPMorgan Chase Bank prime rate plus 0.5%. Each month when our borrowing
needs require inclusion of the $3.5 million overformula in the Borrowing Base,
the interest rate will be increased by 0.5%.
As part of the previous CIT financing arrangement, we entered into a factoring
agreement with CIT, under which CIT purchased accounts receivable that met CIT's
eligibility requirements. Although the CIT ABL Facility replaces our former
factoring arrangement with CIT, the factoring agreement will remain in effect
for all accounts previously factored under that agreement. However, going
forward, the CIT ABL Facility will be the exclusive loan facility between us and
CIT and no additional accounts will be factored and no further advances will be
made by CIT under the previous factoring agreement.
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The first priority liens and mortgage on substantially all of our assets,
including accounts receivable, inventory, intangibles, equipment, intellectual
property, and real estate that secured the previous CIT financing agreement
remain in place and have been amended and modified to secure the CIT ABL
Facility. In addition, the pledge agreement and the subsidiary guarantees
entered into in connection with the previous CIT financing agreement have also
been amended to secure the CIT ABL Facility.
LIQUIDITY AND CAPITAL RESOURCES
As of the end of the first quarter of 2005, we had $13.6 million in net working
capital. This compares with $19.0 million at the end of last year's first
quarter, and $14.9 million at year-end 2004. The decrease in net working capital
quarter-on-quarter is primarily due to our operating losses incurred during
fiscal year 2004 and for the first quarter of 2005 and the decline in our
inventory investment, which resulted in lower short-term funding needs to
support a much leaner business model.
The primary components of net working capital have changed as follows:
o Our accounts receivable decreased from $11.1 million at the end of the
first quarter of 2004, to $9.7 million at the end of the first quarter of
2005. Most of the quarter-on-quarter decrease reflects a decrease in net
sales during the first quarter of 2005 compared with the first quarter of
2004. Accounts receivable decreased slightly from $10.1 at the end of
fiscal 2004 to $9.7 million at the end of the first quarter of 2005.
o Our inventories for first quarter-end 2005 and 2004 were $21.2 million and
$31.8 million, respectively, and $20.2 million at the end of fiscal 2004.
The quarter-on-quarter decrease of approximately $10.6 million in inventory
clearly reflects the positive effects of the change in our operating model
from in-house manufacturing supply to a 100% outsourcing model effected
during 2004.
o We ended the first quarter of 2005 with $1.3 million in cash and cash
equivalents, compared with $2.2 million at the end of the first quarter of
2004. We ended the first quarter of 2005 with $8.2 million in short-term
notes payable, compared with $17.1 million in short-term notes at the end
of the first quarter of 2004. At the end of fiscal 2004, we had nearly $1.0
million in cash and cash equivalents, and $4.9 million in short-term notes
payable. The significant quarter-on-quarter decrease of approximately $9.0
million in our short-term notes payable is due primarily to lower
borrowings required to fund a much leaner business operating model from the
quarter period a year ago.
Capital expenditures during the first quarter of 2005 amounted to $67 thousand
compared with $41 thousand during the same period in 2004. Expenditures in both
years were funded out of working capital, and reflect a much reduced level of
capital asset spending as compared to previous years during which we operated
our own manufacturing plants. We expect our future capital expenditures to be in
line with our new business model and thus require a much lower funding than in
prior years.
OTHER SHORT-TERM DEBT
Early in March 2004, we borrowed $2.2 million against the cash surrender value
of life insurance policies insuring our non-executive chairman. This $2.2
million indebtedness is classified within short-term notes payable in the
accompanying consolidated balance sheets.
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OTHER LONG-TERM INDEBTEDNESS
Approximately $1.1 million, reflected in current installments of long-term debt,
represents the present value, discounted at 8%, of the remaining three quarterly
payments related to our agreement to pay two consulting firms for their
assistance in the process that accelerated the elimination of duties imposed by
the United States of America on slippers coming from Mexico. As part of the
NAFTA agreement, these duties had been scheduled for elimination on January 1,
2008. The duties were eliminated on January 1, 2002. The remaining three
quarterly payments are subordinated to all of our other obligations.
OFF-BALANCE SHEET ARRANGEMENTS
There have been no material changes in our "Off-Balance Sheet Arrangements" and
"Contractual Obligations" since the end of fiscal 2004, other than routine
payments.
RESULTS OF OPERATIONS
During the first quarter of 2005, net sales amounted to nearly $17.0 million or
approximately $1.4 million less than same period last year. Our Barry Comfort
North America business reported net sales of approximately $13.9 million, a
decline of nearly 11% or $1.6 million from the same period in 2004. Net sales in
Barry Comfort Europe were $3.1 million, an increase of $192 thousand or
approximately 7% from the same period last year. (See also Note 8 of the Notes
to Consolidated Financial Statements for selected segment information.) Most of
the decline in net sales reported for Barry Comfort North America during the
first quarter of 2005 occurred in some of our branded products as well as in
some of our products sold under licenses. We believe this reflects a relatively
flat retail sales environment for the first quarter of 2005.
Gross profit during the first quarter period in 2005 and 2004 was $6.8 million
or 40.2% of net sales and $5.5 million or 29.9% of net sales, respectively. The
significant improvement in gross profit dollars and percent of net sales,
notwithstanding our lower net sales for the quarter, is mostly attributable to
the lower cost of purchases from third-party suppliers of outsourced goods, when
compared with the costs incurred under our former supply model of in-house
manufacturing. This benefit further reflects itself as we have move to the
outsourcing of 100% of our supply needs from third-party manufacturers in the
Orient. Another reason for the improvement in the gross profit results for the
quarter is a higher margin on sales of close out goods sold during this year's
quarter as compared to those sold during the same period last year.
Selling, general and administrative expenses ("SG&A") for the quarter were $7.4
million, reflecting a significant decrease of nearly $3.8 million or 34%, from
approximately $11.2 million in the same quarter last year. In addition, SG&A
expenses as a percent of net sales decreased from 60.8% in the first quarter of
2004 to 43.6% of net sales in the first quarter of 2005. Most notably, the
significant decrease in SG&A reflected itself in lower shipping, selling,
professional fees and consulting type expenses, further demonstrating the
positive effects of the significant change in our operating model. The
quarter-on-quarter SG&A decrease was also due to the curtailment loss of $1.1
million recorded in the first quarter of 2004.
During the first quarter of 2005, we recognized $241 thousand in restructuring
and asset impairment charges, compared to approximately $8.3 million reported in
the same period a year earlier. The significant decrease in restructuring and
asset impairment charges is due to less reorganization activity occurring during
this year's quarter as compared to the actions taken in the same period last
year, which were related to the closure of our manufacturing facilities in
Mexico. (See also Note 7 of the Notes to Consolidated Financial Statements for
added information relating to restructuring and asset impairment charges.)
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Net interest expense was $85 thousand for the first quarter 2005, representing a
decrease of approximately $156 thousand from last year's same period. The
quarter-on-quarter net interest expense decline resulted from our short-term
borrowings outstanding of approximately $9.0 million to $8.1 million at the end
of the first quarter of 2005 as compared to $17.1 million at the end of the same
period a year earlier. The net decrease also takes into account slightly higher
interest rates in 2004 as we transitioned to our previous CIT financing
agreement during the first quarter of 2004.
For the first quarter of 2005, we incurred a net loss of $901 thousand or $0.09
loss per diluted share, compared with a net loss incurred during the first
quarter of 2004 of nearly $14.2 million or $1.44 loss per diluted share.
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
Market Risk Sensitive Instruments - Foreign Currency
The majority of our sales were conducted in North America and denominated in US
Dollars during the first quarter of 2005. For any significant sales transactions
denominated in other than US Dollars, our established policy guidelines allow us
to hedge against any significant currency exposure on a short-term basis, using
foreign exchange contracts as a means to protect our operating results from
currency adverse fluctuations. At the end of the first quarter 2005 and fiscal
year-end 2004, there were no such foreign exchange contracts outstanding.
Most of our product is purchased from third party manufacturers in China. While
our business is conducted in US Dollars, should there be a change in the
valuation of the Chinese Renminbi, the cost structure of our suppliers could
change. A revaluation of the Renminbi could potentially result in an increase in
the costs of our products, depending upon the competitive environment and the
availability of alternative suppliers.
Market Risk Sensitive Instruments - Interest Rates
We believe that we have an exposure to the impact of changes in short-term
interest rates. Our principal interest rate risk exposure results from the
floating rate nature of the CIT ABL Facility. If interest rates were to increase
or decrease by one percentage point (100 basis points), we estimate interest
expense would increase or decrease by approximately $100 thousand on an
annualized basis. Currently, we do not hedge our exposure to floating interest
rates.
ITEM 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
With the participation of the President and Chief Executive Officer (the
principal executive officer) and the Senior Vice President-Finance, Chief
Financial Officer and Secretary (the principal financial officer) of R. G. Barry
Corporation ("R. G. Barry"), R. G. Barry's management has evaluated the
effectiveness of R. G. Barry's disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), as of the end of the quarterly period covered by this
Quarterly Report on Form 10-Q. Based on that evaluation, R. G. Barry's President
and Chief Executive Officer and R. G. Barry's Senior Vice President-Finance,
Chief Financial Officer, Secretary and Treasurer have concluded that:
a. information required to be disclosed by R. G. Barry in this Quarterly
Report on Form 10-Q and the other reports which R. G. Barry files or
submits under the Exchange Act would be accumulated and communicated
to R. G. Barry's management, including its principal executive officer
and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure;
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b. information required to be disclosed by R. G. Barry in this Quarterly
Report on Form 10-Q and the other reports which R. G. Barry files or
submits under the Exchange Act would be recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms; and
c. R. G. Barry's disclosure controls and procedures are effective as of
the end of the quarterly period covered by this Quarterly Report on
Form 10-Q to ensure that material information relating to R. G. Barry
and its consolidated subsidiaries is made known to them, particularly
during the period in which this Quarterly Report on Form 10-Q is being
prepared.
Changes in Internal Control Over Financial Reporting
There were no changes in R. G. Barry's internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act) that occurred during R. G.
Barry's quarterly period ended April 2, 2005, that have materially affected, or
are reasonably likely to materially affect, R. G. Barry's internal control over
financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, on June 8, 2004, the Company received a "30-day letter"
from the Internal Revenue Service ("IRS") proposing certain adjustments which,
if sustained, would result in an additional tax obligation approximating $4.0
million plus interest. The proposed adjustments relate to the years 1998 through
2002. Substantially all of the proposed adjustments relate to the timing of
certain deductions taken during that period. On July 7, 2004, the Company
submitted to the IRS a letter protesting the proposed adjustments, and
reiterating its position. In March 2005, the IRS requested and the Company
consented to an extension of the statute of limitations to December 31, 2006.
The Company intends to vigorously contest the proposed adjustments.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) and (b) Not Applicable
(c) R. G. Barry did not purchase any of its common shares during the
quarterly period ended April 2, 2005. R. G. Barry does not currently
have in effect a publicly announced repurchase plan or program.
Item 3. Defaults Upon Senior Securities
(a), (b) Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) through (d) Not Applicable
Item 5. Other Information
On May 16, 2005, R. G. Barry Corporation (the "Company") entered into
Change in Control Agreements (the "Change in Control Agreements") with each of
the following non-executive officers of the Company: Glenn Evans - Senior Vice
President, Creative Services and Sourcing; Pam Gentile - Senior Vice President,
National Accounts; Jose Ibarra - Vice President, Treasurer; and Matt Sullivan -
Senior Vice President, Integrated Supply Chain. Each of the Change in Control
Agreements has a term of three-years and is substantially the same.
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The Change in Control Agreements provide for additional payments to
each officer if the officer's employment with the Company is terminated within
36 months after the occurrence of a "change in control" (as defined). If the
officer's employment is terminated by the Company after a change in control for
"cause" (as defined) or due to the officer's "disability" (as defined) or death,
the officer will receive his or her base salary through the date of termination,
but shall not be entitled to receive any further benefits. If the officer's
employment is terminated by the Company without cause or by the officer for
"good reason" (as defined), the officer will receive his or her unpaid base
salary through the date of termination, payment for all carried over and unused
vacation and compensation days, and a lump sum severance payment equal to the
greater of (i) the total compensation (including bonus) paid to or accrued for
the benefit of the officer for the previous fiscal year, or (ii) the total
compensation (including bonus) paid to or accrued for the benefit of the officer
for the immediately prior twelve-month period.
The form of the Change in Control Agreement entered into between the
Company and each of the officers identified above is filed with this Quarterly
Report on Form 10-Q as Exhibit 10.1. The foregoing summary does not purport to
be complete and is qualified in its entirety by reference to the Change in
Control Agreements.
In addition, on May 16, 2005, the Company and Daniel D. Viren, the
Senior Vice President - Finance, Chief Financial Officer and Secretary of the
Company, entered into a Second Amendment to Executive Employment Agreement (the
"Second Amendment"). The Second Amendment provides for a two-year extension of
the term of the Executive Employment Agreement dated as of June 5, 2000, as
amended by the First Amendment to Executive Employment Agreement dated as of
June 5, 2003 (the "Employment Agreement"). The new expiration date of the
Employment Agreement is June 5, 2007. Other than the extension of the term to
June 5, 2007, the Employment Agreement is unchanged and remains in full force
and effect.
The Second Amendment is filed with this Quarterly Report on Form 10-Q
as Exhibit 10.2. The foregoing summary does not purport to be complete and is
qualified in its entirety by reference to the Second Amendment.
Item 6. Exhibits
See Index to Exhibits at page 22.
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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. G. BARRY CORPORATION
-----------------------
Registrant
May 16, 2005
Date
/s/ Daniel D. Viren
-----------------------------
Daniel D. Viren
Senior Vice President - Finance,
Chief Financial Officer
and Secretary
(Principal Financial Officer)
(Duly Authorized Officer)
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R. G. BARRY CORPORATION
INDEX TO EXHIBITS
Exhibit No. Description Location
- ----------- ----------- --------
10.1 Form of Change in Control Agreement entered into effective as of Filed herewith
May 16, 2005 by R.G. Barry Corporation with each of the following
non-executives officers: Glenn Evans - Senior Vice President,
Creative Services and Sourcing; Pam Gentile - Senior Vice
President National Accounts; Jose Ibarra - Vice President -
Treasurer; and Matt Sullivan - Senior Vice President, Integrated
Supply Chain
10.2 Second Amendment to Executive Employment Agreement, effective May Filed herewith
16, 2005, between R.G. Barry Corporation and Daniel D. Viren
31.1 Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Filed herewith
Officer)
31.2 Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Filed herewith
Officer)
32.1 Section 1350 Certifications (Principal Executive Officer and Filed herewith
Principal Financial Officer)
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