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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 January 3, 1998
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
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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
(9,593,488 outstanding as of March 16, 1998)
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
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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. [ ]
Based upon the closing price reported on the New York Stock Exchange on March
16, 1998, the aggregate market value of the Common Shares of the Registrant held
by non-affiliates on that date was $115,686,219.
Documents Incorporated by Reference:
(1) Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended January 3, 1998, are incorporated by reference into
Part 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 13, 1998, are
incorporated by reference into Part III of this Annual Report on Form
10-K.
Index to Exhibits begins on Page 63.
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PART I
Item 1. Business.
Principal Products
R. G. Barry Corporation (the "Registrant") is organized under the laws
of the State of Ohio. The Registrant and its subsidiaries, Barry de Mexico, S.A.
de C.V., Barry de Acuna, S.A. de C.V., Barry de Zacatecas, S.A. de C.V., R. G.
Barry International, Inc., R.G.B., Inc. and Vesture Corporation (Registrant and
such subsidiaries are referred to collectively as the "Company"), manufacture
and market products which serve the comfort needs of people. The Company
believes that it is the world's largest manufacturer of comfort footwear for at
and around the home, and the dominant domestic supplier of thermal retention
technology products. Comfort is the dominant influence in the Company's brand
lines.
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 also designs, manufactures and markets thermal retention
consumer products in the food preservation; portable, personal comfort; and
comfort therapy categories. As discussed further below, the Company also
designs, manufactures and markets commercial products which use thermal
retention technology to preserve and/or transport temperature-sensitive,
perishable commodities.
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, washable
slipper, in 1947. Since that time, the Company has introduced additional
slipper-type brand lines for men, women and children based upon the concept of
comfort, softness and washability. These footwear products are sold, for the
most part, under various brand names including, but not limited to, Angel
Treads*, Barry(TM)Comfort, Dearfoams*, Dearfoams* for Kids, Dearfoams* for Men,
Madye's*, Snug Treds*, Soft Notes* and EZ feet*. The Company has also marketed
certain of its slipper-type footwear under licensed trademarks. See "Trademarks
and Licenses".
The Company's foam-soled footwear lines have fabric uppers made of
terry cloths, velours, fleeces, satins, nylons and other washable 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 space for its products by creating and marketing brand
lines to different portions of the consumer market. Retail prices for the
Company's footwear range from approximately $4 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.
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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 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.
Many styles of slipper-type footwear have become standard in the
Company's brand lines and are in demand year after year. For many 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 responsive 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 lines in comparison with other footwear
styles.
In 1994, the Company introduced on a national basis its thermal
retention products for consumers featuring MICROCORE* microwave-activated
technology developed by the Company. During that year, the Registrant also
acquired all of the outstanding stock of Vesture Corporation ("Vesture"), the
originators of microwave-heated comfort care products.
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 MICROCORE* thermal retention products have
application as: (1) commercial products which use the Company's MICROCORE*
patented thermal retention technology, either hot or cold, which could be used
to preserve and/or transport temperature-sensitive, perishable commodities such
as food, medicine, pharmaceuticals and flowers; and (2) thermal retention
consumer products that the Company creates, designs, sells and distributes under
its brand names.
The Company's thermal retention products for consumers generally fall
within three categories: (1) food preservation products such as breadwarmer
baskets and portable food carriers; (2) comfort therapy products such as heating
pads and backwarmers; and (3) portable, personal comfort products such as heated
seat cushions, booties, scarves and ear muffs. Retail prices for substantially
all of the Company's thermal retention consumer products range from
approximately $12 to $40, depending on the product, type of retail outlet and
retailer mark-up. The Company believes that the food preservation and comfort
therapy thermal retention products are not weather sensitive and have a
year-round sales appeal while the cold weather portion of the personal, portable
comfort product line is more seasonal and affected by weather changes. The
thermal retention consumer products are sold under the major brand lines of
Dearfoams*, Vesture*, Lava*, LavaPac*, LavaBuns* and LavaBooties*. All carry
MICROCORE* energy packs.
PYREX(R) Portables(TM) with MICROCORE*, which the Company created and
are sold through Corning Consumer Products Company ("Corning"), are
transportable food carriers designed to keep hot dishes warm and cold dishes
chilled using the Company's patented MICROCORE* thermal retention technology.
During 1997, Corning began to directly outsource the PYREX(R) Portables(TM)
fabric carrier component which the Company had previously outsourced as an
accommodation to Corning. The fabric carrier was a low margin commodity
component for the Company. The Company's 1997 sales to Corning declined by about
$9 million as a result of Corning acquiring the fabric carriers from other
suppliers. The Company continues to manufacture and supply to Corning the
Company's patented MICROCORE* hot and cold
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thermal retention elements, where the Company has significant margin and
proprietary, competitive value-added advantages. Corning continues to feature
the MICROCORE* brand name on the product packaging.
In the commercial product area, the Company has 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, perishable commodities. The Company's POWERTECH(TM) with
MICROCORE* is a new, advanced portable heat storage technology (patent pending)
which permits portable, electrically energized heat storage from either A.C. or
D.C. power sources and at specific temperatures through the use of a thermostat.
Underwriters Laboratories Inc. has granted a UL listing mark to the Company's
POWERTECH(TM) with MICROCORE* Pizza Delivery System which is designed to keep
pizza hot at oven temperatures for two hours so that a pizza is delivered to a
home oven-hot, dry and crisp. The Company is actively marketing the
POWERTECH(TM) with MICROCORE* Pizza Delivery System to pizza chains nationwide
who have expressed interest in the technology. In January of 1998, Domino's
Pizza, Inc. ("Domino's") announced that it planned to use thermal technology for
the home delivery of pizza. This delivery system concept was developed and
pioneered by the Company working with Domino's largest franchisee. Although
Domino's chose an alternative system, the Company believes that Domino's
decision and accompanying industry reaction bodes well for the future of the
Company's POWERTECH(TM) with MICROCORE* Pizza Delivery System. The Company has
initiated tests of the POWERTECH(TM) with MICROCORE* Pizza Delivery System with
most other national and many large regional pizza chains.
In 1996, the Company announced the launch of the new PortaFreeze(TM)
with MICROCORE* portable frozen storage system which incorporates the MICROCORE*
thermal retention technology. The PortaFreeze(TM) with MICROCORE* system has
been thermally engineered to hold refrigerated and frozen materials at sub-zero
temperatures for a period of at least 24 hours without the need for an external
power source or dry ice. The Company believes that PortaFreeze(TM) with
MICROCORE* has a wide range of storage and delivery application potentials in
the food, medical and scientific industries, among others. PortaFreeze(TM)
(patent pending) is a rechargeable thermal energy cell configuration with an
insulated carrier which can be designed and manufactured to meet specific
storage and delivery needs of different industries in terms of size, temperature
parameters and desired length of temperature retention. The Company intends to
continue testing PortaFreeze(TM) with MICROCORE.*
Marketing
The Company's brand lines are sold to department, chain 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's brand lines are marketed
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, 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 and make periodic visits to the Company's showroom in New
York. Company salespersons regularly visit retail customers. The Company also
regularly makes catalogs available to its current and potential customers and
periodically follows up with such current and potential customers by telephone.
In addition, the Company participates in trade shows, both regionally and
nationally.
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During the 1997 Christmas selling season, the Company provided
approximately 350 to 400 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 automatic replenishment systems that the Company installed with the
stores, put the Company in a position to optimize its comfort footwear business
during the fourth quarter.
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 selling seasons. See
"Backlog of Orders".
The Company advertises principally in the print media. The Company's
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.
In September of 1996, the Company announced the establishment of the
Barry/Europe division to support what the Company believes will be a major
expansion opportunity in the United Kingdom and Europe for its at and around the
home comfort footwear. The Company has made a strategic commitment to building
its business in Europe with France as the first target market outside of the
United Kingdom. The Company has been market testing its products in hypermarket
stores in France and introduced its comfort footwear products in France in the
fall of 1997 with national network television advertising.
Prior to the formation of the Barry/Europe division, the Company's
international sales were focused on the department store channels in the United
Kingdom and Europe. This operation is now part of the Barry/Europe division. The
Company also markets its products in Canada, Mexico and several other countries
around the world. In 1997, the Company's foreign sales comprised approximately
6% of its total sales.
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 fiscal years 1997, 1996 and 1995, 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 $3.5
million, $3.0 million and $3.1 million, respectively. Substantially all of the
foregoing activities were Company-sponsored. Approximately 50 employees are
engaged full time in research and 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 domestically from
a wide range of suppliers. The Company has experienced no difficulty in
obtaining raw materials from suppliers and anticipates no future difficulty.
Trademarks and Licenses
Approximately 97% 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*, Dearfoams*, Dearfoams* for Kids,
Dearfoams* for Men, Madye's*, Snug Treds*, Soft Notes* and EZ feet*, in the
Company's comfort footwear products; and (b) Dearfoams*, Vesture*, Lava*,
LavaPac*, LavaBuns*,
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LavaBooties*, MICROCORE*, POWERTECH(TM) and PortaFreeze(TM), in the Company's
thermal retention products. 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 also has sold comfort footwear under various names as
licensee under license agreements with the owners of those names. In the 1997,
1996 and 1995 fiscal years, 1%, 3% and 4%, respectively, of the Company's total
footwear sales were represented by footwear sold under these names.
In 1989, the Company entered into a licensing agreement with Fieldcrest
Cannon, Inc., the largest marketer of bed and bath products in the United
States, which allows the Company to manufacture and sell a line of mid-priced
slippers under the Cannon** trademark in the mass merchandise channels of the
Company's business. The Company continued its distribution and marketing of the
Cannon** line of slippers in the 1997 fiscal year. The term of the Company's
license to use the Cannon** trademark expires in December, 1998; however, the
term may be extended for such period as may be mutually agreed upon by the
Company and Fieldcrest Cannon, Inc.
Customers
The customers of the Company which accounted for more than 10% of the
Company's consolidated revenues in fiscal year 1997 were Wal-Mart Stores, Inc.
("Wal-Mart"), J. C. Penney Company, Inc. ("J.C. Penney") and Sears, Roebuck &
Company ("Sears"), which accounted for 20%, 11% and 10%, respectively. The
customers of the Company which accounted for more than 10% of the Company's
consolidated revenues in fiscal year 1996 were Wal-Mart, J.C. Penney, Corning
and Sears, which accounted for 15%, 12%, 11% and 10%, respectively. The
customers of the Company which accounted for 10% or more of the Company's
consolidated revenues in fiscal year 1995 were Wal-Mart and J.C. Penney, which
accounted for approximately 16% and 11%, respectively.
Backlog of Orders
The Company's backlog of orders at the close of each of fiscal year
1997 and fiscal year 1996 was $15 million. It is anticipated that a large
percentage of the orders as of the end of the Company's last fiscal year will be
filled during the current fiscal year.
Generally, the Company's backlog of unfilled sales orders is largest
after the spring and autumn showings of the Company. For example, the Company's
backlog of unfilled sales orders following the conclusion of such showings
during the last two years were as follows: August, 1997 - $79 million; August,
1996 - $80 million; February, 1997 - $13 million; and February, 1996 - $15
million. The Company's backlog of unfilled sales orders reflects the seasonal
nature of the Company's sales - approximately 75% of such sales occur during the
second half of the year as compared to approximately 25% during the first half
of the year.
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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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Inventory
While the styles of some of the Company's slipper 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 change from year to year, particularly in
response to fashion changes. The Company has introduced, and intends to continue
to introduce, a variety of new thermal retention products to compliment its
existing products in response to consumer and commercial demand. The Company
believes that it will be able to control the level of its obsolete inventory.
The Company traditionally has had only a limited exposure to obsolete inventory.
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 products. The
Company believes that it is the dominant domestic supplier of thermal retention
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 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.
Manufacturing, Sales and Distribution Facilities
The Company has seven manufacturing facilities. The Company operates
sewing plants in Nuevo Laredo, Ciudad Acuna, and Zacatecas, Mexico. The Company
also operates a cutting plant in Laredo, Texas and a sole molding operation in
San Angelo, Texas. The Company also has the exclusive rights to the
manufacturing output of a factory in Shenzhen, People's Republic of China. The
Company produces thermal retention products at its manufacturing facilities in
Asheboro, North Carolina.
The Company maintains sales offices in New York, New York; London,
England; and Paris, France. The Company also operates distribution centers in
Asheboro and Goldsboro, North Carolina; San Angelo, Texas; and Mid-Glamorgan,
Wales.
The Company's principal manufacturing, sales and distribution
facilities are described more fully in Item 2. Properties below.
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 upon the capital
expenditures, earnings or competitive position of the Company. 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 1997 fiscal year, the Company employed
approximately 3,300 persons.
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Item 2. Properties.
The Company owns a warehouse facility in Goldsboro, North Carolina,
containing approximately 120,000 square feet.
The Company leases one facility pursuant to a lease agreement with the
local government which issued industrial revenue bonds to construct and equip
the facility. The Company has the right to purchase the facility at a nominal
sum upon retirement of the bonds issued in respect thereof. This transaction has
been treated as a purchase for accounting and tax purposes. See Note (5) to the
Company's Consolidated Financial Statements set forth on pages 26 and 27 of the
Company's Annual Report to Shareholders for the fiscal year ended January 3,
1998. The following table describes this facility:
Average
Location Use Square Feet Annual Rental Lease Expires
-------- --- ----------- ------------- -------------
Fairfield County, Ohio Administrative and 55,000 $150,000 1999
(Leased from County of Executive Offices
Fairfield, Ohio)
In addition to the leased property described above, the Company leases
space aggregating approximately 900,000 square feet at an approximate aggregate
annual rental of $2.2 million. The following table sets forth certain
information with respect to the Company's principal leased properties which were
not in the preceding table:
Approximate Approximate Lease
Location Use Square Feet Annual Rental Expires Renewals
- -------- --- ----------- ------------- ------- --------
Distribution Center Shipping, Warehouse, Office 48,400 $ 16,000 (1) 1999 None
Goldsboro, N.C.
Empire State Building Sales Office 4,300 $117,000 1999 None
New York City, N.Y.
2800 Loop 306 Manufacturing, Office, 145,800 $166,000 (1) 2000 5 years
San Angelo, Texas Warehouse
Distribution Center Shipping, Warehouse 172,800 $432,000 (1) 2007 15 years
San Angelo, Texas
Cesar Lopez de Lara Ave. Manufacturing, Office 90,200 $168,000 1999 5 years
Nuevo Laredo, Mexico
Ciudad Acuna Manufacturing, Office 64,700 $254,000 1999 5 years
Industrial Park
Ciudad Acuna, Mexico
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Approximate Approximate Lease
Location Use Square Feet Annual Rental Expires Renewals
- -------- --- ----------- ------------- ------- --------
Corridor Road Manufacturing, Warehouse, 165,000 $386,000 (1) 2001 2 terms of
Laredo, Texas Office 5 years each
Corridor Road Manufacturing, Warehouse, 76,000 $190,000 (1) 2006 5 years
Laredo, Texas Storage
Industrial Zone Manufacturing 26,200 $ 58,000 1998 2 terms of
Zacatecas, Mexico 5 years each
Industrial Zone Manufacturing 25,800 $ 58,000 2005 3 terms of
Zacatecas, Mexico 5 years each
120 E. Pritchard St. Manufacturing, Office, 57,500 $ 96,000 (1) 2001 None
Asheboro, North Carolina Warehouse
8000 Interstate Administrative Office 9,600 $161,000 2003 None
Highway 10 West
San Antonio, Texas
Chelsea Harbour Sales & Administrative 2,500 $ 87,000 2002 None
London, England Office
Mid-Glamorgan, Wales Warehouse 8,000 $ 21,000 Month-
to-Month N/A
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(1) Net lease.
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.
There are no pending legal proceedings to which the Company or any of
its subsidiaries is a party or to which any of their respective properties are
subject, except routine legal proceedings to which they are parties incident to
their respective businesses. None of such proceedings are considered by the
Company to be material.
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Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
The following table lists the names and ages of the executive officers
of the Registrant as of the date of this Annual Report on Form 10-K, the
positions with the Registrant presently held by each such executive officer and
the business experience of each such executive officer during the past five
years. Unless otherwise indicated, each person has held his principal occupation
for more than five years. All executive officers serve at the pleasure of the
Board of Directors of the Registrant.
Position(s) Held with the Registrant and
Name Age Principal Occupation(s) for Past Five Years
---- --- -------------------------------------------
Gordon Zacks 65 Chairman of the Board and Chief Executive Officer since 1979,
President since 1992, and Director since 1959, of the Registrant.
Richard L. Burrell 65 Senior Vice President-Finance since 1992, Treasurer and Secretary
since 1976, Vice President-Finance from 1976 to 1992, and
Director since 1984, of the Registrant.
Christian Galvis 56 Co-President and Co-Chief Operating Officer of the Barry Comfort
Group since January 1998, Executive Vice President-Operations and
Director since 1992, Vice President-Operations from 1991 to 1992,
of the Registrant.
Charles E. Ostrander 49 Co-President and Co-Chief Operating Officer of the Barry Comfort
Group since January 1998, Executive Vice President-Sales &
Marketing and Director since 1992, Vice President-Sales &
Marketing from 1990 to 1992, Vice President-Marketing from 1987
to 1990, of the Registrant.
Daniel D. Viren 51 Senior Vice President-Administration since 1992, and Vice
President-Controller from 1988 to 1992, of the Registrant.
Harry Miller 55 Vice President-Human Resources of the Registrant since 1993.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
In accordance with General Instruction G(2), the information called for
in this Item 5 is incorporated herein by reference to page 16 of the
Registrant's Annual Report to Shareholders for the fiscal year ended January 3,
1998.
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Item 6. Selected Financial Data.
In accordance with General Instruction G(2), the information called for
in this Item 6 is incorporated herein by reference to pages 14 and 15 of the
Registrant's Annual Report to Shareholders for the fiscal year ended January 3,
1998.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
In accordance with General Instruction G(2), the information called for
in this Item 7 is incorporated herein by reference to pages 17 through 20 of the
Registrant's Annual Report to Shareholders for the fiscal year ended January 3,
1998.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Balance Sheets of the Registrant and its subsidiaries
as of January 3, 1998 and December 28, 1996, the related Consolidated Statements
of Earnings, Shareholders' Equity and Cash Flows for each of the fiscal years in
the three-year period ended January 3, 1998, the related Notes to Consolidated
Financial Statements and the Independent Auditors' Report, appearing on pages 21
through 34 of the Registrant's Annual Report to Shareholders for the fiscal year
ended January 3, 1998, are incorporated herein by reference. Quarterly Financial
Data set forth on page 16 of the Registrant's Annual Report to Shareholders for
the fiscal year ended January 3, 1998, 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.
In accordance with General Instruction G(3), the information called for
in this Item 10 is incorporated herein by reference to the Registrant's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Registrant's Annual Meeting of
Shareholders to be held on May 13, 1998, under the captions "SHARE
OWNERSHIP--Section 16(a) Beneficial Ownership Reporting Compliance," "ELECTION
OF DIRECTORS" and "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS--Employment
Contracts and Termination of Employment and Change-in-Control Arrangements." In
addition, certain information concerning the executive officers of the
Registrant called
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for in this Item 10 is set forth in the portion of Part I of this Annual Report
on Form 10-K entitled "Executive Officers of the Registrant" in accordance with
General Instruction G(3).
Item 11. Executive Compensation.
In accordance with General Instruction G(3), the information called for
in this Item 11 is incorporated herein by reference to the Registrant's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Registrant's Annual Meeting of
Shareholders to be held on May 13, 1998, under the caption "COMPENSATION OF
EXECUTIVE OFFICERS AND DIRECTORS." Neither the report of the Compensation
Committee of the Registrant's Board of Directors on executive compensation nor
the performance graph included in the Registrant's definitive Proxy Statement
relating to the Registrant's Annual Meeting of Shareholders to be held on May
13, 1998, shall be deemed to be incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
In accordance with General Instruction G(3), the information called for
in this Item 12 is incorporated herein by reference to the Registrant's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Registrant's Annual Meeting of
Shareholders to be held on May 13, 1998, under the captions "SHARE OWNERSHIP"
and "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Employment Contracts
and Termination of Employment and Change-in-Control Arrangements."
Item 13. Certain Relationships and Related Transactions.
In accordance with General Instruction G(3), the information called for
in this Item 13 is incorporated herein by reference to the Registrant's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Registrant's Annual Meeting of
Shareholders to be held on May 13, 1998, under the captions "SHARE OWNERSHIP,"
"ELECTION OF DIRECTORS" and "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS."
PART IV
Item 14. 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 18.
-12-
13
(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 18.
(a)(3) Exhibits.
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For list of such exhibits, see "Index to Exhibits" at page
63. The following table provides certain information concerning
executive compensation plans and arrangements required to be filed as
exhibits to this Annual Report on Form 10-K.
Executive Compensation Plans and Arrangements
Exhibit No. Description Location
- ----------- ----------- --------
10(a) R. G. Barry Corporation Associates' *
Retirement Plan (As Amended and Restated
Effective January 1, 1996)
10(b) R. G. Barry Corporation Supplemental Incorporated herein by reference to Plan
Retirement Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 1990
(File No. 0-12667) [Exhibit 10(b)]
10(c) R. G. Barry Corporation Incentive Plan for Incorporated herein by reference to
Key Employees Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 1984
(File No. 0-12667) [Exhibit 10(e)]
10(d) Employment Agreement, dated July 1, 1994, Incorporated herein by reference to
between the Registrant and Gordon Zacks Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994
(File No. 1-8769) [Exhibit 10(e)]
10(e) Agreement, dated September 27, 1989, between Incorporated herein by reference to
the Registrant and Gordon Zacks Registrant's Current Report on Form 8-K
dated October 11, 1989, filed October 12,
1989 (File No. 0-12667) [Exhibit 28.1]
-13-
14
Exhibit No. Description Location
- ----------- ----------- --------
10(f) Amendment No. 1, dated as of Incorporated herein by reference to
October 12, 1994, between the Registrant and Amendment No. 14 to Schedule 13D, dated
Gordon Zacks January 27, 1995, filed by Gordon Zacks on
February 13, 1995 [Exhibit 5]
10(g) Amended Split-Dollar Insurance Agreement, Incorporated herein by reference to
dated March 23, 1995, between the Registrant Registrant's Annual Report on Form 10-K for
and Gordon B. Zacks the fiscal year ended December 30, 1995
(File No. 1-8769) ("Registrant's 1995 Form
10-K") [Exhibit 10(h)]
10(h) R. G. Barry Corporation 1988 Stock Option Incorporated herein by reference to
Plan (Reflects amendments through May 11, Registrant's Registration Statement on Form
1993) S-8, filed August 18, 1993 (Registration
No. 33-67594) [Exhibit 4(r)]
10(i) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of incentive stock Registrant's 1995 Form 10-K [Exhibit 10(k)]
options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
10(j) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of non-qualified Registrant's 1995 Form 10-K [Exhibit 10(l)]
stock options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
10(k) Description of Incentive Bonus Program Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 28, 1991
(File No. 1-8769) [Exhibit 10(k)]
10(l) R. G. Barry Corporation Employee Stock Incorporated herein by reference to
Purchase Plan (Reflects amendments and Registrant's Registration Statement on Form
revisions for stock dividends and stock S-8, filed August 18, 1993 (Registration
splits through May 11, 1993) No. 33-67596) [Exhibit 4(r)]
-14-
15
Exhibit No. Description Location
- ----------- ----------- --------
10(m) R. G. Barry Corporation 1994 Stock Option Incorporated herein by reference to
Plan (Reflects stock splits through Registrant's Registration Statement on
June 22, 1994) Form S-8, filed August 24, 1994
(Registration No. 33-83252) [Exhibit 4(q)]
10(n) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of incentive stock Registrant's 1995 Form 10-K [Exhibit 10(p)]
options pursuant to the R. G. Barry
Corporation 1994 Stock Option Plan
10(o) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of non-qualified Registrant's 1995 Form 10-K [Exhibit 10(q)]
stock options pursuant to the R. G. Barry
Corporation 1994 Stock Option Plan
10(p) Executive Employment Agreement, effective as *
of January 4, 1998, between Registrant and
Charles E. Ostrander
10(q) Executive Employment Agreement, effective as *
of January 4, 1998, between Registrant and
Christian Galvis
10(r) Restricted Stock Agreement, effective as of *
January 4, 1998, between Registrant and
Charles E. Ostrander
10(s) Restricted Stock Agreement, effective as of *
January 4, 1998, between Registrant and
Christian Galvis
10(t) Agreement, effective as of January 4, 1998, *
between Registrant and Richard L. Burrell
10(u) Agreement, effective as of January 4, 1998, *
between Registrant and Daniel D. Viren
10(v) Agreement, effective as of January 4, 1998, *
between Registrant and Harry Miller
-15-
16
Exhibit No. Description Location
- ----------- ----------- --------
10(w) R. G. Barry Corporation Deferred Compensation Incorporated herein by reference to
Plan As Amended and Restated (Effective as of Registrant's 1995 Form 10-K [Exhibit 10(v)]
September 1, 1995)
10(x) R. G. Barry Corporation Stock Option Plan for *
Non-Employee Directors (Reflects share splits
and amendments through February 19, 1998)
10(y) R. G. Barry Corporation 1997 Incentive Stock Incorporated herein by reference to
Plan Registrant's Registration Statement on Form
S-8, filed June 6, 1997 (Registration No.
333-28671) [Exhibit 4(k)]
10(z) Form of Stock Option Agreement used in *
connection with the grant of incentive stock
options pursuant to the R. G. Barry
Corporation 1997 Incentive Stock Plan
10(aa) Form of Stock Option Agreement used in *
connection with the grant of non-qualified
stock options pursuant to the R. G. Barry
Corporation 1997 Incentive Stock Plan
- -------------------
* Filed herewith.
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the fiscal quarter
ended January 3, 1998.
(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" at page 63.
(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 18.
-16-
17
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
Date: March 30, 1998
By: /s/ RICHARD L. BURRELL
-------------------------------
Richard L. Burrell,
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 and on the dates indicated.
Name Date Capacity
- ---- ---- --------
*Gordon Zacks * Chairman of the Board, President, Chief
Executive Officer and Director
*Richard L. Burrell * Senior Vice President-Finance, Secretary,
Treasurer, Principal Financial and Accounting
Officer and Director
*Christian Galvis * Executive Vice President-Operations,
Co-President and Co-Chief Operating Officer of
Barry Comfort Group and Director
*Charles E. Ostrander * Executive Vice President-Sales & Marketing,
Co-President and Co-Chief Operating Officer of
Barry Comfort Group and Director
*Leopold Abraham II * Director
*Philip G. Barach * Director
*William Giovanello * Director
*Harvey M. Krueger * Director
*Edward M. Stan * Director
*By: /s/ RICHARD L. BURRELL
-----------------------------
Richard L. Burrell,
Attorney-in-Fact
Date: March 30, 1998
-17-
18
R. G. BARRY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JANUARY 3, 1998
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
PAGE(S) IN ANNUAL REPORT
DESCRIPTION OF FINANCIAL STATEMENTS (ALL OF WHICH ARE TO SHAREHOLDERS FOR THE
INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FISCAL YEAR ENDED
FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 3, 1998) JANUARY 3, 1998
- ---------------------------------------------------- ---------------
Consolidated Balance Sheets at January 3, 1998 and
December 28, 1996...................................................... 21
Consolidated Statements of Earnings for the years ended
January 3, 1998, December 28, 1996, and December 30, 1995.............. 22
Consolidated Statements of Shareholders' Equity for the years
ended January 3, 1998, December 28, 1996, and December 30, 1995........ 22
Consolidated Statements of Cash Flows for the years ended
January 3, 1998, December 28, 1996 and December 30, 1995............... 23
Notes to Consolidated Financial Statements...................................... 24-34
Independent Auditors' Report.................................................... 34
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 January 3, 1998. 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.
Independent Auditor's Report on Financial Statement Schedules: Included at
page 59 of this
Annual Report on
Form 10-K
Schedules for the fiscal years ended January 3, 1998, December 28, 1996, and
December 30, 1995:
II - Reserves: Included at pages 60 through 62 of this Annual Report on
Form 10-K
-18-
19
FIVE YEAR REVIEW OF SELECTED FINANCIAL DATA
R.G. Barry Corporation and Subsidiaries
SUMMARY OF OPERATIONS (THOUSANDS)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Interest expense, net
Other income (expense)
Earnings before income taxes
Income tax expense
Net earnings
ADDITIONAL DATA
Basic earnings per share*
Diluted earnings per share*
Book value per share*
Annual % change in net sales
Annual % change in net earnings
Net earnings as a percentage of beginning shareholders' equity
Basic average number of shares outstanding (in thousands)*
Diluted average number of shares outstanding (in thousands)*
FINANCIAL SUMMARY (THOUSANDS)
Current assets
Current liabilities
Working capital
Long-term debt and capital leases
Net shareholders' equity
Net property, plant and equipment
Total assets
Capital expenditures
Depreciation and amortization of property, plant and equipment
See also Management's Discussion & Analysis of Financial Condition & Results of
Operations.
* Retroactively restated to reflect 5-for-4 share split distributed June 17,
1996 and 4-for-3 share splits distributed September 15, 1995 and June 22,
1994.
** Fiscal year includes fifty-three weeks.
20
1997** 1996 1995 1994 1993
$148,775 $148,626 $136,561 $116,720 $101,172
77,438 83,202 76,065 69,975 59,795
71,337 65,424 60,496 46,745 41,377
53,137 49,008 48,557 39,375 34,322
(1,817) (2,483) (2,962) (1,701) (1,474)
415 (211) 1,060 333 400
16,798 13,722 10,037 6,002 5,981
6,680 5,465 3,738 2,191 2,183
$ 10,118 $ 8,257 $ 6,299 $ 3,811 $ 3,798
$ 1.06 $ 0.89 $ 0.68 $ 0.43 $ 0.45
$ 1.03 $ 0.84 $ 0.65 $ 0.43 $ 0.45
$ 7.07 $ 6.05 $ 5.14 $ 4.44 $ 3.71
0.1% 8.8% 17.0% 15.4% (0.6%)
22.5% 31.1% 65.3% 0.3% 13.7%
17.8% 17.3% 15.3% 12.1% 13.9%
9,504 9,308 9,234 8,823 8,374
9,820 9,827 9,690 8,823 8,374
$ 82,554 $ 67,679 $ 62,721 $ 56,683 $ 39,974
20,017 13,956 18,793 17,332 12,119
62,537 53,723 43,928 39,351 27,855
12,992 15,265 15,390 16,445 9,745
67,608 56,743 47,611 41,054 31,483
14,231 13,929 14,156 13,785 13,410
104,674 89,067 84,340 76,961 55,635
2,944 2,404 3,363 2,234 1,034
2,531 2,571 2,158 1,905 1,607
21
MARKET AND DIVIDEND INFORMATION
R.G. Barry Corporation and Subsidiaries
Market Value (Restated to reflect share split of June 17, 1996)
QUARTER HIGH LOW
- ---------------------------------------------------------------------------
1997 FIRST $11.50 $9.63
SECOND 12.25 9.50
THIRD 14.38 11.38
FOURTH 14.63 10.50
1996 First $15.70 $11.50
Second 15.80 13.60
Third 15.88 12.75
Fourth 13.75 10.25
Stock Exchange: New York Stock Exchange
Stock Ticker Symbol: RGB
Wall Street Journal Listing: BarryRG
Approximate Number of Registered Shareholders: 1,300
A five-for-four share split was distributed on June 17, 1996 to shareholders of
record on June 3, 1996.
No cash dividends were paid during the periods noted. While the Company has no
current intention to pay cash dividends, it is currently able to pay cash
dividends, subject to the restrictions contained in the various loan agreements.
See also Note 4 to Consolidated Financial Statements, and Management's
Discussion & Analysis of Financial Condition & Results of Operations.
QUARTERLY FINANCIAL DATA
R.G. Barry Corporation and Subsidiaries
1997 FISCAL QUARTERS in thousands, except net earnings (loss) per share
FIRST (1) SECOND (1) THIRD (1) FOURTH (2)
- -----------------------------------------------------------------------------------------------------------
NET SALES $14,963 $14,511 $46,361 $72,940
GROSS PROFIT 8,359 6,888 21,750 34,340
NET EARNINGS (LOSS) (1,073) (1,806) 5,024 7,973
BASIC EARNINGS (LOSS) PER SHARE $(0.11) $(0.19) $0.52 $0.84
DILUTED EARNINGS (LOSS) PER SHARE $(0.11) $(0.19) $0.52 $0.81
1996 Fiscal Quarters
First (1) Second (1) Third (1) Fourth (1)
- -----------------------------------------------------------------------------------------------------------
Net sales $16,074 $19,961 $45,161 $67,430
Gross profit 8,712 8,297 19,854 28,561
Net earnings (loss) (893) (1,234) 4,820 5,564
Basic earnings (loss) per share $(0.09) $(0.14) $0.52 $0.59
Diluted earnings (loss) per share $(0.09) $(0.14) $0.50 $0.57
(1) Quarter contains thirteen weeks
(2) Quarter contains fourteen weeks
See also Management's Discussion & Analysis of Financial Condition & Results of
Operations.
22
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The assets used by the Company in the development, production, marketing,
warehousing and distribution, and sale of its products consist mainly of current
assets, such as cash, receivables, inventory, and prepaid expenses; plus net
property, plant and equipment, and to a lesser extent other non-current assets.
Most of the Company's assets are current assets: at the end of 1997, 79 percent
of its total assets were made up of current assets, compared with 76 percent at
the end of 1996. A substantial portion of the Company's non-current assets are
net property, plant and equipment.
As of the end of 1997, the Company had $62.5 million in net working capital,
made up of $82.6 million in current assets, less $20.0 million in current
liabilities. At the end of 1996, the Company had $53.7 million in net working
capital. Substantially all of the increase in net working capital has been
generated as a result of the Company's net earnings.
The Company ended 1997 with $22.5 million in cash and cash equivalents, $16.0
million in net trade receivables, and $35.6 million in inventory. At the end of
1996, by comparison, the Company had $13.2 million in cash and cash equivalents,
$17.4 million in net trade receivables, and $28.9 million in inventory. The
increase in cash from 1996 to 1997, is largely the result of the profits
generated by the Company in 1997--see also the accompanying Consolidated
Statements of Cash Flows. The decrease in net trade receivables is mainly due to
improved collection of accounts during late 1997, as the receivables turnover
improved slightly in 1997 to 6.6 times from 6.5 times in 1996. The increase in
inventory from $28.9 million in 1996 to $35.6 million in 1997, which the Company
believes is manageable, is spread among varying elements of the Company's
inventory: raw materials, work in-process, and finished goods, and among both
slippers and thermal products.
Traditionally, the Company has leased most of its operating facilities. There
were no significant changes in the Company's facilities in 1997 or 1996. The
Company periodically reviews its facilities to determine whether its current
facilities will satisfy its anticipated operating needs for the foreseeable
future. During 1998 or 1999, the Company anticipates leasing additional
facilities to support anticipated growth in the Company's production and storage
needs. Substantially all of the capital expenditures in 1997 and 1996 were for
routine additions to production machinery and equipment.
The Company has typically relied on its Revolving Credit Agreement ("Revolver")
to satisfy additional capital requirements, including seasonal working capital
needs. In June 1997, the Company and its three main banks agreed to extend the
existing multi-year Revolver through 1999; the Revolver provides for periodic
further extensions beyond 1999, under certain conditions. The Revolver furnishes
the Company with a seasonally adjusted available line of credit ranging from $6
million to $51 million. During 1997, the Company's peak borrowing amounted to
$24 million compared with $33 million in 1996. The daily average borrowing under
the Revolver during 1997 decreased to $8.2 million as compared with $16.9
million in 1996. The Company has met the conditions for extension of the
Revolver, and intends to seek and expects to receive such an extension of the
Revolver through 2000. The Revolver contains covenants that the Company believes
are typically found in agreements of similar type and duration.
At times, the Company has borrowed additional long-term capital from lenders to
provide long-term financing to the Company. The last time the Company incurred
additional long-term debt was in 1994, when the Company issued a $15 million,
9.7 percent note, due in 2004 ("Note"). The Note contains covenants that the
Company believes are normally found in similar agreements of this type. The Note
and the Revolver place restrictions on the amount of future borrowing the
Company may incur, and contain certain other financial covenants--see also Note
4 to the Consolidated Financial Statements for additional information. The Note
requires semi-annual interest payments, with annual principal repayments of $2.1
million commencing in July, 1998. The Company is in compliance with all
covenants of the Note, Revolver and all other debt agreements.
17
23
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
The Company last paid cash dividends in 1981. While the Company's various loan
agreements, at year end 1997, permitted the payment of cash dividends and the
repurchase of common shares for treasury, the Company has no current plans to
resume payment of cash dividends. The Company anticipates continuing to use its
cash resources to finance operations and to fund future growth. Subject to the
covenants in the various loan agreements, the Company currently may incur
additional long-term debt, should that become necessary. See also Note 4 to the
Consolidated Financial Statements for additional information.
The Company believes that it has a strong balance sheet, with strong financial
ratios. At the end of 1997, the Company's total capitalization amounted to $80.6
million, which was composed of 16.1 percent long-term debt and capital leases
and 83.9 percent shareholders' equity. This compares with $72.0 million in total
capitalization at year end 1996, composed of 21.2 percent long-term debt and
capital leases and 78.8 percent shareholders' equity. The Company's current
ratio, a measure of the relationship of current assets to current liabilities,
was 4.12 to 1 at year end 1997, compared with 4.85 to 1 at year end 1996.
YEAR 2000 CONSIDERATIONS
The Company has conducted a review of its key financial, information and
operating systems to determine the extent to which it is exposed to year 2000
computer date problems. The Company believes that all of its critical
application systems have been converted to correct for potential problems.
Electronic trading partners have been contacted to obtain their commitments to
conversion, so as to minimize problems relating to the exchange of electronic
data. During 1998, the Company will be conducting further tests to assure the
efficacy of the conversion. The Company estimates that the costs incurred to
date in this conversion have not been significant, and does not anticipate the
future impact on its financial condition, results of operations or cash flows
will be material.
FOREIGN CURRENCY RISK
Late in 1997 and early in 1998, the value of a number of foreign currencies,
principally those in the Far East, were subject to fluctuations in value in
world currency markets, and in some cases currencies suffered significant
devaluation. The Company's operations currently are conducted primarily in U.S.
Dollars and to a lesser degree in British Pound Sterling, Swiss Francs and
French Francs--all currencies that historically have not been subject to
significant volatility. The Company, in accordance with established policy
guidelines, at times, hedges some of these currencies, using foreign exchange
contracts as a means to protect itself from currency fluctuations. The amount of
foreign exchange contracts that the Company has maintained has not been material
to the Company's operations.
In addition, a portion of the Company's labor costs are incurred in Mexican
Pesos and to a lesser degree in Chinese Renminbi. As of February, 1998, these
two currencies had not been subject to significant volatility in recent months.
If either of these two currencies were to suffer a devaluation, the Company
believes that the impact of any devaluation would likely have the effect of
reducing the Company's effective costs of manufacturing in those countries,
although any such reduction is not expected to have a significant impact upon
the Company's results of operations.
RESULTS OF OPERATIONS
1997 SALES AND OPERATIONS COMPARED WITH 1996
Net sales for 1997 of $148.8 million were essentially equal to net sales in 1996
of $148.6 million. During the same period, net earnings increased by 22.5
percent to $10.1 million from $8.3 million in 1995. In last year's Annual Report
to Shareholders, the Company discussed that a major customer of the Company's
food preservation thermal products would be sourcing certain low-margin
non-MICROCORE(R) components directly during 1997, lowering the Company's net
sales during 1997. As a result, the Company's sales to that customer declined by
about $9 million during 1997. The Company continued to sell its MICROCORE(R)
thermal elements to that customer during 1997, and expects this relationship to
continue. Net sales of food preservation thermal products, thus, decreased
during 1997. The Company replaced the loss of low-margin non-MICROCORE(R)
component sales with increased volume of higher margin sales of at and around
the home comfort footwear.
18
24
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
In 1997, the Company opened an office in Paris, France. The Company believes
that there is great growth potential for the Company's footwear products in
Europe, and in 1991, opened its initial European office in London, England. The
Paris office is an outgrowth of that strategy and represents the Company's
initial penetration of the French marketplace.
Gross profit increased during 1997, despite flat overall net sales for the year.
Gross profit amounted to $71.3 million, compared with $65.4 million in 1996, an
increase of 9.0 percent. The Company's gross profit margin, as a percent of net
sales, increased during 1997 to 47.9 percent, compared with 44.0 percent in
1996, mainly due to: a) an increase in sales of higher margin at and around the
home comfort footwear; b) a decrease in sales of lower margin non-MICROCORE(R)
components; c) improved materials utilization from increased usage of
computerized cutting; and d) expanded use of modular manufacturing in the
company's production facilities. With the expanded use of modular manufacturing,
the Company realized improved efficiencies and lowered the per product cost of
manufacturing without making a sizable investment in infrastructure. The Company
expects to conclude converting its production lines at existing plants, to
modular manufacturing during the spring of 1998.
Selling, general and administrative expenses increased during 1997 to $53.1
million, an 8.4 percent increase over the $49.0 million expense incurred in
1996. Most of the increase related to marketing and sales programs implemented
to support the net sales, with the predominate portion of the increase going
toward the advertising and marketing costs necessary to seed the startup of the
Company's Paris, France, sales office. All expenses relating to the startup in
France were expensed during the year.
Net interest expense in 1997 declined to $1.8 million from $2.5 million in 1996.
The Company's improved profitability in 1996 and 1997 has resulted in improved
liquidity as well. In 1997, the Company's daily average borrowings under the
Revolver amounted to $8.2 million, with a weighted average interest rate of 6.7
percent. This compares with average borrowing in 1996 of $16.9 million, and a
weighted average interest rate of 6.5 percent.
For the year, earnings before income taxes amounted to $16.8 million compared
with $13.7 million in 1996, an increase of 22.4 percent. Net earnings after
taxes increased by 22.5 percent in 1997 to $10.1 million from $8.3 million in
1996. For 1997, basic earnings per share (a measure of earnings per average
common share issued and outstanding) amounted to $1.06 per share, while diluted
earnings per share (a measure that includes a computation of common shares
attributable to certain outstanding but unissued options) amounted to $1.03 per
share. The comparable per share calculations for 1996 are: basic earnings per
share of $0.89 per share, and diluted earnings per share of $0.84 per share.
1996 SALES AND OPERATIONS COMPARED WITH 1995
Total net sales during 1996 increased by 8.8 percent to $148.6 million from
$136.6 million during 1995. A substantial portion of the growth in net sales
occurred in the Company's at and around the home comfort footwear, and mostly
represents growth in volume with only modest unit price increases. As a result
of the Company's determination, in 1995, that the use of television was not
cost-effective for advertising thermal products sold through accessories
departments of department stores, sales of those products declined in 1996. The
Company's net sales of food preservation products increased to 10.2 percent of
total net sales in 1996 compared with 6.7 percent in 1995. Net sales of these
products were expected to be below 10 percent in 1997, because certain
components of the principal food preservation product were sourced directly by a
major customer.
Gross profit in 1996 increased by 8.1 percent, which is consistent with the 8.8
percent increase in sales. Gross profit as a percent of net sales remained
nearly constant at 44.0 percent in 1996, compared with 44.3 percent in 1995. The
Company's manufacturing operations continued to function very efficiently in
1996, as they had in 1995.
19
25
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
Selling, general and administrative expenses, at $49.0 million in 1996,
increased by less than one percent from 1995.
Net interest expense in 1996, declined to $2.5 million from $3.0 million in
1995. The Company's improved profitability in 1996 resulted in improved
liquidity. In 1996, the Company's borrowings under the Revolver averaged $16.9
million, with a weighted average interest rate of 6.5 percent. This compares
with an average borrowing in 1995 of $19.2 million with a weighted average
interest rate of 7.1 percent.
For the entire year, the Company earned $13.7 million before income taxes,
compared with $10.0 million in 1995; an increase of 36.7 percent. After income
taxes, net earnings increased 31.1 percent to $8.3 million, compared with $6.3
million in 1995. Basic earning per share for 1996 amounted to $0.89 per share
compared with basic earnings per share for 1995 of $0.68 per share. Diluted
earnings per share amounted to $0.84 in 1996 compared with $0.65 per share in
1995. All share calculations have been retroactively restated for all previous
share splits.
FORWARD LOOKING STATEMENTS
"SAFEHARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995:
The statements in this Annual Report to Shareholders, which are not
historical fact are forward looking statements based upon the Company's
current plans and strategies, and reflect the Company's current
assessment of the risks and uncertainties related to its business,
including such things as product demand and market acceptance; the
economic and business environment and the impact of governmental
regulations, both in the United States and abroad; the effects of
competitive products and pricing pressures; currency risks; capacity;
efficiency and supply constraints; weather conditions; and other risks
detailed in the Company's press releases, shareholder communications, and
Securities and Exchange Commission filings. Actual events affecting the
Company and the impact of such events on the Company's operations may
vary from those currently anticipated.
20
26
CONSOLIDATED BALANCE SHEETS
R.G. Barry Corporation and Subsidiaries
January 3, 1998 December 28, 1996
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (note 4) $ 22,495 $13,187
Accounts receivable:
Trade (less allowance for doubtful receivables, returns and
promotions of $8,493,000 and $8,972,000, respectively) 15,957 17,372
Other 1,004 1,184
Inventory (note 2) 35,602 28,854
Deferred income taxes (note 6) 4,827 5,055
Prepaid expenses 2,669 2,027
-------- -------
Total current assets 82,554 67,679
-------- -------
Property, plant and equipment, at cost (notes 3 and 5) 40,840 39,088
Less accumulated depreciation and amortization 26,609 25,159
-------- -------
Net property, plant and equipment 14,231 13,929
-------- -------
Deferred income taxes (note 6) 752 470
Goodwill (less accumulated amortization of $396,000 and $280,000,
respectively) 4,230 4,346
Other assets 2,907 2,643
-------- -------
$104,674 $89,067
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt and capital lease
obligations (notes 4 and 5) $ 2,273 $125
Accounts payable 6,389 4,170
Accrued expenses (note 7) 11,355 9,661
-------- -------
Total current liabilities 20,017 13,956
-------- -------
Accrued retirement cost, net (note 8) 3,520 2,889
Long-term debt, excluding current installments (note 4) 12,857 15,000
Capital lease obligations, excluding current installments (note 5) 135 265
Other 537 214
-------- -------
Total liabilities 37,066 32,324
-------- -------
Shareholders' equity (notes 4, 9, 10 and 11):
Preferred shares, $1 par value. Authorized 4,000,000 Class A and 1,000,000
Series I Junior Participating Class B shares;
none issued -- --
Common shares, $1 par value. Authorized 22,500,000
and 15,000,000 shares; issued 9,564,000 and 9,375,000 shares
(excluding treasury shares of 561,000 and 557,000) 9,564 9,375
Additional capital in excess of par value 14,629 14,071
Retained earnings 43,415 33,297
-------- -------
Net shareholders' equity 67,608 56,743
-------- -------
Commitments and contingencies (notes 5, 12 and 13)
$104,674 $89,067
======== =======
See accompanying notes to consolidated financial statements.
21
27
CONSOLIDATED STATEMENTS OF EARNINGS
R.G. Barry Corporation and Subsidiaries
January 3, 1998 December 28, 1996 December 30, 1995
(in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------
Net sales $148,775 $148,626 $136,561
Cost of sales 77,438 83,202 76,065
-------- -------- --------
Gross profit 71,337 65,424 60,496
Selling, general and administrative expenses 53,137 49,008 48,557
-------- -------- --------
Operating income 18,200 16,416 11,939
Other (expense) income (note 3) 415 (211) 1,060
Interest expense, net of interest income of $322,000,
$172,000, and $67,000, respectively (1,817) (2,483) (2,962)
-------- -------- --------
Earnings before income taxes 16,798 13,722 10,037
Income tax expense (note 6) 6,680 5,465 3,738
-------- -------- --------
Net earnings $ 10,118 $ 8,257 $ 6,299
======== ======== ========
Earnings per common share (note 10):
Basic 1.06 .89 .68
======== ======== ========
Diluted 1.03 .84 .65
======== ======== ========
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
R.G. Barry Corporation and Subsidiaries
Additional
capital in
Common excess of Retained
shares par value earnings
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $ 5,543 $ 16,770 $ 18,741
Net earnings -- -- 6,299
Stock options exercised 39 155 --
Purchase of shares (20) (220) --
Four-for-three stock split (including $11,000 paid
for fractional shares) 1,848 (1,859) --
Tender of shares -- (5) --
Tax benefit associated with the activity
under various stock plans -- 320 --
-------- -------- --------
Balance at December 30, 1995 7,410 15,161 25,040
Net earnings -- -- 8,257
Five-for-four stock split (including $7,000 paid
for fractional shares) 1,855 (1,862) --
Issuance of shares in connection with
the employee stock purchase plan 25 252 --
Stock options exercised 85 335 --
Tax benefit associated with the activity
under various stock plans -- 174 --
Other -- 11 --
-------- -------- --------
Balance at December 28, 1996 9,375 14,071 33,297
Net earnings -- -- 10,118
Stock options exercised 193 452 --
Tender of shares (4) (37) --
Tax benefit associated with the activity
under various stock plans -- 143 --
Balance at January 3, 1998 $ 9,564 $ 14,629 $ 43,415
======== ======== ========
See accompanying notes to consolidated financial statements.
22
28
CONSOLIDATED STATEMENTS OF CASH FLOWS
R.G. Barry Corporation and Subsidiaries
January 3, 1998 December 28, 1996 December 30, 1995
(in thousands)
Cash flows from operating activities:
Net earnings $ 10,118 $ 8,257 $ 6,299
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Tax benefit associated with the activity under
various stock plans 143 174 320
Depreciation and amortization of property,
plant, and equipment 2,531 2,571 2,158
Amortization of goodwill 116 116 116
Deferred income tax benefit (54) (1,181) (1,385)
Loss (gain) on disposal of property, plant, and equipment 97 25 (966)
Net (increase) decrease in:
Accounts receivable 1,595 (304) 5,160
Inventory (6,748) 2,854 (5,646)
Prepaid expenses (642) 61 (158)
Other assets (264) 358 (1,126)
Net increase (decrease) in:
Accounts payable 2,219 (4,791) 787
Accrued expenses 1,694 644 2,536
Accrued retirement cost, net 631 405 354
Other liabilities 323 214 --
-------- -------- --------
Net cash provided by operating activities 11,759 9,403 8,449
-------- -------- --------
Cash flows from investing activities:
Additions to property, plant, and equipment (2,944) (2,404) (3,363)
Proceeds from disposal of property, plant, and equipment 14 35 1,800
-------- -------- --------
Net cash used in investing activities (2,930) (2,369) (1,563)
-------- -------- --------
Cash flows from financing activities:
Repayment of long-term debt, capital lease obligations,
and short-term note payable (125) (815) (2,917)
Proceeds from stock issued 645 701 194
Purchase of common shares for treasury (41) -- (256)
-------- -------- --------
Net cash provided by (used in) financing activities 479 (114) (2,979)
-------- -------- --------
Net increase in cash 9,308 6,920 3,907
Cash and cash equivalents at beginning of year 13,187 6,267 2,360
-------- -------- --------
Cash and cash equivalents at end of year $ 22,495 $ 13,187 $ 6,267
======== ======== ========
Supplemental cash flow disclosures:
Interest paid $ 2,035 $ 2,624 $ 2,930
======== ======== ========
Income taxes paid $ 3,937 $ 8,713 $ 1,740
======== ======== ========
See accompanying notes to consolidated financial statements.
23
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Operations
R.G. Barry Corporation (the Company) is a United States based
multinational corporation. Its principal line of business is comfort
products for at and around the home. The predominant market for the
Company's products is North America. Products are sold primarily to
department and discount stores.
In 1997, three customers accounted for approximately 20%, 11%, and 10%
of the Company's net sales. In 1996, four customers accounted for
approximately 15%, 12%, 11%, and 10% of the Company's net sales. In
1995, two customers accounted for approximately 16% and 11% of the
Company's net sales.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
(c) Cash Equivalents
Investments with maturities of three months or less at the date of
issuance are considered cash equivalents.
(d) Inventory
Inventory is valued at the lower of cost or market. Approximately 77%
and 72% of the 1997 and 1996, respectively, ending inventory costs are
determined on the last in, first out (LIFO) basis. The remainder are
determined on the first in, first out (FIFO) basis.
(e) Depreciation and Amortization
Depreciation and amortization have been provided substantially using
the double declining-balance method over the estimated useful lives of
the assets acquired prior to September 30, 1991. The Company adopted
the straight-line method of depreciation on its machinery and equipment
acquired after September 30, 1991.
(f) Revenue Recognition
The Company recognizes revenue when the goods are shipped to customers.
The Company has established programs which, in certain circumstances,
enable its customers to return product. The effect of these programs is
estimated and a returns allowance is provided.
(g) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(h) Per-Share Information
In 1997, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share. Statement 128 replaced
the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings
per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement
128 requirements.
The computation of basic earnings per common share for 1997, 1996, and
1995 is based on the weighted average number of outstanding common
shares during the period. Diluted earnings 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 shares subject to stock options and the stock
purchase plan.
Effective June 17, 1996, the Board of Directors of the Company approved
a five-for-four share split to shareholders of record on June 3, 1996.
On September 15, 1995, the Board of Directors of the Company approved a
four-for-three share split to shareholders of record on September 1,
1995. All share splits have been distributed in the form of a share
dividend. The stock splits specifically excluded treasury shares. All
references to the number of shares and per-share amounts in the
footnotes to the financial statements have been restated to reflect the
stock splits.
24
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Significant estimates made by management include the adequacy of
accounts receivable and inventory valuation allowances, and the
realizability of the deferred tax assets.
(j) Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable, and
accrued expenses as reported in the financial statements approximate
their fair value because of the short-term maturity of those
instruments. The fair value of the Company's long-term debt is
disclosed in note 4.
(k) Goodwill
Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on the straight-line method over
40 years. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's
average cost of funds. The assessment of the recoverability of goodwill
will be impacted if estimated future operating cash flows are not
achieved.
(l) Stock Option Plans
Effective for fiscal 1996, the Company adopted SFAS No. 123, Accounting
for Stock-Based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and provide certain pro forma
information. APB Opinion No. 25 requires that compensation expense be
recorded on the date of grant only if the current market price of the
underlying stock exceeds the exercise price. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of SFAS No. 123 (see note 9).
(m) New Accounting Pronouncements
The FASB has issued Statement 130, Reporting Comprehensive Income and
Statement 131, Disclosures About Segments of an Enterprise and Related
Information. Both statements will become effective in 1998. The Company
believes that the adoption of these pronouncements will not have a
significant impact on financial position or results of operations.
(n) Advertising
The Company expenses the costs of advertising as incurred. For the
years ended January 3, 1998, December 28, 1996, and December 30, 1995,
advertising expenses were $6,471,000, $5,314,000, and $6,056,000,
respectively.
(2) INVENTORY
If the FIFO method had been used to value inventory, inventory would have
been $2,409,000, $3,113,000, and $3,050,000 higher than that reported at
the end of 1997, 1996, and 1995, respectively. Because LIFO inventory is
valued using the dollar value method, it is impracticable to separate
inventory values between raw materials, work-in-process, and finished
goods.
(3) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
January 3, December 28, Estimated
1998 1996 life in years
------------------------------------------------------
(in thousands)
Land and improvements $ 490 $ 490 8-15
Buildings and improvements 4,858 4,315 40-50
Machinery and equipment 27,361 27,039 3-10
Leasehold improvements 7,443 6,980 5-20
Construction in progress 688 264
------- -------
$40,840 $39,088
======= =======
25
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
In December 1995, the Company sold two properties that it had previously
leased to other companies. The properties, located in Arkansas and Texas
were sold at a gain of $966,000.
See note 5 for a summary of property and equipment, included above,
representing capitalized leases.
(4) LONG-TERM DEBT AND RESTRICTIONS
Long-term debt consists of the following:
January 3, December 28,
1998 1996
--------------------------------
(in thousands)
9.7% note, due July 2004 $15,000 $15,000
Less current installments 2,143 --
------- -------
Long-term debt, excluding current installments $12,857 $15,000
======= =======
The 9.7% note, issued in July 1994, requires semiannual interest payments,
and annual principal repayments of $2,143,000 commencing in 1998 and
ending in 2004.
The Company has determined the fair value of its long-term debt based upon
the present value of expected cash flows, considering expected maturities
and using current interest rates available to the Company for borrowings
with similar terms. The fair value of the 9.7% note payable was
$15,700,000 and $15,400,000 at January 3, 1998 and December 28, 1996,
respectively.
In February 1996, the Company negotiated a new unsecured revolving credit
agreement with its banks. The new agreement provides the Company with a
seasonally adjusted amount of credit that has a minimum availability of $6
million and a peak availability of $51 million, with interest at variable
rates. At January 3, 1998 and December 28, 1996, no amounts were
outstanding. This agreement expires on December 31, 1999.
Under the most restrictive covenants of the various loan agreements, the
Company is (1) required to maintain a seasonally adjusted current ratio,
as defined; (2) required to maintain a minimum seasonally adjusted
tangible net worth, as defined; (3) restricted as to annual acquisition of
fixed assets; and (4) restricted with regard to the amount of additional
borrowings, purchase of treasury shares and payment of dividends. At
January 3, 1998, approximately $13 million of retained earnings was
available for the payment of cash dividends and the purchase of treasury
shares (see also note 9). There were no covenant violations during 1997
and 1996.
The Company maintains compensating cash balances, which are not legally
restricted, to defray the costs of other banking services provided.
(5) LEASED ASSETS AND LEASE COMMITMENTS
The Company has a lease agreement with a local government which issued
Industrial Development Revenue Bonds to construct and purchase an office
facility. The lease expires in 1999, at which time the Company has the
right to acquire (at a nominal amount) the property under this lease
agreement. The Company also has the option to acquire the leased assets
prior to the expiration of the lease for an amount approximating the
outstanding bonds, plus accrued interest. The outstanding bonds bear
interest at 6.5%.
At January 3, 1998, minimum lease payments due under this capital lease
are:
Fiscal year Amount
-----------------------------------------------------------------
(in thousands)
1998 $ 147
1999 144
-----
Total minimum lease payments 291
Less amount representing interest 26
-----
Present value of minimum lease payments $ 265
=====
26
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
The present value of minimum capital lease payments are reflected in the
balance sheets:
January 3, 1998 December 28, 1996
-------------------------------------
(in thousands)
Current $ 130 $ 125
Noncurrent 135 265
----- -----
$ 265 $ 390
===== =====
These leased assets are capitalized in property, plant, and equipment:
January 3, 1998 December 28, 1996
-------------------------------------
(in thousands)
Land and improvements $ 392 $ 392
Buildings and improvements 2,583 2,482
------ ------
2,975 2,874
Less accumulated amortization 1,732 1,666
------ ------
Net book value $1,243 $1,208
====== ======
The Company occupies certain manufacturing, warehousing, operating, and
sales facilities and uses certain equipment under other cancelable and
noncancelable operating lease arrangements. A summary of the noncancelable
operating lease commitments at January 3, 1998 follows:
Fiscal year Amount
-----------------------------------------------------------------
(in thousands)
1998 $ 2,992
1999 2,568
2000 1,909
2001 1,429
2002 983
Later fiscal years, through 2008 3,316
-------
$13,197
=======
Substantially all of these operating lease agreements are renewable for
periods of 3 to 15 years and require the Company to pay insurance, taxes
and maintenance expenses. Rent expense under cancelable and noncancelable
operating lease arrangements in 1997, 1996 and 1995 amounted to
$4,986,000, $4,956,000, and $4,569,000, respectively.
(6) INCOME TAXES
Income tax expense (benefit) consists of:
1997 1996 1995
------------------------------------------------
(in thousands)
Current expense:
Federal $5,607 $5,682 $4,483
Foreign 108 137 60
State 1,019 827 580
------ ------ ------
6,734 6,646 5,123
Deferred benefit (54) (1,181) (1,385)
------ ------ ------
$6,680 $5,465 $3,738
====== ====== ======
The differences between income taxes computed by applying the statutory
federal income tax rate (35% in 1997 and 1996, and 34% in 1995) and income
tax expense in the consolidated financial statements are:
1997 1996 1995
------------------------------------------------
(in thousands)
Computed "expected" tax expense $5,879 $4,803 $3,413
State income taxes, net of federal income taxes 662 538 383
Foreign income tax expense 108 137 60
Other, net 31 (13) (118)
------ ------ ------
$6,680 $5,465 $3,738
====== ====== ======
27
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
January 3, 1998 December 28, 1996
-------------------------------------
(in thousands)
Deferred tax assets:
Accounts receivable, principally due to allowances for returns,
promotions, and doubtful accounts $3,139 $3,232
Inventories, principally due to additional costs inventoried for
tax purposes and valuation allowances 1,145 1,284
Package design costs 327 318
Certain accounting accruals, including such items as
self-insurance costs, vacation costs, and others 216 221
Pension costs 1,478 1,173
------ ------
Total deferred tax assets 6,305 6,228
Deferred tax liabilities:
Basis differences and differing methods of depreciation
for book and tax purposes 553 530
Difference in gain recognition on sale of property, plant,
and equipment 173 173
------ ------
Total deferred tax liabilities 726 703
------ ------
Net deferred tax assets $5,579 $5,525
------ ======
In order to realize the deferred tax asset, the Company will need to
generate future taxable earnings or be able to carryback to 1997 or 1996.
The Company's taxable earnings history is as follows (in thousands):
1997 1996
--------------------------------------------------------------
Taxable earnings $16,300 $16,744
The Company believes the existing net deductible temporary differences
will reverse during periods in which the Company generates net taxable
earnings, or in periods in which a carryback to 1997 or 1996 is available.
Further, the Company believes it has available certain tax planning
strategies that could be implemented, if necessary, to supplement taxable
earnings from operations. The Company has considered the above factors in
concluding that it is more likely than not that the Company will realize
the benefits of existing deferred tax assets. There can be no assurance,
however, that the Company will generate any specific level of continuing
earnings.
(7) ACCRUED EXPENSES
Accrued expenses consist of the following:
January 3, 1998 December 28, 1996
-------------------------------------
(in thousands)
Salaries and wages $ 1,933 $3,287
Income taxes 6,665 3,650
Other 2,757 2,724
------- ------
$11,355 $9,661
======= ======
28
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(8) Employee Retirement Plans
The Company and its domestic subsidiaries have a noncontributory
retirement plan for the benefit of salaried and nonsalaried employees, the
Associates' Retirement Plan (ARP).
The employees covered under the ARP are eligible to participate upon the
completion of one year of service. Salaried participant benefits are
based upon a formula applied to a participant's final average salary and
years of service, which is reduced by a certain percentage of the
participant's social security benefits. Nonsalaried participant benefits
are based on a fixed amount for each year of service. The Plan provides
reduced benefits for early retirement. The Company intends to fund the
minimum amounts required under the Employee Retirement Income Security
Act of 1974.
The funded status of the ARP and the accrued retirement costs recognized
at January 3, 1998 and December 28, 1996 were:
1997 1996
--------------------------
(in thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefit of
$17,578,000 and $17,292,000, respectively $18,147 $17,873
Projected effect of increase in compensation levels 1,645 1,422
------- -------
Projected benefit obligation (PBO) 19,792 19,295
Plan assets at fair value 24,323 20,641
------- -------
Plan assets in excess of PBO 4,531 1,346
Unrecognized net gain (4,999) (1,374)
Unamortized net asset (209) (458)
Unrecognized prior service cost 197 226
------- -------
Accrued retirement cost $ (480) $ (260)
======= =======
The Company also has a Supplemental Retirement Plan (SRP) for certain
officers and other key employees of the Company as designated by the Board
of Directors. The SRP is unfunded, noncontributory, and provides for the
payment of monthly retirement benefits. Benefits are based on a formula
applied to the recipients' final average monthly compensation, reduced by
a certain percentage of their social security benefits.
The funded status of the SRP and the accrued retirement cost recognized at
January 3, 1998 and December 28, 1996 are:
1997 1996
--------------------------
(in thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefit of
$3,096,000 and $2,710,000, respectively $ 3,109 $ 2,718
Projected effect of increase in compensation levels 357 370
------- -------
Projected benefit obligation (PBO) 3,466 3,088
Plan assets at fair value -- --
------- -------
PBO in excess of plan assets (3,466) (3,088)
Unrecognized net loss from past experience different from that
assumed and effects of changes in actuarial assumptions 211 9
Unamortized net asset existing at the date of adoption of
FAS No. 87, which is being amortized over approximately 12 years 167 217
Unrecognized prior service cost 117 149
Adjustment required to recognize minimum liability (167) (15)
------- -------
Accrued retirement cost $(3,138) $(2,728)
======= =======
29
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
The components of net pension cost for the retirement plans were:
1997 1996 1995
-------------------------------------------------
(in thousands)
Service cost-benefits earned during the period $ 721 $ 662 $ 572
Interest cost on PBO 1,700 1,604 1,498
Actual return on plan assets (1,702) (1,582) (1,384)
Net amortization and deferral (142) (133) (63)
------ ------ -----
$ 577 $ 551 $ 623
====== ====== ======
Assumptions used in accounting for the pension plans as of January 3, 1998
and December 28, 1996 were:
1997 1996
---------------------------
Discount rates 7.25% 7.75%
Rates of increase in compensation levels 5.00% 5.00%
Expected long-term rate of return on assets 9.25% 9.25%
The Company adopted a 401(k) plan effective September 1, 1995. Salaried
and nonsalaried employees may contribute a percentage, as defined, of
their compensation per pay period and the Company contributes 50% of the
first 3% of each participant's compensation contributed to this plan. The
Company's contribution to the 401(k) plan for the year ended January 3,
1998 and December 28, 1996 was $185,000 and $150,000, respectively.
(9) SHAREHOLDERS' EQUITY
The Company has various stock option plans, which have granted incentive
stock options (ISO's) and nonqualified stock options exercisable for
periods of up to 10 years from date of grant at prices not less than fair
market value at date of grant. Information with respect to options under
these plans follows:
ISO Nonqualified
number number Weighted-average
Qualified plans of shares of shares exercise price
----------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1994 904,500 85,200 $ 5.67
Granted 82,600 -- 8.64
Exercised (58,400) -- 3.31
Canceled (17,200) -- 8.75
--------- ------- -------
Outstanding at December 30, 1995 911,500 85,200 6.00
Granted 207,600 54,600 12.62
Exercised (85,400) (2,700) 4.77
Canceled (14,600) -- 8.59
--------- ------- -------
Outstanding at December 28, 1996 1,019,100 137,100 7.57
Granted 127,200 55,300 11.16
Exercised (191,100) (1,400) 3.34
Canceled (26,000) -- 9.76
--------- ------- -------
Balance outstanding at January 3, 1998 929,200 191,000 $ 8.83
========= ======= =======
Options exercisable at January 3, 1998 414,200 106,100
========= =======
30
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
Options outstanding Options exercisable
-------------------------------------------------- -------------------------------
Number Weighted-average Number
Range of outstanding remaining Weighted-average exercisable Weighted-average
exercise prices at 1/3/98 contractual life exercise price at 1/3/98 exercise price
---------------------------------------------------------------------------------------------------------------
$ 5.00 and under 221,700 3.49 $ 3.15 182,800 $ 3.14
5.01 - 10.00 454,000 6.18 $ 8.44 253,000 $ 8.45
10.01 - 15.00 439,500 8.35 $ 12.01 83,500 $ 13.04
15.01 and over 5,000 8.60 $ 15.13 1,000 $ 15.13
--------- -------
1,120,200 520,300
========= =======
At January 3, 1998, the remaining number of ISO and nonqualified shares
available for grant was 406,000.
At January 3, 1998, December 28, 1996, and December 30, 1995, the options
outstanding under these plans were held by 109, 105, and 84 employees,
respectively, and had expiration dates ranging from 1998 to 2007.
Stock appreciation rights may be issued subject to certain limitations.
There were no rights outstanding at January 3, 1998, December 28, 1996,
or December 30, 1995.
Had the Company elected to determine compensation cost based on the fair
value at the grant date, as alternatively permitted under SFAS No. 123,
the Company's net earnings would have been reduced to the pro forma
amounts indicated below:
1997 1996 1995
---------------------------------------------------
Net earnings:
As reported $10,118 $8,257 $6,299
Pro forma 9,395 7,517 6,189
Earnings per share (diluted):
As reported 1.03 .84 .65
Pro forma .96 .76 .64
Using the Black Scholes option-pricing model, the per-share,
weighted-average fair value of stock options granted during 1997, 1996 and
1995 was $4.93, $5.97, and $4.21, respectively, on the date of grant. The
assumptions used in estimating the fair value of the options as of January
3, 1998 and December 28, 1996 were:
1997 1996
--------------------------------
Expected dividend yield 0% 0%
Expected volatility 45% 47%
Risk-free interest rate 5.5% 5.5%
Expected life-- ISO grants 5.5 years 5.5 years
Nonqualified grants 7.5 years 8 years
Pro forma net earnings reflects only options granted in 1997, 1996, and
1995. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net
earnings amounts presented above because compensation cost is reflected
over the options' vesting period of 5 years and compensation cost for
options granted prior to January 1, 1995 is not considered.
The Company has an employee stock purchase plan in which approximately
600 employees are eligible to participate. Under the terms of the Plan,
employees receive options to acquire common shares at the lower of 85%
of the fair market value on their enrollment date or at the end of each
2 year plan term.
31
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
Shares
subscribed
----------
Balance at December 31, 1994 68,200
Subscriptions 3,100
Purchases --
Cancellations (10,200)
--------
Balance at December 30, 1995 61,100
Subscriptions --
Purchases (24,900)
Cancellations (36,200)
--------
Balance at December 28, 1996 --
Subscriptions 70,100
Purchases --
Cancellations (200)
--------
Balance at January 3, 1998 69,900
========
The Company previously issued 666,000 restricted common shares pursuant to
an employment agreement with a key executive. Prior to the lapse of
restrictions, these shares could not be disposed of or transferred by the
holder, however, the shares were entitled to full voting and dividend
rights. The restrictions lapsed, with certain exemptions, at the rate of
10% per year. Without regard to any debt covenant limitations, the Company
was obligated under the agreement to purchase up to 50% of the
unrestricted shares presented by the executive within 90 days of the date
the restrictions lapsed. During 1995, the final restrictions lapsed, and
the Company fulfilled its final obligation, under the agreement, to
purchase any such shares. Charges to earnings relating to this plan were
$0 in 1995. The agreement also provides for separation compensation in the
certain circumstances and in the event of early termination.
(10) EARNINGS PER SHARE
For the years ended:
1997
-------------------------------------------------------
Earnings Shares Per-share
(Numerator) (Denominator) amount
-------------------------------------------------------
BASIC EPS --
Net earnings available to
common shareholders $10,118 9,504 $1.06
EFFECT OF DILUTIVE SECURITIES--
Stock options -- 316 (.03)
DILUTED EPS--
Net earnings available to common
shareholders plus assumed conversions 10,118 9,820 1.03
1996
-------------------------------------------------------
Earnings Shares Per-share
(Numerator) (Denominator) amount
-------------------------------------------------------
BASIC EPS --
Net earnings available to
common shareholders $ 8,257 9,308 $ .89
EFFECT OF DILUTIVE SECURITIES--
Stock options -- 519 (.05)
DILUTED EPS--
Net earnings available to common
shareholders plus assumed conversions 8,257 9,827 .84
32
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
1995
-------------------------------------------------------
Earnings Shares Per-share
(Numerator) (Denominator) amount
-------------------------------------------------------
BASIC EPS --
Net earnings available to
common shareholders $ 6,299 9,234 $ .68
EFFECT OF DILUTIVE SECURITIES--
Stock options -- 456 (.03)
DILUTED EPS--
Net earnings available to common
shareholders plus assumed conversions 6,299 9,690 .65
Options to purchase 321,000 shares of common stock at prices up to $15.13
were outstanding in 1997 but were not included in the computation of
diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares and, therefore, the
effect would be anti-dilutive.
(11) PREFERRED SHARE PURCHASE RIGHTS
In February, 1998, the Company's Board of Directors declared a
distribution of one Preferred Share Purchase Right (Right) for each
outstanding common share of the Company to shareholders of record on March
16, 1998. The new Rights will replace similar Rights issued in 1988 which
will expire on March 16, 1998. Under certain conditions, each new Right
may be exercised to purchase one one-hundredth of a share of Series I
Junior Participating Class A Preferred Shares, par value $1 per share, at
an initial exercise price of $40. The Rights initially will be attached to
the Common Shares. The Rights will separate from the Common Shares and a
Distribution Date will occur upon the earlier of 10 business days after a
public announcement that a person or group has acquired, or obtained the
right to acquire 20% or more of the Company's outstanding common shares
(Share Acquisition Date) or 10 business days (or such later date as the
Board shall determine) after the commencement of a tender or exchange
offer that would result in a person or group owning 20% or more of the
Company's outstanding common shares. The Rights are not exercisable until
the Distribution Date.
In the event that any Person becomes the beneficial owner of more than
20% of the then outstanding common shares, each holder of a Right will
be entitled to purchase, upon exercise of the Right, common shares
having a market value two times the exercise price of the Right. In the
event that, at any time following the Share Acquisition Date, the Company
is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or 50% or more of the
Company's assets or earning power is sold or transferred, the holder of
a Right will be entitled to buy the number of shares of common stock of
the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
The Rights, which do not have any voting rights, expire on March 16,
2008, and may be redeemed by the Company at a price of $0.01 per Right
at any time until 10 business days following the Share Acquisition
Date.
Each Class A Preferred share is entitled to one-tenth of one vote,
while the Class B Preferred shares are entitled to ten votes. The
preferred shares are entitled to a preference in liquidation. None of
these shares have been issued.
(12) RELATED PARTY OBLIGATION
The Company and a key executive have entered into an agreement pursuant to
which the Company is obligated for up to two years after the death of the
key executive to purchase, if the estate elects to sell, up to $4 million
of the Company's common shares, at their fair market value. To fund its
potential obligation to purchase such shares, the Company has purchased a
$5 million life insurance policy on the key executive, the cash surrender
value of which is included in other assets in the accompanying balance
sheets. In addition, for a period of 24 months following the key
executive's death, the Company will have a right of first refusal to
purchase any shares of the Company owned by the key executive at the time
of his death if his estate elects to sell such shares. The Company would
have the right to purchase such shares on the same terms and conditions as
the estate proposes to sell such shares.
33
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R.G. Barry Corporation and Subsidiaries
continued
(13) 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 such matters is not expected to have a material adverse
effect on the Company's financial position or results of operations.
INDEPENDENT AUDITORS' REPORT
R.G. Barry Corporation and Subsidiaries
THE BOARD OF DIRECTORS AND SHAREHOLDERS
R.G. Barry Corporation:
We have audited the accompanying consolidated balance sheets of R.G. Barry
Corporation and subsidiaries (the Company) as of January 3, 1998 and December
28, 1996, and the related consolidated statements of earnings, shareholders'
equity, and cash flows for each of the fiscal years in the three-year period
ended January 3, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of R.G. Barry
Corporation and subsidiaries as of January 3, 1998 and December 28, 1996, and
the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended January 3, 1998, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 19, 1998
34
40
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholders
R. G. Barry Corporation:
Under date of February 19, 1998, we reported on the consolidated balance sheets
of R. G. Barry Corporation and subsidiaries as of January 3, 1998 and December
28, 1996, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the fiscal years in the three-year period
ended January 3, 1998, as contained in the fiscal 1997 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
1997. 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.
KPMG Peat Marwick LLP
Columbus, Ohio
February 19, 1998
41
Schedule II
R. G. BARRY CORPORATION AND SUBSIDIARIES
Reserves
Fiscal year ended January 3, 1998
Column A Column B Column C Column D Column E
- ------------------------------------------- --------------- -------------- ---------------- --------------
Additions
Balance at charged to Balance at
beginning costs and end of
Description of period expenses Deductions period
----------- --------- -------- ---------- ------
Reserves deducted from accounts receivable:
Allowance for doubtful receivables $ 235,000 80,000 111,000(1) 204,000
Allowance for returns 4,052,000 4,300,000 4,052,000(2) 4,300,000
Allowance for promotions 4,685,000 3,989,000 4,685,000(3) 3,989,000
---------- --------- --------- ---------
$8,972,000 8,369,000 8,848,000 8,493,000
========== ========= ========= =========
- --------------------
(1) Write-off of uncollectible accounts.
(2) Represents 1997 sales returns reserved for in fiscal 1996.
(3) Represents 1997 promotions expenditures committed to and reserved for in
fiscal 1996.
42
Schedule II
R. G. BARRY CORPORATION AND SUBSIDIARIES
Reserves
Fiscal year ended December 28, 1996
Column A Column B Column C Column D Column E
- ------------------------------------------- --------------- -------------- ---------------- --------------
Additions
Balance at charged to Balance at
beginning costs and end of
Description of period expenses Deductions period
----------- --------- -------- ---------- ------
Reserves deducted from accounts receivable:
Allowance for doubtful receivables $ 349,000 140,000 254,000(1) 235,000
Allowance for returns 3,021,000 4,052,000 3,021,000(2) 4,052,000
Allowance for promotions 4,300,000 4,685,000 4,300,000(3) 4,685,000
---------- --------- --------- ---------
$7,670,000 8,877,000 7,575,000 8,972,000
========== ========= ========= =========
- --------------------
(1) Write-off of uncollectible accounts.
(2) Represents 1996 sales returns reserved for in fiscal 1995.
(3) Represents 1996 promotions expenditures committed to and reserved for in
fiscal 1995.
43
Schedule II
R. G. BARRY CORPORATION AND SUBSIDIARIES
Reserves
Fiscal year ended December 30, 1995
Column A Column B Column C Column D Column E
- ------------------------------------------- --------------- -------------- ---------------- --------------
Additions
Balance at charged to Balance at
beginning costs and end of
Description of period expenses Deductions period
----------- --------- -------- ---------- ------
Reserves deducted from accounts receivable:
Allowance for doubtful receivables $ 160,000 648,000 459,000(1) 349,000
Allowance for returns 1,537,000 3,021,000 1,537,000(2) 3,021,000
Allowance for promotions 2,403,000 4,300,000 2,403,000(3) 4,300,000
---------- --------- --------- ---------
$4,100,000 7,969,000 4,399,000 7,670,000
========== ========= ========= =========
- --------------------
(1) Write-off of uncollectible accounts.
(2) Represents 1995 sales returns reserved for in fiscal 1994.
(3) Represents 1995 promotions expenditures committed to and reserved for in
fiscal 1994.
44
R. G. BARRY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JANUARY 3, 1998
INDEX TO EXHIBITS
Exhibit No. Description Location
----------- ----------- --------
3(a)(1) Articles of Incorporation of Registrant (as Incorporated herein by reference to
filed with Ohio Secretary of State on March Registrant's Annual Report on
26, 1984) Form 10-K for the fiscal year ended
December 31, 1988 (File No. 0-12667)
("Registrant's 1988 Form 10-K")
[Exhibit 3(a)(i)]
3(a)(2) Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant Authorizing the Registrant's 1988 Form 10-K [Exhibit
Series I Junior Participating Class B 3(a)(i)]
Preferred Shares (as filed with the Ohio
Secretary of State on March 1, 1988)
3(a)(3) Certificate of Amendment to the Articles of Incorporated herein by reference to
Registrant (as filed with the Ohio Secretary Registrant's 1988 Form 10-K [Exhibit
of State on May 9, 1988) 3(a)(i)]
3(a)(4) Certificate of Amendment to the Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with the Registrant's Annual Report on Form 10-K for
Ohio Secretary of State on May 22, 1995) the fiscal year ended December 30, 1995
(File No. 1-8769) ("Registrant's 1995 Form
10-K") [Exhibit 3(b)]
3(a)(5) Certificate of Amendment to Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with Registrant's 1995 Form 10-K [Exhibit 3(c)]
the Ohio Secretary of State on September
1, 1995)
3(a)(6) Certificate of Amendment to Articles of Incorporated herein by reference to
Incorporation of Registrant (as filed with Registrant's Registration Statement on Form
the Ohio Secretary of State on May 30, 1997) S-8, filed June 6, 1997 (Registration No.
333-28671) [Exhibit 4(h)(6)]
45
Exhibit No. Description Location
----------- ----------- --------
3(a)(7) Certificate of Amendment to the Articles of *
Incorporation of Registrant Authorizing
Series I Junior Participating Class A Preferred
Shares (as filed with the Ohio Secretary of
State on March 10, 1998)
3(a)(8) Articles of Incorporation of Registrant *
(reflecting amendments through March 10, 1998)
[for purposes of SEC reporting compliance
only -- not filed with the Ohio Secretary
of State]
3(b) Regulations of Registrant, as amended Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended January 2, 1988 (File
No. 0-12667) [Exhibit 3(b)]
4(a) Trust Indenture, dated as of July 1, 1972, by Incorporated herein by reference to
and between Registrant and The Registrant's Registration Statement on Form
Huntington National Bank of Columbus, S-1, filed June 27, 1972 (Registration No.
as Trustee 2-44432) [Exhibit 4(a)]
4(b) First Supplemental Trust Indenture, dated as Incorporated herein by reference to
of May 2, 1975, by and between Registrant and Registrant's Registration Statement on Form
The Huntington National Bank of Columbus, as S-7, filed March 3, 1978 (Registration No.
Trustee 2-60888) [Exhibit 2(b)(ii)]
4(c) Second Supplemental Trust Indenture, dated as Incorporated herein by reference to
of April 1, 1978, by and between Registrant Registrant's Registration Statement on Form
and The Huntington National Bank of Columbus, S-7, filed March 3, 1978 (Registration No.
as Trustee 2-60888) [Exhibit 2(b)(iii)]
4(d) Third Supplemental Indenture, dated as of June Incorporated herein by reference to
22, 1984, between Registrant and The Registrant's Current Report on Form 8-K
Huntington National Bank, as Trustee dated June 22, 1984, filed June 26, 1984
(File No. 1-7231) [Exhibit 4(d)]
46
Exhibit No. Description Location
----------- ----------- --------
4(e) Fourth Supplemental Trust Indenture, dated as Incorporated herein by reference to
of February 27, 1985, between Registrant and Registrant's Annual Report on Form 10-K for
The Huntington National Bank, as Trustee the fiscal year ended December 29, 1984
(File No. 0-12667) [Exhibit 4(e)]
4(f) Revolving Credit Agreement, made to be Incorporated herein by reference to
effective on February 28, 1996, among Registrant's 1995 Form 10-K [Exhibit 4(f)]
Registrant, The Bank of New York, The
Huntington National Bank and NBD Bank
4(g) Agreement to Extend Revolving Credit Incorporated herein by reference to
Agreement, dated May 1, 1997, among Registrant's Quarterly Report on Form 10-Q
Registrant, The Bank of New York, The for the fiscal quarter ended June 28, 1997
Huntington National Bank and NBD Bank (File No. 1-8769) [Exhibit 4]
4(h) Note Agreement, dated July 5, 1994, between Incorporated herein by reference to
Registrant and Metropolitan Life Insurance Registrant's Registration Statement on Form
Company S-3, filed July 21, 1994 (Registration
No. 33-81820) [Exhibit 4(t)]
4(i) Rights Agreement, dated as of February 19, Incorporated herein by reference to
1998, between Registrant and The Bank of New Registrant's Current Report on Form 8-K,
York, as Rights Agent dated March 13, 1998 and filed March 16,
1998 (File No. 1-8769) [Exhibit 4]
9(a) Zacks-Streim Voting Trust and amendments Incorporated herein by reference to
thereto Registrant's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993 (File
No. 1-8769) [Exhibit 9]
9(b) Documentation related to extension of term of Incorporated herein by reference to
the Voting Trust Agreement for the Registrant's 1995 Form 10-K [Exhibit 9(b)]
Zacks-Streim Voting Trust
10(a) R. G. Barry Corporation Associates' Retirement *
Plan (As Amended and Restated Effective
January 1, 1996)
47
Exhibit No. Description Location
----------- ----------- --------
10(b) R. G. Barry Corporation Supplemental Incorporated herein by reference to
Retirement Plan Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 1990
(File No. 0-12667) [Exhibit 10(b)]
10(c) R. G. Barry Corporation Incentive Plan for Key Incorporated herein by reference to
Employees Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 1984
(File No. 0-12667) [Exhibit 10(e)]
10(d) Employment Agreement, dated July 1, 1994, Incorporated herein by reference to
between Registrant and Gordon Zacks Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994
(File No. 1-8769) [Exhibit 10(e)]
10(e) Agreement, dated September 27, 1989, between Incorporated herein by reference to
Registrant and Gordon Zacks Registrant's Current Report on Form 8-K
dated October 11, 1989, filed October 12,
1989 (File No. 0-12667) [Exhibit 28.1]
10(f) Amendment No. 1, dated as of October 12, 1994, Incorporated herein by reference to
between Registrant and Gordon Zacks Amendment No. 14 to Schedule 13D, dated
January 27, 1995, filed by Gordon Zacks on
February 13, 1995 [Exhibit 5]
10(g) Amended Split-Dollar Insurance Agreement, Incorporated herein by reference to
dated March 23, 1995, between Registrant and Registrant's 1995 Form 10-K [Exhibit 10(h)]
Gordon B. Zacks
10(h) R. G. Barry Corporation 1988 Stock Option Plan Incorporated herein by reference to
(Reflects amendments through May 11, 1993) Registrant's Registration Statement on Form
S-8, filed August 18, 1993 (Registration No.
33-67594) [Exhibit 4(r)]
10(i) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of incentive stock Registrant's 1995 Form 10-K [Exhibit 10(k)]
options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
48
Exhibit No. Description Location
----------- ----------- --------
10(j) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of non-qualified Registrant's 1995 Form 10-K [Exhibit 10(l)]
stock options pursuant to the R. G. Barry
Corporation 1988 Stock Option Plan
10(k) Description of Incentive Bonus Program Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 28, 1991
(File No. 1-8769) [Exhibit 10(k)]
10(l) R. G. Barry Corporation Employee Stock Incorporated herein by reference to
Purchase Plan (Reflects amendments and Registrant's Registration Statement on Form
revisions for stock dividends and stock splits S-8, filed August 18, 1993 (Registration No.
through May 11, 1993) 33-67596) [Exhibit 4(r)]
10(m) R. G. Barry Corporation 1994 Stock Option Plan Incorporated herein by reference to
(Reflects stock splits through June 22, 1994) Registrant's Registration Statement on Form
S-8, filed August 24, 1994 (Registration
No. 33-83252) [Exhibit 4(q)]
10(n) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of incentive stock Registrant's 1995 Form 10-K [Exhibit 10(p)]
options pursuant to the R. G. Barry
Corporation 1994 Stock Option Plan
10(o) Form of Stock Option Agreement used in Incorporated herein by reference to
connection with the grant of non-qualified Registrant's 1995 Form 10-K [Exhibit 10(q)]
stock options pursuant to the R. G. Barry
Corporation 1994 Stock Option Plan
10(p) Executive Employment Agreement, effective as *
of January 4, 1998, between Registrant and
Charles E. Ostrander
10(q) Executive Employment Agreement, effective as *
of January 4, 1998, between Registrant and
Christian Galvis
10(r) Restricted Stock Agreement, effective as of *
January 4, 1998, between Registrant and
Charles E. Ostrander
49
Exhibit No. Description Location
----------- ----------- --------
10(s) Restricted Stock Agreement, effective as of *
January 4, 1998, between Registrant and
Christian Galvis
10(t) Agreement, effective as of January 4, 1998, *
between Registrant and Richard L. Burrell
10(u) Agreement, effective as of January 4, 1998, *
between Registrant and Daniel D. Viren
10(v) Agreement, effective as of January 4, 1998, *
between Registrant and Harry Miller
10(w) R. G. Barry Corporation Deferred Compensation Incorporated herein by reference to
Plan As Amended and Restated (Effective as of Registrant's 1995 Form 10-K [Exhibit 10(v)]
September 1, 1995)
10(x) R. G. Barry Corporation Stock Option Plan for *
Non-Employee Directors (Reflects share splits
and amendments through February 19, 1998)
10(y) R. G. Barry Corporation 1997 Incentive Stock Incorporated herein by reference to
Plan Registrant's Registration Statement on Form
S-8, filed June 6, 1997 (Registration No.
333-28671) [Exhibit 4(k)]
10(z) Form of Stock Option Agreement used in *
connection with the grant of incentive stock
options pursuant to the R. G. Barry
Corporation 1997 Incentive Stock Plan
10(aa) Form of Stock Option Agreement used in *
connection with the grant of non-qualified
stock options pursuant to the R. G. Barry
Corporation 1997 Incentive Stock Plan
50
Exhibit No. Description Location
----------- ----------- --------
13 Registrant's Annual Report to Shareholders for Incorporated herein by reference to the
the fiscal year ended January 3, 1998 (Not financial statements portion of this Annual
deemed filed except for the portions thereof Report on Form 10-K beginning at page 18
which are specifically incorporated by
reference into this Annual Report on Form 10-K)
21 Subsidiaries of Registrant Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994
(File No. 1-8769) [Exhibit 21]
23 Consent of Independent Auditors *
24 Powers of Attorney *
27.1 Financial Data Schedule (Fiscal Year Ended *
January 3, 1998)
27.2 Financial Data Schedule (Fiscal Year Ended *
December 28, 1996 Restated)
27.3 Financial Data Schedule (Fiscal Year Ended *
December 30, 1995 Restated)
- ----------
* Filed herewith