##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 26, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-08769
 R.G. BARRY CORPORATION
  OHIO
    
    31-4362899(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer
Identification No.)13405 Yarmouth Road NW, Pickerington, Ohio
    
    43147(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 Yes
o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



PagePART I  FINANCIAL INFORMATIONITEM 1  Financial Statements
    
    
    4ITEM 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    18ITEM 4  Controls and Procedures
    
    
    18ITEM 4T  Controls and Procedures
    
    
    18PART II  OTHER INFORMATIONITEM 1  Legal Proceedings
    
    
    19ITEM 1A  Risk Factors
    
    
    19ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19ITEM 3  Defaults Upon Senior Securities
    
    
    19ITEM 4  Submission of Matters to a Vote of Security Holders
    
    
    19ITEM 5  Other Information
    
    
    19ITEM 6  Exhibits
    
    
    19SIGNATURES
    
    
    20INDEX TO EXHIBITS
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
  Definitions
  Fiscal 2010
    
    53 weeks ending July 3, 2010Fiscal 2009
    
    52 weeks ended June 27, 2009First Quarter of Fiscal 2010
    
    13 weeks ended September 26, 2009First Quarter of Fiscal 2009
    
    13 weeks ended September 27, 2008
  3




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September 26, 2009
    
    
    June 27, 2009(unaudited)ASSETSCash and cash equivalents
    
    $
    3,490
    
    
    $
    14,259Short-term investments
    
    
    15,301
    
    
    
    24,977Accounts receivable (less allowances of $6,712 and $2,725, respectively)
    
    
    24,499
    
    
    
    9,503Inventory
    
    
    23,692
    
    
    
    8,499Deferred tax assets  current
    
    
    1,433
    
    
    
    2,621Prepaid expenses
    
    
    1,210
    
    
    
    723Total current assets
    
    
    69,625
    
    
    
    60,582Property, plant and equipment, at cost
    
    
    11,396
    
    
    
    11,254Less accumulated depreciation and amortization
    
    
    7,710
    
    
    
    7,511Net property, plant and equipment
    
    
    3,686
    
    
    
    3,743Deferred tax assets  noncurrent
    
    
    7,743
    
    
    
    7,685Other assets
    
    
    3,082
    
    
    
    3,073Total assets
    
    $
    84,136
    
    
    $
    75,083LIABILITIES AND SHAREHOLDERS EQUITYShort-term notes payable
    
    $
    1,750
    
    
    $
    1,750Current installments of long-term debt
    
    
    90
    
    
    
    90Accounts payable
    
    
    11,992
    
    
    
    3,887Accrued expenses
    
    
    2,405
    
    
    
    3,979Total current liabilities
    
    
    16,237
    
    
    
    9,706Long-term debt, excluding current installments
    
    
    75
    
    
    
    97Accrued retirement costs and other
    
    
    19,609
    
    
    
    19,372Total liabilities
    
    
    35,921
    
    
    
    29,175Commitments and contingencies (note 10)Shareholders equity:Preferred shares, $1 par value per share: Authorized 3,775 Class A
shares, 225 Series I Junior Participating Class A Shares, and 1,000
Class B Shares; none issued
    
    
    
    
    
    
    Common shares, $1 par value per share: Authorized 22,500 shares;
issued and outstanding 10,769 and 10,722 shares, respectively
(excluding treasury shares of 1,025 and 1,008, respectively)
    
    
    10,769
    
    
    
    10,722Additional capital in excess of par value
    
    
    17,034
    
    
    
    16,940Accumulated other comprehensive loss
    
    
    (11,148
    )
    
    
    (11,049
    )Retained earnings
    
    
    31,560
    
    
    
    29,295Total shareholders equity
    
    
    48,215
    
    
    
    45,908Total liabilities and shareholders equity
    
    $
    84,136
    
    
    $
    75,083
   4




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First Quarter
    
    
    First QuarterFiscal 2010
    
    
    Fiscal 2009(unaudited)
    
    
    (unaudited)Net sales
    
    $
    29,449
    
    
    $
    25,630Cost of sales
    
    
    17,158
    
    
    
    15,470Gross profit
    
    
    12,291
    
    
    
    10,160Selling, general and administrative expenses
    
    
    8,809
    
    
    
    8,588Operating profit
    
    
    3,482
    
    
    
    1,572Interest income, net
    
    
    148
    
    
    
    145Earnings, before income taxes
    
    
    3,630
    
    
    
    1,717Income tax expense
    
    
    1,365
    
    
    
    612Net earnings
    
    $
    2,265
    
    
    $
    1,105Net earnings per common shareBasic
    
    $
    0.21
    
    
    $
    0.10Diluted
    
    $
    0.21
    
    
    $
    0.10Average number of common shares outstandingBasic
    
    
    10,803
    
    
    
    10,595Diluted
    
    
    10,948
    
    
    
    10,749
   5




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First Quarter
    
    
    First QuarterFiscal 2010
    
    
    Fiscal 2009(unaudited)
    
    
    (unaudited)Operating activities:Net earnings
    
    $
    2,265
    
    
    $
    1,105Adjustments to reconcile net earnings to net cash used in operating activities:Depreciation and amortization
    
    
    199
    
    
    
    163Deferred income tax expense
    
    
    1,188
    
    
    
    439Stock-based compensation expense
    
    
    254
    
    
    
    199Changes in:Accounts receivable
    
    
    (14,996
    )
    
    
    (9,048
    )Inventory
    
    
    (15,192
    )
    
    
    (14,664
    )Prepaid expenses and other
    
    
    (497
    )
    
    
    74Accounts payable
    
    
    8,100
    
    
    
    7,953Accrued expenses
    
    
    (1,727
    )
    
    
    (1,541
    )Accrued retirement costs and other, net
    
    
    80
    
    
    
    (435
    )Net cash used by operating activities
    
    
    (20,326
    )
    
    
    (15,755
    )Investing activities:Purchases of property, plant and equipment, net
    
    
    (137
    )
    
    
    (735
    )Proceeds from sale of short-term investments
    
    
    9,677
    
    
    
    3,648Net cash provided by investing activities
    
    
    9,540
    
    
    
    2,913Financing activities:Repayment of short-term and long-term debt
    
    
    (22
    )
    
    
    (20
    )Proceeds from common shares issued, net
    
    
    39
    
    
    
    2Net cash provided (used) by financing activities
    
    
    17
    
    
    
    (18
    )Net decrease in cash and cash equivalents
    
    
    (10,769
    )
    
    
    (12,860
    )Cash and cash equivalents at the beginning of the period
    
    
    14,259
    
    
    
    14,210Cash and cash equivalents at the end of the period
    
    $
    3,490
    
    
    $
    1,350
   6




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##### Table of Contents



R.G. BARRY CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
for the First Quarter of Fiscal 2010 and the First Quarter of Fiscal 2009
(dollar amounts in thousands, except per share data and share data)
 1.
    
    Basis of Presentation
   Item 8  Financial Statements and Supplementary Data.
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Standards. FASB
Accounting Standards Codification
 2.
    
    Short-Term Investments and Fair Value
   
    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the Company has the ability to access at the measurement
date.
 
    
    Level 2 inputs are inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly or indirectly.
 
    
    Level 3 inputs are unobservable inputs for the asset or liability.
   7




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the First Quarter of Fiscal 2010 and the First Quarter of Fiscal 2009
(dollar amounts in thousands, except per share data and share data)
  Fair Value Measurements at Reporting Date Using:Quoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableSeptember 26,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Available-for-sale
securities
    
    $
    12,124
    
    
    
    0
    
    
    
    12,124
    
    
    
    0Total
    
    $
    12,124
    
    
    
    0
    
    
    
    12,124
    
    
    
    0
  3.
    
    Stock-Based Compensation
      8




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the First Quarter of Fiscal 2010 and the First Quarter of Fiscal 2009
(dollar amounts in thousands, except per share data and share data)
  Number of
    
    
    Number of
    
    
    Weighted-common shares
    
    
    common shares
    
    
    Averagesubject to ISOs
    
    
    subject to NQs
    
    
    exercise priceOutstanding at June 27, 2009
    
    
    117,000
    
    
    
    146,200
    
    
    $
    5.21Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (9,500
    )
    
    
    
    
    
    
    4.16Expired/Cancelled
    
    
    
    
    
    
    
    
    
    
    Outstanding at September 26, 2009
    
    
    107,500
    
    
    
    146,200
    
    
    $
    5.19Options exercisable at September 26, 2009
    
    
    104,500
    
    
    
    146,200
  Number ofcommon shares
    
    
    Grant Dateunderlying RSUs
    
    
    Fair ValueNonvested at June 27, 2009
    
    
    319,500
    
    
    $
    6.86Granted
    
    
    121,200
    
    
    
    7.61Vested
    
    
    (55,300
    )
    
    
    7.23Forfeited/Cancelled
    
    
    (20,100
    )
    
    
    7.45Nonvested at September 26, 2009
    
    
    365,300
    
    
    $
    7.02
   4.
    
    Income Taxes
  First Quarter
    
    
    First QuarterFiscal 2010
    
    
    Fiscal 2009Computed expected tax expense
    
    $
    1,234
    
    
    $
    584State income tax expense, net of federal income tax benefit
    
    
    117
    
    
    
    55Other, net
    
    
    14
    
    
    
    (27
    )Total expense
    
    $
    1,365
    
    
    $
    612
   5.
    
    Net Earnings Per Common Share
   9




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the First Quarter of Fiscal 2010 and the First Quarter of Fiscal 2009
(dollar amounts in thousands, except per share data and share data)
  First Quarter
    
    
    First QuarterFiscal 2010
    
    
    Fiscal 2009Numerator:Net earnings
    
    $
    2,265
    
    
    $
    1,105Denominator:Weighted-average common shares outstanding
    
    
    10,803
    
    
    
    10,595Effect of potentially dilutive securities: stock options and RSUs
    
    
    145
    
    
    
    154Weighted-average common shares outstanding, assuming dilution
    
    
    10,948
    
    
    
    10,749Basic net earnings per common share
    
    $
    0.21
    
    
    $
    0.10Diluted net earnings per common share
    
    $
    0.21
    
    
    $
    0.10
  First Quarter
    
    
    First QuarterFiscal 2010
    
    
    Fiscal 2009Stock options excluded from the calculation of diluted earnings per common share
    
    
    
    
    
    
    62
 6.
    
    Inventories  September 26, 2009
    
    
    June 27, 2009Raw materials
    
    $
    221
    
    
    $
    90Finished goods
    
    
    23,471
    
    
    
    8,409Total inventory
    
    $
    23,692
    
    
    $
    8,499
  7.
    
    Employee Retirement Plans
    First Quarter
    
    
    First QuarterFiscal 2010
    
    
    Fiscal 2009Service cost
    
    $
    9
    
    
    $
    11Interest cost
    
    
    571
    
    
    
    605Expected return on plan assets
    
    
    (493
    )
    
    
    (551
    )Net amortization
    
    
    173
    
    
    
    71Settlement loss
    
    
    185
    
    
    
    Total pension expense
    
    $
    445
    
    
    $
    136
  10




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the First Quarter of Fiscal 2010 and the First Quarter of Fiscal 2009
(dollar amounts in thousands, except per share data and share data)
 8.
    
    Comprehensive Income  First Quarter
    
    
    First QuarterFiscal 2010
    
    
    Fiscal 2009Net earnings
    
    $
    2,265
    
    
    $
    1,105Pension related adjustments, net of tax
    
    
    (99
    )
    
    
    Total comprehensive income
    
    $
    2,166
    
    
    $
    1,105
  9.
    
    Related Party Transactions
  10.
    
    Contingent Liabilities
  11.
    
    Subsequent Events  12.
    
    Recently Issued Accounting Standards
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Standards. FASB Accounting Standards
Codification
 .
  11




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the First Quarter of Fiscal 2010 and the First Quarter of Fiscal 2009
(dollar amounts in thousands, except per share data and share data)
    12




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ITEM 2 

    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
   Results of Operations
       Seasonality
   13




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Looking ahead to the remainder of fiscal 2010 and beyond
  Liquidity and Capital Resources
    Operating Activities
     14




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
    
    Net accounts receivable increased by $15.0 million and 9.0 million in the first quarter of
fiscal 2010 and the first quarter of fiscal 2009, respectively. The change in net accounts
receivable during these reporting periods primarily reflected the timing of shipments of
finished goods inventory to our customers consistent with the seasonality of our business, and
the timing of cash collections and customer deductions for promotions and other allowances.
 
    
    Net inventories increased by $15.2 million and $14.7 million during the first
quarter of fiscal 2010 and 2009 respectively. The increases reflected the net effect of the
timing of purchases of finished goods from third-party manufacturers and shipments to our
customers over the quarterly periods.
 
    
    Accounts payable increased by $8.1 million and $8.0 million during the first quarter of
fiscal 2010 and 2009, respectively. These changes were due primarily to the timing of
purchases and payment for finished goods inventory in line with the seasonality of our
business.
 
    
    Accrued expenses decreased by $1.7 million and $1.5 million during the first quarter of
fiscal 2010 and 2009. The decrease in accrued expenses was primarily due to the payment
during these periods of bonuses, which had been accrued at each of fiscal 2009 and fiscal
2008, respectively.
 Investing Activities
  Financing activities
  2010 Liquidity
  Bank Facility
  July to December
    
    
    January to JuneFiscal 2010
    
    $12 million
    
    $5 millionFiscal 2011
    
    $10 million
    
    $5 millionFiscal 2012
    
    $8 million
   15




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Other Long-Term Indebtedness and Current Installments of Long-Term Debt
  Contractual Obligations
 Item 7  Managements Discussion and Analysis of Financial Condition
and Results of Operations
 Critical Accounting Policies and Use of Significant Estimates
  Item 8 
Financial Statements and Supplementary Data.
  a)
    
    We recognize revenue when the following criteria are met:
 
    
    goods are shipped from our warehouses and other third-party distribution
locations, at which point our customers take ownership and assume risk of loss;
 
    
    collection of the relevant receivable is probable;
 
    
    persuasive evidence of an arrangement exists; and
 
    
    the sales price is fixed or determinable.
 In certain circumstances, we sell products to customers under special arrangements, which
provide for return privileges, discounts, promotions and other sales incentives. At the time
we recognize revenue, we reduce our measurement of revenue by an estimate of the potential
future returns and allowable retailer promotions and incentives, and recognize a
corresponding reduction in reported trade accounts receivable. These estimates have
traditionally been, and continue to be, sensitive to and
dependent on a variety of factors including, but not limited to, quantities sold to our
customers and the related selling and marketing support programs; channels of distribution;
sell-through rates at retail; the acceptance of the styling of our products by consumers; the
overall economic environment; consumer confidence leading towards and through the holiday
selling season; and other related factors. During the first quarter of fiscal 2010, there
were no significant adjustments related to our customer incentive reserves of $1.3 million
established at June 27, 2009.
  16




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We monitor the creditworthiness of our customers and the related collection of monies owed to
us. In circumstances where we become aware of a specific customers inability to meet its
financial obligations, a specific reserve for bad debts is taken as a reduction to accounts
receivable to reduce the net recognized receivable to the amount reasonably expected to be
collected. For all other customers, we recognize estimated reserves for bad debts based on
our historical collection experience, the financial condition of our customers, an evaluation
of current economic conditions and anticipated trends, each of which are subjective and
require certain assumptions. Actual charges for uncollectible amounts have not differed
materially from our estimates in prior periods.
 b)
    
    We value inventories using the lower of cost or market, based upon the first-in,
first-out (FIFO) costing method. We evaluate our inventories for any reduction in
realizable value in light of the prior selling season, the overall economic environment
and our expectations for the upcoming selling seasons, and we record the appropriate
write-downs based on this evaluation. During the first quarter of fiscal 2010, there were
no significant write-downs recorded to inventory.
 c)
    
    We make an assessment of the amount of income taxes that will become currently
payable or recoverable for the just concluded period, and the deferred tax costs or
benefits that will become realizable for income tax purposes in the future, as a
consequence of differences between results of operations as reported in conformity with
U.S. GAAP, and the requirements of the income tax codes existing in the various
jurisdictions where we operate. In evaluating the future benefits of deferred tax assets,
we examine our capacity for refund of federal income taxes due to our net operating loss
carryforward position, and our projections of future profits. In addition, we make
ongoing assessments of income tax exposures that may arise at the federal, state or local
tax levels. As a result of these evaluations, any exposure deemed more likely than not
will be quantified and accrued as tax expense during the period and reported in a reserve
for uncertain tax positions. Any identified exposures will be subjected to continuing
assessment and estimates will be revised accordingly as information becomes available to
us. We had no tax reserve for uncertain tax positions at the end of the first quarter of
fiscal 2010, the end of the first quarter of fiscal 2009, or the end of fiscal 2009 at
either the state or federal tax levels.
 d)
    
    We establish assumptions to measure our pension liabilities and project the long-term
rate of return expected on the invested pension assets in our qualified associates
retirement plan. Changes in assumptions, which may be caused by conditions in the debt
and equity markets, changes in asset mix, and plan experience, could have a material
effect on our pension obligations and expenses, and can affect our net income, assets, and
shareholders equity. Changes in assumptions may also result in voluntary or mandatory
requirements to make additional contributions to our qualified associates retirement
plan. These assumptions are reviewed and reset as appropriate at the pension measurement
date commensurate with the end of our fiscal year end, and we monitor these assumptions
over the course of the fiscal year.
 e)
    
    There are various other accounting policies that also require managements judgment.
For an additional discussion of all of our significant accounting policies, please see
Notes (1) (a) through (u) of the Notes to Consolidated Financial Statements in Item
8  Financial Statements and Supplementary Data. of Part II of our 2009 Form 10-K.
  Recently Issued Accounting Standards
   17




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ITEM 3

     Quantitative and Qualitative Disclosures About Market Risk
      
 ITEM 4

     Controls and Procedures
  
 ITEM 4T

     Controls and Procedures
   a.
    
    information required to be disclosed by the Company in this Quarterly Report on Form 10-Q
and the other reports that the Company files or submits under the Exchange Act would be
accumulated and communicated to the Companys management, including its principal executive
officer and its principal financial officer, as appropriate to allow timely decisions
regarding required disclosure;
 b.
    
    information required to be disclosed by the Company in this Quarterly Report on Form 10-Q
and the other reports that it files or submits under the Exchange Act would be recorded,
processed, summarized and reported within the time periods specified in the SECs rules and
forms; and
 c.
    
    the Companys disclosure controls and procedures were effective as of the end of the
quarterly period covered by this Quarterly Report on Form 10-Q.
    18




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Item 1.
    Legal Proceedings
  
 Item 1A.
    Risk Factors
  
 Item 2.
    Unregistered Sales of Equity Securities and Use of Proceeds
   
 Item 3.
    Defaults Upon Senior Securities
  
 Item 4.
    Submission of Matters to a Vote of Security Holders
  
 Item 5.

    Other Information
  
 Item 6.

    Exhibits
   19




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R.G. BARRY CORPORATION
RegistrantDate: November 4, 2009
    By:
    /s/ José G. IbarraJosé G. IbarraSenior Vice President  Finance, Chief Financial
Officer and Secretary (Principal Financial Officer)
(Duly Authorized Officer)  20




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Exhibit No.
    
    Description
    
    Location31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certifications (Principal Executive Officer)
    
    Filed herewith31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certifications (Principal Financial Officer)
    
    Filed herewith32.1
    
    
    Section 1350 Certifications (Principal Executive Officer and
Principal Financial Officer)
    
    Filed herewith
  21