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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 29, 2007
 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
    
    (IRS Employerof incorporation or organization)
    
    Identification Number)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
  o o þ
 o þ




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TABLE OF CONTENTS
  
 PART I  FINANCIAL INFORMATION
    
    
    4ITEM 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 INFORMATION
    
    
    19ITEM 1  Legal Proceedings
    
    
    19ITEM 1A  Risk Factors
    
    
    19ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20ITEM 3  Defaults Upon Senior Securities
    
    
    20ITEM 4  Submission of Matters to a Vote of Security Holders
    
    
    20ITEM 5  Other Information
    
    
    21ITEM 6  Exhibits
    
    
    21SIGNATURES
    
    
    22INDEX TO EXHIBITS
    
    
    23EX-31.1EX-31.2EX-32.1
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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
  Definitions
  Fiscal 2008
    
    52 weeks ending June 28, 2008Fiscal 2007
    
    52 weeks ended June 30, 20072006 transition period
    
    26 weeks ended July 1, 2006First quarter of fiscal 2008
    
    13 weeks ended September 29, 2007First quarter of fiscal 2007
    
    13 weeks ended September 30, 2006
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September 29, 2007
    
    
    June 30, 2007ASSETSCash and cash equivalents
    
    $
    1,288
    
    
    $
    18,207Accounts receivable (less allowances of $5,135 and $2,190, respectively)
    
    
    22,137
    
    
    
    6,860Inventory
    
    
    21,376
    
    
    
    14,639Deferred tax assets  current
    
    
    4,038
    
    
    
    6,243Prepaid expenses
    
    
    1,454
    
    
    
    949Assets held for disposal
    
    
    
    
    
    
    2,788Total current assets
    
    
    50,293
    
    
    
    49,686Property, plant and equipment, at cost
    
    
    9,693
    
    
    
    9,294Less accumulated depreciation and amortization
    
    
    7,166
    
    
    
    7,039Net property, plant and equipment
    
    
    2,527
    
    
    
    2,255Deferred tax assets  noncurrent
    
    
    8,279
    
    
    
    8,404Other assets
    
    
    3,157
    
    
    
    3,183Total assets
    
    $
    64,256
    
    
    $
    63,528LIABILITIES AND SHAREHOLDERS EQUITYShort-term notes payable
    
    $
    2,200
    
    
    $
    2,200Current installments of long-term debt
    
    
    78
    
    
    
    78Accounts payable
    
    
    9,424
    
    
    
    7,443Accrued expenses
    
    
    1,728
    
    
    
    3,412Liabilities associated with assets held for disposal
    
    
    
    
    
    
    2,357Total current liabilities
    
    
    13,430
    
    
    
    15,490Accrued retirement costs and other
    
    
    10,832
    
    
    
    11,551Long-term debt, excluding current installments
    
    
    252
    
    
    
    272Total liabilities
    
    
    24,514
    
    
    
    27,313Shareholders 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 10,392 and 10,352 shares, respectively
(excluding treasury shares of 1,005 and 1,000, respectively)
    
    
    10,392
    
    
    
    10,352Additional capital in excess of par value
    
    
    14,756
    
    
    
    14,546Accumulated other comprehensive loss
    
    
    (4,457
    )
    
    
    (3,968
    )Retained earnings
    
    
    19,051
    
    
    
    15,285Total shareholders equity
    
    
    39,742
    
    
    
    36,215Total liabilities and shareholders equity
    
    $
    64,256
    
    
    $
    63,528
  4




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First Quarter
    
    
    First QuarterFiscal 2008
    
    
    Fiscal 2007Net sales
    
    $
    32,130
    
    
    $
    35,292Cost of sales
    
    
    18,071
    
    
    
    20,473Gross profit
    
    
    14,059
    
    
    
    14,819Selling, general and administrative expenses
    
    
    8,265
    
    
    
    8,207Restructuring and asset impairment charges
    
    
    
    
    
    
    74Operating profit
    
    
    5,794
    
    
    
    6,538Other income
    
    
    15
    
    
    
    45Interest income (expense), net
    
    
    99
    
    
    
    (278
    )Income from continuing operations, before income tax
    
    
    5,908
    
    
    
    6,305Income tax expense
    
    
    2,142
    
    
    
    81Earnings from continuing operations
    
    
    3,766
    
    
    
    6,224Earnings from discontinued operations, net of income taxes
    
    
    
    
    
    
    73Net earnings
    
    $
    3,766
    
    
    $
    6,297Earnings per common share: continuing operationsBasic
    
    $
    0.36
    
    
    $
    0.62Diluted
    
    $
    0.35
    
    
    $
    0.60Earnings per common share: discontinued operationsBasic
    
    
    
    
    
    $
    0.01Diluted
    
    
    
    
    
    $
    0.01Net earnings per common shareBasic
    
    $
    0.36
    
    
    $
    0.63Diluted
    
    $
    0.35
    
    
    $
    0.61Average number of common shares outstandingBasic
    
    
    10,396
    
    
    
    10,020Diluted
    
    
    10,677
    
    
    
    10,343
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##### Table of Contents



First Quarter
    
    
    First QuarterFiscal 2008
    
    
    Fiscal 2007Operating activities:Net earnings
    
    $
    3,766
    
    
    $
    6,297Adjustments to reconcile net earnings to net cash used by operating activities:Depreciation and amortization
    
    
    129
    
    
    
    131Deferred income tax expense
    
    
    2,205
    
    
    
    Stock-based compensation expense
    
    
    150
    
    
    
    153Changes in:Accounts receivable
    
    
    (15,277
    )
    
    
    (21,208
    )Inventory
    
    
    (6,737
    )
    
    
    (1,243
    )Prepaid expenses and other
    
    
    (479
    )
    
    
    (3
    )Accounts payable
    
    
    1,981
    
    
    
    (2,364
    )Accrued expenses
    
    
    (1,734
    )
    
    
    (2,488
    )Accrued retirement costs and other, net
    
    
    (719
    )
    
    
    (310
    )Net cash used in operating activities
    
    
    (16,715
    )
    
    
    (21,035
    )Investing activities:Purchases of property, plant and equipment
    
    
    (400
    )
    
    
    (279
    )Proceeds from sale of subsidiary, net
    
    
    66
    
    
    
    Net cash used in investing activities
    
    
    (334
    )
    
    
    (279
    )Financing activities:Additions to short-term debt
    
    
    
    
    
    
    21,225Repayment of short-term debt
    
    
    (19
    )
    
    
    Proceeds from common shares issued
    
    
    149
    
    
    
    13Net cash provided by financing activities
    
    
    130
    
    
    
    21,238Effect of exchange rates on cash and cash equivalents
    
    
    
    
    
    
    3Net decrease in cash and cash equivalents
    
    
    (16,919
    )
    
    
    (73
    )Cash and cash equivalents at the beginning of the period
    
    
    18,207
    
    
    
    988Cash and cash equivalents at the end of the period
    
    $
    1,288
    
    
    $
    915Supplemental cash flow disclosures:Interest paid
    
    $
    89
    
    
    $
    334Income taxes refunded
    
    
    63
    
    
    
    
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2008 and First Quarter of Fiscal 2007
(dollar amounts in thousands, except per share data)
   Accounting for the Impairment or Disposal of Long-Lived Assets
     Shared-Based Payment
 Accounting for Stock-Based
Compensation
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##### Table of Contents



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2008 and First Quarter of Fiscal 2007
(dollar amounts in thousands, except per share data)
     Number of
    
    
    Number of
    
    
    Weighted-common shares
    
    
    common shares
    
    
    averagesubject to ISOs
    
    
    subject to NQs
    
    
    exercise priceOutstanding at June 30, 2007
    
    
    280,100
    
    
    
    435,900
    
    
    $
    5.79Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (27,800
    )
    
    
    (6,700
    )
    
    $
    4.06Expired/Cancelled
    
    
    
    
    
    
    
    
    
    
    Outstanding at September 29, 2007
    
    
    252,300
    
    
    
    429,200
    
    
    $
    5.87Options exercisable at September 29, 2007
    
    
    196,800
    
    
    
    335,900
  Number ofcommonsharesunderlying
    
    
    Grant DateRSUs
    
    
    Fair ValueNonvested at June 30, 2007
    
    
    85,900
    
    
    $
    7.82Granted
    
    
    95,900
    
    
    $
    9.01Vested
    
    
    (11,200
    )
    
    $
    6.18Forfeited
    
    
    
    
    
    
    Nonvested at September 29, 2007
    
    
    170,600
    
    
    $
    8.60
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2008 and First Quarter of Fiscal 2007
(dollar amounts in thousands, except per share data)
   First Quarter
    
    
    First QuarterFiscal 2008
    
    
    Fiscal 2007Computed expected tax expense
    
    $
    2,009
    
    
    $
    2,181State income tax expense, net of federal benefit
    
    
    180
    
    
    
    120Change in valuation allowance
    
    
    
    
    
    
    (2,265
    )Other, net
    
    
    (47
    )
    
    
    81Total expense
    
    $
    2,142
    
    
    $
    117Total expense allocated to discontinued operations
    
    
    
    
    
    
    36Total expense on continuing operations
    
    $
    2,142
    
    
    $
    81
 , Accounting for Income Taxes,
    Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement 109
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2008 and First Quarter of Fiscal 2007
(dollar amounts in thousands, except per share data)
   First Quarter
    
    
    First QuarterFiscal 2008
    
    
    Fiscal 2007Numerator:Net earnings
    
    $
    3,766
    
    
    $
    6,297Denominator:Weighted average common shares outstanding
    
    
    10,396
    
    
    
    10,020Effect of potentially dilutive securities: stock options and RSUs
    
    
    281
    
    
    
    323Weighted average common shares outstanding, assuming dilution
    
    
    10,677
    
    
    
    10,343Basic net earnings per common share
    
    $
    0.36
    
    
    $
    0.63Diluted net earnings per common share
    
    $
    0.35
    
    
    $
    0.61
    September 29, 2007
    
    
    June 30, 2007Raw materials
    
    $
    191
    
    
    $
    158Finished goods
    
    
    21,185
    
    
    
    14,481Total inventory
    
    $
    21,376
    
    
    $
    14,639
      First Quarter
    
    
    First QuarterFiscal 2008
    
    
    Fiscal 2007Service cost
    
    $
    11
    
    
    $
    19Interest cost
    
    
    573
    
    
    
    445Expected return on plan assets
    
    
    (539
    )
    
    
    (370
    )Net amortization
    
    
    107
    
    
    
    107Total pension expense
    
    $
    152
    
    
    $
    201
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2008 and First Quarter of Fiscal 2007
(dollar amounts in thousands, except per share data)
   First Quarter
    
    
    First QuarterFiscal 2008
    
    
    Fiscal 2007Net earnings
    
    $
    3,766
    
    
    $
    6,297Pension related adjustment
    
    
    (124
    )
    
    
    Foreign currency translation adjustments
    
    
    (365
    )
    
    
    18Total comprehensive income
    
    $
    3,277
    
    
    $
    6,315
  September 29, 2007
    
    
    June 30, 2007Accumulated foreign currency translation adjustments
    
    $
    
    
    
    $
    365Pension related adjustment, net of taxes
    
    
    (4,457
    )
    
    
    (4,333
    )Accumulated other comprehensive loss
    
    $
    (4,457
    )
    
    $
    (3,968
    )
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2008 and First Quarter of Fiscal 2007
(dollar amounts in thousands, except per share data)
    , Fair Value Measurements
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Introduction
    Fiscal 2008
    
    52 weeks ending June 28, 2008Fiscal 2007
    
    52 weeks ended June 30, 20072006 transition period
    
    26 weeks ended July 1, 2006First quarter of fiscal 2008
    
    13 weeks ended September 29, 2007First quarter of fiscal 2007
    
    13 weeks ended September 30, 2006
 Results of Continuing Operations
     q
    
    a $513 thousand increase in marketing and advertising costs incurred in support of our
existing and new product brand lines; offset byq
    
    a $425 thousand decrease in payroll expense, which was comprised of a $284 thousand
reduction in our bonus incentive accrual for the first quarter of fiscal 2008 as compared
to the same quarter a year ago, and a $141 thousand favorable adjustment with respect to
the bonus incentive accrual established at the end of fiscal 2007.
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Results of Discontinued Operations
  Seasonality
  Looking ahead to the remainder of fiscal 2008 and beyond
  Liquidity and Capital Resources
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Operating Activities
   Investing Activities
  Financing activities
  2008 Liquidity
  Bank Borrowing Facility
  
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Other Long-Term Indebtedness and Current Installments of Long-Term Debt
  Off-Balance Sheet Arrangements and Contractual Obligations
  Critical Accounting Policies and Use of Significant Estimates
   (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 related receivable is probable;
    
    persuasive evidence of a sale arrangement exists; and
    
    the sales price is fixed or determinable.
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(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. No significant changes occurred during the first quarter of fiscal 2008 with
respect to these estimates made at June 30, 2007.
 (c)
    
    We make an assessment of the amount of income taxes that will become currently payable or
recoverable for the just concluded period, and what deferred tax costs or benefits will become
realizable for income tax purposes in the future, as a 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 carry-forward position, and our projections of future
profits. We recorded a valuation allowance when it was more likely than not that some portion
or all of our deferred tax assets would not be realized. Accordingly, beginning with year-end
fiscal 2003, we established a valuation allowance against the value of those deferred tax
assets. At that time, there was not sufficient historical assurance that future taxable
income would be generated to offset these deferred deductible items. Accordingly, we
established a valuation allowance against the net deferred tax assets in the amount of $18.3
million at the end of the 2006 transition period.
    Recently Issued Accounting Standards
 , Fair Value Measurements
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a.
    
    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 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; andc.
    
    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.
   
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Our North America business, which is our primary business, is dependent on our ability to continue
sourcing products from outside North America.
 ®
  Our concentration of customers could have a material adverse effect on us, and our success is
dependent on the success of our customers.
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The footwear industry is highly competitive.
  
    
   
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R.G. BARRY CORPORATIONRegistrantDate: November 13, 2007
    
    By:
    
    /s/ Daniel D. VirenDaniel D. VirenSenior Vice President  Finance, Chief FinancialOfficer and Secretary (Principal Financial Officer)(Duly Authorized Officer)
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Exhibit No.
    
    Description
    
    Location10.1
    
    Summary of Compensation for Directors of R.G. Barry Corporation
    
    Incorporated herein
by reference to
Exhibit 10.42 to
the Annual Report
on Form 10-K for
the fiscal year
ended June 30, 2007
of R.G. Barry
Corporation (File
No. 001-08769)10.2
    
    2008 R.G. Barry Corporation Management Bonus Plan
    
    Incorporated herein
by reference to
Exhibit 10.1 to the
Current Report of
R.G. Barry
Corporation on Form
8-K dated and filed
August 28, 2007
(File No.
001-08769)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
    
    Filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)
    
    Filed herewith32.1
    
    Section 1350 Certifications (Principal Executive Officer and Principal Financial Officer)
    
    Filed herewith
 23