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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 27, 2008
 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 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
  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
    
    12ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
    
    16ITEM 4  Controls and Procedures
    
    17ITEM 4T  Controls and ProceduresPART II  OTHER INFORMATIONITEM 1  Legal Proceedings
    
    18ITEM 1A  Risk Factors
    
    18ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    18ITEM 3  Defaults Upon Senior Securities
    
    18ITEM 4  Submission of Matters to a Vote of Security Holders
    
    18ITEM 5  Other Information
    
    19ITEM 6  Exhibits
    
    19SIGNATURES
    
    20INDEX TO EXHIBITS
    
    21EX-10.1EX-31.1EX-31.2EX-32.1
  2




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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
  Definitions
  Fiscal 2009
    
    52 weeks ending June 27, 2009Fiscal 2008
    
    52 weeks ended June 28, 2008First quarter of fiscal 2009
    
    13 weeks ended September 27, 2008First quarter of fiscal 2008
    
    13 weeks ended September 29, 20072006 transition period
    
    26 weeks ending July 1, 2006
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September 27, 2008
    
    
    June 28, 2008ASSETSCash and cash equivalents
    
    $
    1,350
    
    
    $
    14,210Short-term investments
    
    
    8,222
    
    
    
    11,870Accounts receivable (less allowances of $4,917 and $1,885, respectively)
    
    
    21,693
    
    
    
    12,653Inventory
    
    
    25,505
    
    
    
    10,842Deferred tax assets  current
    
    
    4,105
    
    
    
    4,344Prepaid expenses
    
    
    1,526
    
    
    
    1,557Total current assets
    
    
    62,401
    
    
    
    55,476Property, plant and equipment, at cost
    
    
    10,820
    
    
    
    10,059Less accumulated depreciation and amortization
    
    
    7,073
    
    
    
    6,910Net property, plant and equipment
    
    
    3,747
    
    
    
    3,149Deferred tax assets  noncurrent
    
    
    5,949
    
    
    
    6,111Other assets
    
    
    3,156
    
    
    
    3,207Total assets
    
    $
    75,253
    
    
    $
    67,943LIABILITIES AND SHAREHOLDERS EQUITYShort-term notes payable
    
    $
    2,200
    
    
    $
    2,200Current installments of long-term debt
    
    
    84
    
    
    
    84Accounts payable
    
    
    12,141
    
    
    
    4,164Accrued expenses
    
    
    1,830
    
    
    
    3,303Total current liabilities
    
    
    16,255
    
    
    
    9,751Long-term debt, excluding current installments
    
    
    167
    
    
    
    187Accrued retirement costs and other
    
    
    11,606
    
    
    
    11,976Total liabilities
    
    
    28,028
    
    
    
    21,914Shareholders 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 10,571 and 10,548 shares, respectively
(excluding treasury shares of 1,014 and 1,005, respectively)
    
    
    10,571
    
    
    
    10,548Additional capital in excess of par value
    
    
    15,872
    
    
    
    15,763Accumulated other comprehensive loss
    
    
    (5,307
    )
    
    
    (5,352
    )Retained earnings
    
    
    26,089
    
    
    
    25,070Total shareholders equity
    
    
    47,225
    
    
    
    46,029Total liabilities and shareholders equity
    
    $
    75,253
    
    
    $
    67,943
  4




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First Quarter
    
    
    First QuarterFiscal 2009
    
    
    Fiscal 2008Net sales
    
    $
    25,630
    
    
    $
    32,130Cost of sales
    
    
    15,470
    
    
    
    18,071Gross profit
    
    
    10,160
    
    
    
    14,059Selling, general and administrative expenses
    
    
    8,588
    
    
    
    8,265Operating profit
    
    
    1,572
    
    
    
    5,794Interest income, net
    
    
    145
    
    
    
    114Earnings, before income tax
    
    
    1,717
    
    
    
    5,908Income tax
    
    
    612
    
    
    
    2,142Net earnings
    
    $
    1,105
    
    
    $
    3,766Net earnings per common shareBasic
    
    $
    0.10
    
    
    $
    0.36Diluted
    
    $
    0.10
    
    
    $
    0.35Average number of common shares outstandingBasic
    
    
    10,595
    
    
    
    10,396Diluted
    
    
    10,749
    
    
    
    10,677
  5




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##### Table of Contents



First Quarter
    
    
    First QuarterFiscal 2009
    
    
    Fiscal 2008Operating activities:Net earnings
    
    $
    1,105
    
    
    $
    3,766Adjustments to reconcile net earnings to net cash used in operating activities:Depreciation and amortization
    
    
    163
    
    
    
    129Deferred income tax expense
    
    
    439
    
    
    
    2,205Stock-based compensation expense
    
    
    199
    
    
    
    150Changes in:Accounts receivable
    
    
    (9,048
    )
    
    
    (15,277
    )Inventory
    
    
    (14,664
    )
    
    
    (6,737
    )Prepaid expenses and other
    
    
    74
    
    
    
    (479
    )Accounts payable
    
    
    7,953
    
    
    
    1,981Accrued expenses
    
    
    (1,541
    )
    
    
    (1,734
    )Accrued retirement costs and other, net
    
    
    (435
    )
    
    
    (719
    )Net cash used in operating activities
    
    
    (15,755
    )
    
    
    (16,715
    )Investing activities:Purchases of property, plant and equipment
    
    
    (735
    )
    
    
    (400
    )Proceeds from sale of short-term investments
    
    
    3,648
    
    
    
    Proceeds from sale of subsidiary, net
    
    
    
    
    
    
    66Net cash provided by (used in) investing activities
    
    
    2,913
    
    
    
    (334
    )Financing activities:Repayment of short-term and long-term debt
    
    
    (20
    )
    
    
    (19
    )Proceeds from common shares issued, net
    
    
    2
    
    
    
    149Net cash (used in) provided by financing activities
    
    
    (18
    )
    
    
    130Net decrease in cash and cash equivalents
    
    
    (12,860
    )
    
    
    (16,919
    )Cash and cash equivalents at the beginning of the period
    
    
    14,210
    
    
    
    18,207Cash and cash equivalents at the end of the period
    
    $
    1,350
    
    
    $
    1,288
  
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2009 and the First Quarter of Fiscal 2008
(dollar amounts in thousands, except per share data)
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2009 and the First Quarter of Fiscal 2008
(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 28, 2008
    
    
    212,600
    
    
    
    238,200
    
    
    $
    5.23Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (1,700
    )
    
    
    
    
    
    
    4.25Expired/Cancelled
    
    
    
    
    
    
    
    
    
    
    Outstanding at September 27, 2008
    
    
    210,900
    
    
    
    238,200
    
    
    $
    5.23Options exercisable at September 27, 2008
    
    
    206,900
    
    
    
    204,900
  Number ofcommon shares
    
    
    Grant Dateunderlying RSUs
    
    
    Fair ValueNonvested at June 28, 2008
    
    
    190,900
    
    
    $
    7.94Granted
    
    
    88,500
    
    
    $
    7.16Vested
    
    
    (29,200
    )
    
    $
    8.07Forfeited/Cancelled
    
    
    
    
    
    $
    Nonvested at September 27, 2008
    
    
    250,200
    
    
    $
    7.80
     First Quarter
    
    
    First QuarterFiscal 2009
    
    
    Fiscal 2008Computed expected tax expense
    
    $
    584
    
    
    $
    2,009State income tax expense, net of federal income tax
    
    
    55
    
    
    
    180Other, net
    
    
    (27
    )
    
    
    (47
    )Total expense
    
    $
    612
    
    
    $
    2,142
 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 2009 and the First Quarter of Fiscal 2008
(dollar amounts in thousands, except per share data)
    First Quarter
    
    
    First QuarterFiscal 2009
    
    
    Fiscal 2008Numerator:Net earnings
    
    $
    1,105
    
    
    $
    3,766Denominator:Weighted average common shares outstanding
    
    
    10,595
    
    
    
    10,396Effect of potentially dilutive securities: stock options and RSUs
    
    
    154
    
    
    
    281Weighted average common shares outstanding, assuming dilution
    
    
    10,749
    
    
    
    10,677Basic net earnings per common share
    
    $
    0.10
    
    
    $
    0.36Diluted net earnings per common share
    
    $
    0.10
    
    
    $
    0.35
    September 27, 2008
    
    
    June 28, 2008Raw materials
    
    $
    300
    
    
    $
    72Finished goods
    
    
    25,205
    
    
    
    10,770Total inventory
    
    $
    25,505
    
    
    $
    10,842
   Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R)
 Before
    
    
    Effect of
    
    
    Afterapplication of
    
    
    applying
    
    
    application ofSFAS No. 158
    
    
    SFAS No. 158
    
    
    SFAS No. 158Assets:Deferred tax assets-noncurrent
    
    $
    5,925
    
    
    $
    24
    
    
    $
    5,949Liabilities and shareholders equity:Accrued retirement cost and other
    
    $
    (11,541
    )
    
    $
    (65
    )
    
    $
    (11,606
    )Accumulated other comprehensive loss
    
    
    5,352
    
    
    
    (45
    )
    
    
    5,307Retained earnings
    
    
    (26,175
    )
    
    
    86
    
    
    
    (26,089
    )Total liabilities and shareholders equity affected
    
    $
    (32,364
    )
    
    $
    (24
    )
    
    $
    (32,388
    )
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2009 and the First Quarter of Fiscal 2008
(dollar amounts in thousands, except per share data)
   First Quarter
    
    
    First QuarterFiscal 2009
    
    
    Fiscal 2008Service cost
    
    $
    11
    
    
    $
    11Interest cost
    
    
    605
    
    
    
    573Expected return on plan assets
    
    
    (551
    )
    
    
    (539
    )Net amortization
    
    
    71
    
    
    
    107Total pension expense
    
    $
    136
    
    
    $
    152
   First Quarter
    
    
    First QuarterFiscal 2009
    
    
    Fiscal 2008Net earnings
    
    $
    1,105
    
    
    $
    3,766Pension related adjustments
    
    
    
    
    
    
    (124
    )Foreign currency translation adjustments
    
    
    
    
    
    
    (365
    )Total comprehensive income
    
    $
    1,105
    
    
    $
    3,277
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the First Quarter of Fiscal 2009 and the First Quarter of Fiscal 2008
(dollar amounts in thousands, except per share data)
  Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R),
 , Fair Value Measurements Application of FASB Statement No. 157 to
FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13, Effective Date
of FASB Statement No. 157 Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active. Accounting for Leases . Fair Value Measurements,
 Business Combinations, Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB
No.151.
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Introduction
   Results of Operations
       12




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Seasonality
  Looking ahead to the remainder of fiscal 2009 and beyond
  Liquidity and Capital Resources
    Operating Activities
   13




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§
    Net accounts receivable increased by $9.0 million and $15.3 million. These increases in
net accounts receivable during these reporting periods reflect the timing of shipments of
finished goods inventory to our customers in those quarterly periods.§
    Net inventories increased by $14.7 million and $6.7 million. These increases reflect the
net effect of the timing of purchases of finished goods inventory from third-party
manufacturers and shipments of products to our customers over the quarterly periods.§
    Accounts payable increased by $8.0 million and $2.0 million. The increases in this area
were due primarily to the timing of purchases and payment for finished goods inventory, which
were in line with the seasonality of our business.§
    Accrued expenses decreased by $1.5 million and $1.7 million. The decreases in accrued
expenses were due primarily to payment during the respective periods of our incentive bonus
accrued at each of the preceding fiscal year ends.
 Investing Activities
  Financing activities
  2009 Liquidity
  Bank Facility
  
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Other Long-Term Indebtedness and Current Installments of Long-Term Debt
  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 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
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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.
 There were no significant adjustments reported during the first quarter of fiscal 2009 to
allowance accruals established at the end of fiscal 2008.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 2009, there were no significant adjustments recorded to
inventory valuation allowances established at the end of fiscal 2008.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 tax
contingency reserve. 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 contingency reserve at the end of the first quarter of fiscal 2009, the end of
the first quarter of fiscal 2008, or the end of fiscal 2008, as determined by management at
either the state or federal tax levels.d)
    
    There are various other accounting policies that also require managements judgment.
We follow these policies consistently from year to year and period to period. For an
additional discussion of all of our significant accounting policies, please see Notes 1
(a) through (u) of the Notes to Consolidated Financial Statements in Item 8. Financial
Statements and Supplementary Data of our 2008 Form 10-K.
  Recently Issued Accounting Standards
  
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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 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; 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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Potential Bonus(as a % of Annual Salary)Name
    
    Position
    
    Threshold
    
    MaximumGreg Tunney
    
    President and Chief Executive Office
    
    
    27.5
    %
    
    
    82
    %Daniel Viren
    
    Senior Vice President-Finance, Chief Financial Officer, Secretary
    
    
    19.25
    %
    
    
    46.13
    %Pamela
Gentile
    
    Senior Vice President-Sales and Brand President, Dearfoams Brands
    
    
    13.75
    %
    
    
    41
    %Glenn Evans
    
    Senior Vice President-Sourcing and Logistics
    
    
    13.75
    %
    
    
    41
    %Lee Smith
    
    Senior Vice President-Design and Development
    
    
    13.75
    %
    
    
    41
    %
   
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R.G. BARRY CORPORATION
RegistrantDate: November 4, 2008
    By:
    /s/ Daniel D. VirenDaniel D. VirenSenior Vice President  Finance, Chief Financial

Officer and Secretary (Principal Financial Officer)

(Duly Authorized Officer) 20




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Exhibit No.
    
    Description
    
    Location10.1
    
    2009 R.G. Barry Corporation Management Bonus Plan
    
    Filed herewith31.1
    
    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
 21