##### 



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 December 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 
of incorporation or organization)
    
    (IRS Employer
Identification Number)


13405 Yarmouth Road NW, Pickerington, Ohio
    
    43147(Address of principal executive offices)
    
    (Zip Code)












þ o




o o þ o


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
    
    
    19ITEM 4  Controls and Procedures
    
    
    19ITEM 4T  Controls and Procedures
    
    
    19PART II  OTHER INFORMATION
    
    
    20ITEM 1  Legal Proceedings
    
    
    20ITEM 1A  Risk Factors
    
    
    20ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21ITEM 3   Defaults Upon Senior Securities
    
    
    21ITEM 4  Submission of Matters to a Vote of Security Holders
    
    
    21ITEM 5  Other Information
    
    
    21ITEM 6  Exhibits
    
    
    21SIGNATURES
    
    
    22INDEX TO EXHIBITS
    
    
    23
  EX-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 2008
    
    52 weeks ending June 28, 2008Fiscal 2007
    
    52 weeks ended June 30, 20072006 transition period
    
    26 weeks ended July 1, 2006First half fiscal 2008
    
    26 weeks ended December 29, 2007First half fiscal 2007
    
    26 weeks ended December 30, 2006Second quarter of fiscal 2008
    
    13 weeks ended December 29, 2007Second quarter of fiscal 2007
    
    13 weeks ended December 30, 2006
 3




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##### 



December 29, 2007
    
    
    June 30, 2007ASSETSCash and cash equivalents
    
    $
    23,105
    
    
    $
    18,207Short term investments
    
    
    1,090
    
    
    
    Accounts receivable (less allowances of $11,368 and $2,190, respectively)
    
    
    10,305
    
    
    
    6,860Inventory
    
    
    14,428
    
    
    
    14,639Deferred tax assets  current
    
    
    1,684
    
    
    
    6,243Prepaid expenses
    
    
    1,039
    
    
    
    949Assets held for disposal
    
    
    
    
    
    
    2,788Total current assets
    
    
    51,651
    
    
    
    49,686Property, plant and equipment, at cost
    
    
    10,367
    
    
    
    9,294Less accumulated depreciation and amortization
    
    
    7,272
    
    
    
    7,039Net property, plant and equipment
    
    
    3,095
    
    
    
    2,255Deferred tax assets  noncurrent
    
    
    8,360
    
    
    
    8,404Other assets
    
    
    3,108
    
    
    
    3,183Total assets
    
    $
    66,214
    
    
    $
    63,528LIABILITIES AND SHAREHOLDERS EQUITYShort-term notes payable
    
    $
    2,200
    
    
    $
    2,200Current installments of long-term debt
    
    
    78
    
    
    
    78Accounts payable
    
    
    6,753
    
    
    
    7,443Accrued expenses
    
    
    2,065
    
    
    
    3,412Liabilities associated with assets held for disposal
    
    
    
    
    
    
    2,357Total current liabilities
    
    
    11,096
    
    
    
    15,490Accrued retirement costs and other
    
    
    10,828
    
    
    
    11,551Long-term debt, excluding current installments
    
    
    233
    
    
    
    272Total liabilities
    
    
    22,157
    
    
    
    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 10,405 and 10,352 shares, respectively
(excluding treasury shares of 1,005 and 1,000, respectively)
    
    
    10,405
    
    
    
    10,352Additional capital in excess of par value
    
    
    14,976
    
    
    
    14,546Accumulated other comprehensive loss
    
    
    (4,457
    )
    
    
    (3,968
    )Retained earnings
    
    
    23,133
    
    
    
    15,285Total shareholders equity
    
    
    44,057
    
    
    
    36,215Total liabilities and shareholders equity
    
    $
    66,214
    
    
    $
    63,528
  4




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##### 



Second Quarter
    
    
    First HalfFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net sales
    
    $
    38,555
    
    
    $
    39,527
    
    
    $
    70,685
    
    
    $
    74,818Cost of sales
    
    
    22,813
    
    
    
    24,337
    
    
    
    40,884
    
    
    
    44,809Gross profit
    
    
    15,742
    
    
    
    15,190
    
    
    
    29,801
    
    
    
    30,009Selling, general and administrative expenses
    
    
    9,340
    
    
    
    8,562
    
    
    
    17,605
    
    
    
    16,768Gain on disposal of land
    
    
    
    
    
    
    (878
    )
    
    
    
    
    
    
    (878
    )Restructuring and asset impairment charges
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    72Operating profit
    
    
    6,402
    
    
    
    7,508
    
    
    
    12,196
    
    
    
    14,047Other income
    
    
    35
    
    
    
    51
    
    
    
    50
    
    
    
    96Interest income (expense), net
    
    
    79
    
    
    
    (257
    )
    
    
    178
    
    
    
    (536
    )Income from continuing operations, before income tax
    
    
    6,516
    
    
    
    7,302
    
    
    
    12,424
    
    
    
    13,607Income tax expense (benefit)
    
    
    2,434
    
    
    
    (12,929
    )
    
    
    4,576
    
    
    
    (12,849
    )Earnings from continuing operations
    
    
    4,082
    
    
    
    20,231
    
    
    
    7,848
    
    
    
    26,456Earnings from discontinued operations, net of income taxes
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    153Net earnings
    
    $
    4,082
    
    
    $
    20,311
    
    
    $
    7,848
    
    
    $
    26,609Earnings per common share: continuing operationsBasic
    
    $
    0.39
    
    
    $
    2.02
    
    
    $
    0.75
    
    
    $
    2.64Diluted
    
    $
    0.38
    
    
    $
    1.95
    
    
    $
    0.74
    
    
    $
    2.56Earnings per common share: discontinued operationsBasic
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    $
    0.01Diluted
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    $
    0.01Net earnings per common shareBasic
    
    $
    0.39
    
    
    $
    2.03
    
    
    $
    0.75
    
    
    $
    2.65Diluted
    
    $
    0.38
    
    
    $
    1.96
    
    
    $
    0.74
    
    
    $
    2.57Average number of common shares outstandingBasic
    
    
    10,426
    
    
    
    10,040
    
    
    
    10,411
    
    
    
    10,030Diluted
    
    
    10,640
    
    
    
    10,384
    
    
    
    10,664
    
    
    
    10,358
  5




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##### 



First HalfFiscal 2008
    
    
    Fiscal 2007Operating activities:Net earnings
    
    $
    7,848
    
    
    $
    26,609Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    264
    
    
    
    259Deferred income tax expense (benefit)
    
    
    4,477
    
    
    
    (13,443
    )Stock-based compensation expense
    
    
    325
    
    
    
    288Gain on disposal of property, plant and equipment, net
    
    
    
    
    
    
    (867
    )Changes in:Accounts receivable
    
    
    (3,445
    )
    
    
    (6,981
    )Inventory
    
    
    211
    
    
    
    13,900Prepaid expenses and other
    
    
    (15
    )
    
    
    461Accounts payable
    
    
    (768
    )
    
    
    (4,254
    )Accrued expenses
    
    
    (1,396
    )
    
    
    (1,898
    )Accrued retirement costs and other, net
    
    
    (723
    )
    
    
    (676
    )Net cash provided by operating activities
    
    
    6,778
    
    
    
    13,398Investing activities:Purchase of short term investments
    
    
    (1,090
    )
    
    
    Purchases of property, plant and equipment
    
    
    (1,028
    )
    
    
    (412
    )Proceeds from sale of property, plant and equipment
    
    
    4
    
    
    
    887Proceeds from sale of subsidiary, net
    
    
    66
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (2,048
    )
    
    
    475Financing activities:Additions to short-term debt
    
    
    
    
    
    
    54Repayment of short-term and long-term debt
    
    
    (39
    )
    
    
    (109
    )Proceeds from common shares issued
    
    
    207
    
    
    
    21Net cash provided by (used in) financing activities
    
    
    168
    
    
    
    (34
    )Effect of exchange rates on cash and cash equivalents
    
    
    
    
    
    
    16Net increase in cash and cash equivalents
    
    
    4,898
    
    
    
    13,855Cash and cash equivalents at the beginning of the period
    
    
    18,207
    
    
    
    988Cash and cash equivalents at the end of the period
    
    $
    23,105
    
    
    $
    14,843Supplemental cash flow disclosures:Interest paid
    
    $
    99
    
    
    $
    585Income taxes paid, net of taxes refunded
    
    
    107
    
    
    
    273
  6




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##### 



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Second Quarter and First Half of Fiscal 2008 and the Second Quarter and First Half of Fiscal 2007
(dollar amounts in thousands, except per share data)
   Accounting for the Impairment or Disposal of Long-Lived Assets
       Shared-Based Payment
 7




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##### 



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Second Quarter and First Half of Fiscal 2008 and the Second Quarter and First Half of Fiscal 2007
(dollar amounts in thousands, except per share data)
 Accounting for Stock-Based
Compensation
     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
    
    
    (40,300
    )
    
    
    (6,700
    )
    
    $
    3.48Expired/Cancelled
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 29, 2007
    
    
    239,800
    
    
    
    429,200
    
    
    $
    5.92Options exercisable at December 29, 2007
    
    
    185,300
    
    
    
    335,900
  Number ofcommon shares
    
    
    Grant Dateunderlying RSUs
    
    
    Fair ValueNonvested at June 30, 2007
    
    
    85,900
    
    
    $
    7.82Granted
    
    
    100,700
    
    
    $
    9.02Vested
    
    
    (11,200
    )
    
    $
    6.18Forfeited
    
    
    (3,200
    )
    
    $
    6.18Nonvested at December 29, 2007
    
    
    172,200
    
    
    $
    8.66
 8




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##### 



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Second Quarter and First Half of Fiscal 2008 and the Second Quarter and First Half of Fiscal 2007
(dollar amounts in thousands, except per share data)
     First HalfFiscal 2008
    
    
    Fiscal 2007Computed expected tax expense
    
    $
    4,224
    
    
    $
    4,705State income tax expense, net of federal benefit
    
    
    379
    
    
    
    412Change in valuation allowance
    
    
    
    
    
    
    (18,273
    )Other, net
    
    
    (27
    )
    
    
    384Total expense (benefit)
    
    $
    4,576
    
    
    $
    (12,772
    )Total expense allocated to discontinued operations
    
    
    
    
    
    
    77Total expense (benefit) on continuing operations
    
    $
    4,576
    
    
    $
    (12,849
    )
 , Accounting for Income Taxes,
  Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement 109
     9




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Second Quarter and First Half of Fiscal 2008 and the Second Quarter and First Half of Fiscal 2007
(dollar amounts in thousands, except per share data)
  Second Quarter
    
    
    First HalfFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Numerator:Net earnings
    
    $
    4,082
    
    
    $
    20,311
    
    
    $
    7,848
    
    
    $
    26,609Denominator:Weighted average common shares outstanding
    
    
    10,426
    
    
    
    10,040
    
    
    
    10,411
    
    
    
    10,030Effect of potentially dilutive
securities: stock options and RSUs
    
    
    214
    
    
    
    344
    
    
    
    253
    
    
    
    328Weighted average common shares
outstanding, assuming dilution
    
    
    10,640
    
    
    
    10,384
    
    
    
    10,664
    
    
    
    10,358Basic net earnings per common share
    
    $
    0.39
    
    
    $
    2.03
    
    
    $
    0.75
    
    
    $
    2.65Diluted net earnings per common share
    
    $
    0.38
    
    
    $
    1.96
    
    
    $
    0.74
    
    
    $
    2.57
    December 29, 2007
    
    
    June 30, 2007Raw materials
    
    $
    167
    
    
    $
    158Finished goods
    
    
    14,261
    
    
    
    14,481Total inventory
    
    $
    14,428
    
    
    $
    14,639
      Second Quarter
    
    
    First HalfFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Service cost
    
    $
    11
    
    
    $
    19
    
    
    $
    22
    
    
    $
    38Interest cost
    
    
    573
    
    
    
    445
    
    
    
    1,146
    
    
    
    889Expected return on plan assets
    
    
    (539
    )
    
    
    (370
    )
    
    
    (1,078
    )
    
    
    (740
    )Net amortization
    
    
    106
    
    
    
    104
    
    
    
    213
    
    
    
    213Total pension expense
    
    $
    151
    
    
    $
    198
    
    
    $
    303
    
    
    $
    400
 10




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##### 



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Second Quarter and First Half of Fiscal 2008 and the Second Quarter and First Half of Fiscal 2007
(dollar amounts in thousands, except per share data)
   Second Quarter
    
    
    First HalfFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net earnings
    
    $
    4,082
    
    
    $
    20,311
    
    
    $
    7,848
    
    
    $
    26,609Pension related adjustment
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    72
    
    
    
    (365
    )
    
    
    91Total comprehensive income
    
    $
    4,082
    
    
    $
    20,383
    
    
    $
    7,359
    
    
    $
    26,700
  December 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
    )
      11




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Second Quarter and First Half of Fiscal 2008 and the Second Quarter and First Half of Fiscal 2007
(dollar amounts in thousands, except per share data)
     , Fair Value Measurements
 Business Combinations, Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB
No.151.
 12




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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 half fiscal 2008
    
    26 weeks ended December 29, 2007First half fiscal 2007
    
    26 weeks ended December 30, 2006Second quarter of fiscal 2008
    
    13 weeks ended December 29, 2007Second quarter of fiscal 2007
    
    13 weeks ended December 30, 2006
 Results of Continuing Operations
    13




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Results of Discontinued Operations
  Seasonality
  14




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Looking ahead to the remainder of fiscal 2008 and beyond
  Liquidity and Capital Resources
     Operating Activities
     15




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
    
    Net accounts receivable increased by $3.4 million and by nearly $7.0 million during the
first half of fiscal 2008 and first half of fiscal 2007, respectively. The increases in net
accounts receivable during these reporting periods were due primarily to the seasonality of
our business.
    
    Net inventories decreased by $211 thousand during the first half of fiscal 2008. This
decrease reflected primarily the net effect of our continued success in selling closeout
inventories, our planned purchases of inventory to support an initiative with a key customer
and purchases made in support of the launching of two new brand lines. The decrease in net
inventories of $13.9 million during the first half of fiscal 2007 primarily reflected our
successful efforts to manage our inventory levels consistent with our customer-centric sell-in
approach as well as our continued success in selling our closeout inventories.
    
    Accounts payable decreased by $768 thousand and approximately $4.2 million during the first
half of fiscal 2008 and first half of fiscal 2007, respectively. The decreases in accounts
payable were due primarily to the timing of purchases and payment for inventories, which were
in line with the seasonality of our business and consistent with supporting a product
transition initiative with a key customer.
    
    Accrued expenses decreased by $1.4 million and $1.9 million during the fist half of fiscal
2008 and fist half of fiscal 2007, respectively. The decreases in accrued expenses were due
primarily to a reduction in our bonus incentive accrual recorded at the end of each of the
reporting periods.
 Investing Activities
  Financing activities
  2008 Liquidity
  Bank Facility
  
  16




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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
    
    
    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.
  17




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##### 



Recently Issued Accounting Standards
 , Fair Value Measurements
 Business Combinations, Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB
No.151.
 18




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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.
   
   19




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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.
   20




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##### 



The footwear industry is highly competitive.
  We rely on distribution centers to store and distribute our products, and if there are any
significant disruptions affecting the flow of products to and from any of these facilities, we may
be unable to effectively deliver products to our customers.
  
    
   
   
   
   21




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##### 



R.G. BARRY CORPORATION
RegistrantDate: February 8, 2008
    By:
    /s/ Daniel D. VirenDaniel D. VirenSenior Vice President  Finance, Chief Financial
Officer and Secretary (Principal Financial Officer)
(Duly Authorized Officer) 22




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##### 



Exhibit No.
    
    Description
    
    Location31.1
    
    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