##### 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 April 2, 2011
 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
    
    (I.R.S. Employerof incorporation or organization)
    
    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
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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
    
    
    20ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    29ITEM 4  Controls and Procedures
    
    
    29PART II  OTHER INFORMATIONITEM 1  Legal Proceedings
    
    
    30ITEM 1A  Risk Factors
    
    
    30ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30ITEM 3   Defaults Upon Senior Securities
    
    
    30ITEM 4  [ Reserved ]
    
    
    30ITEM 5  Other Information
    
    
    30ITEM 6  Exhibits
    
    
    30SIGNATURES
    
    
    31INDEX TO EXHIBITS
    
    
    32Exhibit 10.1Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
  Definitions
  Fiscal 2011
    
    52 weeks ending July 2, 2011Fiscal 2010
    
    53 weeks ended July 3, 2010Nine-month period of Fiscal 2011
    
    39 weeks ended April 2, 2011Nine-month period of Fiscal 2010
    
    40 weeks ended April 3, 2010Third Quarter of Fiscal 2011
    
    13 weeks ended April 2, 2011Third Quarter of Fiscal 2010
    
    13 weeks ended April 3, 2010
  3




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##### Table of Contents



April 2, 2011
    
    
    July 3, 2010(unaudited)ASSETSCash and cash equivalents
    
    $
    7,358
    
    
    $
    16,988Short-term investments
    
    
    21,018
    
    
    
    27,954Accounts receivable (less allowances of $4,988 and $3,446, respectively)
    
    
    13,286
    
    
    
    8,302Inventory
    
    
    19,752
    
    
    
    13,486Deferred tax assets  current
    
    
    1,676
    
    
    
    1,676Prepaid expenses
    
    
    584
    
    
    
    999Total current assets
    
    
    63,674
    
    
    
    69,405Property, plant and equipment, at cost
    
    
    12,511
    
    
    
    11,669Less accumulated depreciation and amortization
    
    
    8,251
    
    
    
    7,544Net property, plant and equipment
    
    
    4,260
    
    
    
    4,125Deferred tax assets  noncurrent
    
    
    6,949
    
    
    
    6,936Goodwill
    
    
    33,571
    
    
    
    Other intangible assets (net of accumulated amortization of $552 and $434, respectively)
    
    
    6,948
    
    
    
    171Other assets
    
    
    2,930
    
    
    
    2,732Total assets
    
    $
    118,332
    
    
    $
    83,369LIABILITIES AND SHAREHOLDERS EQUITYShort-term notes payable
    
    $
    1,750
    
    
    $
    1,750Current installments of long-term debt
    
    
    4,311
    
    
    
    97Accounts payable
    
    
    3,899
    
    
    
    3,598Accrued expenses
    
    
    3,362
    
    
    
    4,867Total current liabilities
    
    
    13,322
    
    
    
    10,312Long-term debt
    
    
    25,357
    
    
    
    Accrued retirement costs and other
    
    
    18,141
    
    
    
    18,461Total liabilities
    
    
    56,820
    
    
    
    28,773Commitments and contingent liabilities (note 17)
    
    
    
    
    
    
    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 11,046 and 10,930 shares, respectively (excluding treasury shares of
1,046 and 1,025, respectively)
    
    
    11,046
    
    
    
    10,930Additional capital in excess of par value
    
    
    20,035
    
    
    
    19,195Accumulated other comprehensive loss
    
    
    (12,652
    )
    
    
    (12,594
    )Retained earnings
    
    
    43,083
    
    
    
    37,065Total shareholders equity
    
    
    61,512
    
    
    
    54,596Total liabilities and shareholders equity
    
    $
    118,332
    
    
    $
    83,369
   4




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##### Table of Contents



Third Quarter
    
    
    Nine-month periodFiscal 2011
    
    
    Fiscal 2010
    
    
    Fiscal 2011
    
    
    Fiscal 2010(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Net sales
    
    $
    20,113
    
    
    $
    22,212
    
    
    $
    106,042
    
    
    $
    107,235Cost of sales
    
    
    12,183
    
    
    
    13,249
    
    
    
    66,686
    
    
    
    62,020Gross profit
    
    
    7,930
    
    
    
    8,963
    
    
    
    39,356
    
    
    
    45,215Selling, general and administrative expenses
    
    
    8,080
    
    
    
    8,245
    
    
    
    26,391
    
    
    
    27,829Operating (loss) profit
    
    
    (150
    )
    
    
    718
    
    
    
    12,965
    
    
    
    17,386Other income
    
    
    84
    
    
    
    
    
    
    
    278
    
    
    
    Interest income
    
    
    42
    
    
    
    56
    
    
    
    133
    
    
    
    279Interest expense
    
    
    (82
    )
    
    
    (20
    )
    
    
    (130
    )
    
    
    (68
    )(Loss) earnings, before income taxes
    
    
    (106
    )
    
    
    754
    
    
    
    13,246
    
    
    
    17,597Income tax (benefit) expense
    
    
    (64
    )
    
    
    215
    
    
    
    4,873
    
    
    
    6,568Net (loss) earnings
    
    $
    (42
    )
    
    $
    539
    
    
    $
    8,373
    
    
    $
    11,029Net earnings per common shareBasic
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    0.76
    
    
    $
    1.02Diluted
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    0.75
    
    
    $
    1.00Weighted average number of common shares outstandingBasic
    
    
    11,123
    
    
    
    10,914
    
    
    
    11,086
    
    
    
    10,862Diluted
    
    
    11,123
    
    
    
    11,112
    
    
    
    11,212
    
    
    
    11,028Common shares outstanding at end of period
    
    
    11,046
    
    
    
    10,881
    
    
    
    11,046
    
    
    
    10,881Cash dividends declared per common share
    
    $
    0.07
    
    
    $
    0.05
    
    
    $
    0.21
    
    
    $
    0.10
   5




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##### Table of Contents



Nine-month period
    
    
    Nine-month periodFiscal 2011
    
    
    Fiscal 2010(unaudited)
    
    
    (unaudited)Operating activities:Net earnings
    
    $
    8,373
    
    
    $
    11,029Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    811
    
    
    
    607Deferred income tax expense
    
    
    148
    
    
    
    2,380Loss on disposal of property, plant and equipment
    
    
    
    
    
    
    43Gross excess tax benefit from exercise of stock options and vesting of
restricted stock units
    
    
    (127
    )
    
    
    (1,227
    )Stock-based compensation expense
    
    
    974
    
    
    
    604Changes in:Accounts receivable, net
    
    
    (786
    )
    
    
    (1,006
    )Inventory
    
    
    (1,404
    )
    
    
    (5,626
    )Prepaid expenses and other assets
    
    
    204
    
    
    
    86Accounts payable
    
    
    (1,675
    )
    
    
    (907
    )Accrued expenses
    
    
    (1,759
    )
    
    
    1,864Accrued retirement costs and other
    
    
    (436
    )
    
    
    3Net cash provided by operating activities
    
    
    4,323
    
    
    
    7,850Investing activities:Purchases of property, plant and equipment
    
    
    (643
    )
    
    
    (831
    )Acquisitions of principal assets of Foot Petals, LLC and baggallini, Inc. business
operations, net of assumed liabilities
    
    
    (47,702
    )
    
    
    Proceeds from sale (purchase) of short-term investments, net
    
    
    6,936
    
    
    
    (8,041
    )Net cash used by investing activities
    
    
    (41,409
    )
    
    
    (8,872
    )Financing activities:Proceeds from long-term debt
    
    
    30,000
    
    
    
    Principal repayment of long-term debt
    
    
    (429
    )
    
    
    (67
    )Proceeds from stock options exercised
    
    
    77
    
    
    
    372Gross excess tax benefit from exercise of stock options and vesting of restricted
stock units
    
    
    127
    
    
    
    1,227Dividends paid
    
    
    (2,319
    )
    
    
    (1,085
    )Net cash provided by financing activities
    
    
    27,456
    
    
    
    447Net decrease in cash and cash equivalents
    
    
    (9,630
    )
    
    
    (575
    )Cash and cash equivalents at the beginning of the period
    
    
    16,988
    
    
    
    14,259Cash and cash equivalents at the end of the period
    
    $
    7,358
    
    
    $
    13,684
   6




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##### Table of Contents



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
     Item 8  Financial Statements and Supplementary Data.
     
    
    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 Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
    Fair Value Measurements at Reporting Date Using:Quoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsApril 2, 2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Available-for-sale
securities
    
    $
    21,018
    
    
    
    
    
    
    $
    21,018
    
    
    
    Total
    
    $
    21,018
    
    
    
    
    
    
    $
    21,018
    
    
    
    Liabilities:Interest rate contract
    
    $
    105
    
    
    
    
    
    
    $
    105
    
    
    
    Total
    
    $
    105
    
    
    
    
    
    
    $
    105
    
    
    
    
       8




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
   Dividend yield
    
    
    2.6
    %Expected volatility
    
    
    48.4
    %Risk-free interest rate
    
    
    1.4
    %Expected term
    
    3 years
     Number of
    
    
    Number of
    
    
    Weighted-common shares
    
    
    common shares
    
    
    Averagesubject to ISOs
    
    
    subject to NQs
    
    
    exercise priceOutstanding at July 3, 2010
    
    
    36,000
    
    
    
    105,500
    
    
    $
    6.11Granted
    
    
    
    
    
    
    7,500
    
    
    
    10.60Exercised
    
    
    (6,900
    )
    
    
    (5,000
    )
    
    
    6.54Expired/Cancelled
    
    
    
    
    
    
    
    
    
    
    Outstanding at April 2, 2011
    
    
    29,100
    
    
    
    108,000
    
    
    $
    6.32Options exercisable at April 2, 2011
    
    
    29,100
    
    
    
    100,500
  9




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
  Number ofcommon shares
    
    
    Grant Dateunderlying RSUs
    
    
    Fair ValueNonvested at July 3, 2010
    
    
    314,000
    
    
    $
    7.49Granted
    
    
    124,500
    
    
    
    9.92Vested
    
    
    (94,600
    )
    
    
    8.05Forfeited/Cancelled
    
    
    (24,000
    )
    
    
    7.80Nonvested at April 2, 2011
    
    
    319,900
    
    
    $
    8.24
     April 2, 2011
    
    
    July 3, 2010Raw materials
    
    $
    119
    
    
    $
    73Finished goods
    
    
    19,633
    
    
    
    13,413Total inventory
    
    $
    19,752
    
    
    $
    13,486
        10




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
     April 2, 2011
    
    
    July 3, 2010Salaries and wages
    
    $
    306
    
    
    $
    3,320Income taxes
    
    
    1,639
    
    
    
    14Current pension liabilities
    
    
    675
    
    
    
    675Other
    
    
    742
    
    
    
    858Total accrued expenses
    
    $
    3,362
    
    
    $
    4,867
   Third Quarter
    
    
    Nine-month periodFiscal 2011
    
    
    Fiscal 2010
    
    
    Fiscal 2011
    
    
    Fiscal 2010Computed expected tax (benefit) expense
    
    $
    (36
    )
    
    $
    256
    
    
    $
    4,504
    
    
    $
    5,983State income tax (benefit) expense, net
of federal income tax benefit
    
    
    (6
    )
    
    
    18
    
    
    
    418
    
    
    
    560Other, net
    
    
    (22
    )
    
    
    (59
    )
    
    
    (49
    )
    
    
    25Total expense
    
    $
    (64
    )
    
    $
    215
    
    
    $
    4,873
    
    
    $
    6,568
     11




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##### Table of Contents



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
         April 2, 2011
    
    
    July 3, 2010Long-term debt
    
    $
    29,668
    
    
    $
    97Less current installments
    
    
    4,311
    
    
    
    97Long-term debt excluding current installments
    
    $
    25,357
    
    
    $
    
  12




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
  April 2011-March 2012
    
    $
    4,311April 2012-March 2013
    
    
    4,286April 2013-March 2014
    
    
    4,286April 2014-March 2015
    
    
    4,286April 2015-March 2016
    
    
    4,286March 2016 due at end of term loan
    
    
    8,213$
    29,668
       Liability DerivativeBalance Sheet
    
    
    Fair ValueLocation
    
    
    (in thousands)Derivative designated as hedging instrument:Interest rate contract
    
    Accrued retirement costs and other
    
    $
    105$
    105
 Cash Flow Hedges
   13




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
  Notional Amount
    
    
    Maturity DateInterest rate contract
    
    $
    15,000
    
    
    March 1, 2016
  LossLoss
    
    
    Location of
    
    
    (IneffectiveLoss
    
    
    Location of Loss
    
    
    Reclassified
    
    
    Loss
    
    
    Portion) andRecognized
    
    
    Reclassified from
    
    
    from
    
    
    (Ineffective
    
    
    Excludedin OCI
    
    
    Accumulated
    
    
    Accumulated
    
    
    Portion) and
    
    
    from(Effective
    
    
    OCI (Effective
    
    
    OCI
    
    
    Excluded from
    
    
    EffectivenessPortion)
    
    
    Portion)
    
    
    (Effective)
    
    
    Effectiveness
    
    
    TestingFor the Third Quarter
ended April 2, 2011:Interest rate contract
    
    $
    92
    
    
    Interest expense
    
    $
    
    
    
    Interest expense
    
    $
    13For the Nine-month period
ended April 2, 2011:Interest rate contract
    
    $
    92
    
    
    Interest expense
    
    $
    
    
    
    Interest expense
    
    $
    13
      Third Quarter
    
    
    Nine-month periodFiscal 2011
    
    
    Fiscal 2010
    
    
    Fiscal 2011
    
    
    Fiscal 2010Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9Interest cost
    
    
    494
    
    
    
    571
    
    
    
    1,480
    
    
    
    1,714Expected return on plan assets
    
    
    (511
    )
    
    
    (493
    )
    
    
    (1,532
    )
    
    
    (1,480
    )Net amortization
    
    
    315
    
    
    
    176
    
    
    
    946
    
    
    
    523Settlement loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185Total pension expense
    
    $
    298
    
    
    $
    254
    
    
    $
    894
    
    
    $
    951
  14




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
  
  Third Quarter
    
    
    Nine-month periodFiscal 2011
    
    
    Fiscal 2010
    
    
    Fiscal 2011
    
    
    Fiscal 2010Numerator:Net (loss) earnings
    
    $
    (42
    )
    
    $
    539
    
    
    $
    8,373
    
    
    $
    11,029Denominator:Weighted-average common shares outstanding
    
    
    11,123
    
    
    
    10,914
    
    
    
    11,086
    
    
    
    10,862Effect of potentially dilutive securities: stock options and RSUs
    
    
    
    
    
    
    198
    
    
    
    126
    
    
    
    166Weighted-average common shares outstanding, assuming dilution
    
    
    11,123
    
    
    
    11,112
    
    
    
    11,212
    
    
    
    11,028Basic net earnings per common share
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    0.76
    
    
    $
    1.02Diluted net earnings per common share
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    0.75
    
    
    $
    1.00
    Third Quarter
    
    
    Nine-month periodFiscal 2011
    
    
    Fiscal 2010
    
    
    Fiscal 2011
    
    
    Fiscal 2010Net (loss) earnings
    
    $
    (42
    )
    
    $
    539
    
    
    $
    8,373
    
    
    $
    11,029Interest rate contract fair value adjustments, net of tax
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )
    
    
    Pension related adjustments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )Total comprehensive (loss) income
    
    $
    (100
    )
    
    $
    539
    
    
    $
    8,315
    
    
    $
    10,930
   15




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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
  The following table provides a summary of the changes in total equity for the Nine-month period
of Fiscal 2011:
 AccumulatedAdditional
    
    
    other
    
    
    
    
    
    
    NetCommon
    
    
    capital in excess
    
    
    comprehensive
    
    
    Retained
    
    
    shareholdersshares
    
    
    of par value
    
    
    loss
    
    
    earnings
    
    
    equityBalance at July 3, 2010
    
    $
    10,930
    
    
    $
    19,195
    
    
    $
    (12,594
    )
    
    $
    37,065
    
    
    $
    54,596Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,373
    
    
    
    8,373Stock-based compensation expense
    
    
    
    
    
    
    974
    
    
    
    
    
    
    
    
    
    
    
    974Stock-based compensation tax benefit realized
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    127Other
comprehensive loss on interest rate contract, net of tax of $34
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )Restricted stock units vested and stock
options exercised
    
    
    116
    
    
    
    (261
    )
    
    
    
    
    
    
    
    
    
    
    (145
    )Dividends declared at $0.21 per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,355
    )
    
    
    (2,355
    )Balance at April 2, 2011
    
    $
    11,046
    
    
    $
    20,035
    
    
    $
    (12,652
    )
    
    $
    43,083
    
    
    $
    61,512
  Acquisition of assets of Foot Petals LLC
    At January 27, 2011Fair value of total consideration transferred-cash
    
    $
    14,000Acquisition-related cost(included in selling, general and administrative
expenses in the Companys condensed consolidated statement of operations
for the Nine-month period ended April 2, 2011)
    
    $
    823Recognized amounts of identifiable assets acquired and liabilities assumedAccounts receivable
    
    $
    1,472Inventory
    
    
    648Property, plant and equipment
    
    
    63Other assets
    
    
    27Identifiable intangible assets
    
    
    6,800Accounts payable and accrued expenses
    
    
    (430
    )Goodwill
    
    
    5,420$
    14,000
  16




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##### Table of Contents



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
  Acquisition of assets of baggallini, Inc.
     At March 31, 2011ConsiderationCash
    
    $
    33,702Additional consideration owed to seller
    
    
    1,077Fair value of total consideration
    
    $
    34,779Acquisition-related cost(included in selling, general and administrative
expenses in the Companys condensed consolidated statement of operations
for the Nine-month period ended April 2, 2011)
    
    $
    37Recognized amounts of identifiable assets acquired and liabilities assumedAccounts receivable
    
    $
    2,725Inventory
    
    
    4,216Property, plant and equipment
    
    
    151Other assets
    
    
    11Accounts payable and accrued expenses
    
    
    (475
    )Goodwill
    
    
    28,151$
    34,779
  17




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##### Table of Contents



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
  Diluted NetNet Sales
    
    
    Net Earnings
    
    
    Earnings per shareActual from July 4, 2010 to April 2, 2011
    
    $
    
    
    
    $
    
    
    
    $
    Supplemental pro forma from July 4, 2010 to April 2, 2011
    
    $
    119,757
    
    
    $
    11,069
    
    
    $
    0.99Supplemental pro forma from June 28, 2009 to April 3, 2010
    
    $
    118,162
    
    
    $
    13,151
    
    
    $
    1.19
   Third Quarter ended April 2, 2011
    
    Footwear
    
    
    Accessories
    
    
    TotalNet sales
    
    $
    17,752
    
    
    $
    2,361
    
    
    $
    20,113Gross profit
    
    
    6,444
    
    
    
    1,486
    
    
    
    7,930Depreciation and amortization
    
    
    251
    
    
    
    84
    
    
    
    335Operating (loss) profit
    
    
    (965
    )
    
    
    815
    
    
    
    (150
    )
 Third Quarter ended April 3, 2010
    
    Footwear
    
    
    Accessories
    
    
    TotalNet sales
    
    $
    22,212
    
    
    $
    
    
    
    $
    22,212Gross profit
    
    
    8,963
    
    
    
    
    
    
    
    8,963Depreciation and amortization
    
    
    204
    
    
    
    
    
    
    
    204Operating profit
    
    
    718
    
    
    
    
    
    
    
    718
 Nine-month period ended April 2, 2011
    
    Footwear
    
    
    Accessories
    
    
    TotalNet sales
    
    $
    103,681
    
    
    $
    2,361
    
    
    $
    106,042Gross profit
    
    
    37,870
    
    
    
    1,486
    
    
    
    39,356Depreciation and amortization
    
    
    714
    
    
    
    84
    
    
    
    798Operating profit
    
    
    12,150
    
    
    
    815
    
    
    
    12,965Total assets
    
    
    67,089
    
    
    
    51,243
    
    
    
    118,332
 Nine-month period ended April 3, 2010
    
    Footwear
    
    
    Accessories
    
    
    TotalNet sales
    
    $
    107,235
    
    
    $
    
    
    
    $
    107,235Gross profit
    
    
    45,215
    
    
    
    
    
    
    
    45,215Depreciation and amortization
    
    
    607
    
    
    
    
    
    
    
    607Operating profit
    
    
    17,386
    
    
    
    
    
    
    
    17,386
  18




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##### Table of Contents



R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
for the Third Quarter and Nine-month period of Fiscal 2011 and the Third Quarter and Nine-month period of Fiscal 2010
(dollar amounts in thousands, except per share data)
      Fair Value Measurement and Disclosures.
  19




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##### Table of Contents



Introduction
 Form 10-K.
     Consolidated Results of Operations
  Third Quarter
    
    
    
    
    
    
    Third QuarterEnded
    
    
    % of
    
    
    Ended
    
    
    % of
    
    
    Increase/(all amounts are in 000s)
    
    April 2, 2011
    
    
    Net Sales
    
    
    April 3, 2010
    
    
    Net Sales
    
    
    (Decrease)Net sales
    
    $
    20,113
    
    
    
    100
    
    
    $
    22,212
    
    
    
    100
    
    
    $
    (2,099
    )Gross profit
    
    
    7,930
    
    
    
    39.4
    
    
    
    8,963
    
    
    
    40.4
    
    
    
    (1,033
    )Selling, general and administrative
(SGA) expenses
    
    
    8,080
    
    
    
    40.2
    
    
    
    8,245
    
    
    
    37.1
    
    
    
    (165
    )Operating (loss) profit
    
    
    (150
    )
    
    
    (0.7
    )
    
    
    718
    
    
    
    3.2
    
    
    
    (868
    )Other income and interest income, net
    
    
    44
    
    
    
    0.2
    
    
    
    36
    
    
    
    0.2
    
    
    
    8(Loss) earnings, before income taxes
    
    
    (106
    )
    
    
    (0.5
    )
    
    
    754
    
    
    
    3.4
    
    
    
    (860
    )Income tax (benefit) expense
    
    
    (64
    )
    
    
    0.3
    
    
    
    215
    
    
    
    1.0
    
    
    
    279Net (loss) earnings
    
    
    (42
    )
    
    
    (0.2
    )
    
    
    539
    
    
    
    2.4
    
    
    
    (581
    )
    20




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##### Table of Contents



®
   Nine-month
    
    
    
    
    
    
    Nine-monthPeriod Ended
    
    
    % of
    
    
    Period Ended
    
    
    % of
    
    
    Increase/(all amounts are in 000s)
    
    April 2, 2011
    
    
    Net Sales
    
    
    April 3, 2010
    
    
    Net Sales
    
    
    (Decrease)Net sales
    
    $
    106,042
    
    
    
    100
    
    
    $
    107,235
    
    
    
    100
    
    
    $
    (1,193
    )Gross profit
    
    
    39,356
    
    
    
    37.1
    
    
    
    45,215
    
    
    
    42.2
    
    
    
    (5,859
    )SGA expenses
    
    
    26,391
    
    
    
    24.9
    
    
    
    27,829
    
    
    
    26.0
    
    
    
    (1,438
    )Operating profit
    
    
    12,965
    
    
    
    12.2
    
    
    
    17,386
    
    
    
    16.2
    
    
    
    (4,421
    )Other income and interest income, net
    
    
    281
    
    
    
    0.3
    
    
    
    211
    
    
    
    0.2
    
    
    
    70Earnings, before income taxes
    
    
    13,246
    
    
    
    12.5
    
    
    
    17,597
    
    
    
    16.4
    
    
    
    (4,351
    )Income tax expense
    
    
    4,873
    
    
    
    4.6
    
    
    
    6,568
    
    
    
    6.1
    
    
    
    (1,695
    )Net earnings
    
    
    8,373
    
    
    
    7.9
    
    
    
    11,029
    
    
    
    10.3
    
    
    
    (2,656
    )
   ®
 ®
    21




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##### Table of Contents



Results of Operations- Footwear Segment
   Third Quarter
    
    
    
    
    
    
    Third QuarterEnded
    
    
    % of
    
    
    Ended
    
    
    % of
    
    
    Increase/(all amounts are in 000s)
    
    April 2, 2011
    
    
    Net Sales
    
    
    April 3, 2010
    
    
    Net Sales
    
    
    (Decrease)Net sales
    
    $
    17,752
    
    
    
    100
    
    
    $
    22,212
    
    
    
    100
    
    
    $
    (4,460
    )Gross profit
    
    
    6,444
    
    
    
    36.3
    
    
    
    8,963
    
    
    
    40.4
    
    
    
    (2,518
    )Operating (loss) profit
    
    
    (965
    )
    
    
    (5.4
    )
    
    
    718
    
    
    
    3.2
    
    
    
    (1,683
    )
 Nine-month
    
    
    
    
    
    
    Nine-monthPeriod Ended
    
    
    % of
    
    
    Period Ended
    
    
    % of
    
    
    Increase/April 2, 2011
    
    
    Net Sales
    
    
    April 3, 2010
    
    
    Net Sales
    
    
    (Decrease)Net sales
    
    $
    103,681
    
    
    
    100
    
    
    $
    107,235
    
    
    
    100
    
    
    $
    (3554
    )Gross profit
    
    
    37,870
    
    
    
    36.5
    
    
    
    45,215
    
    
    
    42.2
    
    
    
    (7,345
    )Operating profit
    
    
    12,150
    
    
    
    11.7
    
    
    
    17,386
    
    
    
    16.2
    
    
    
    (5,235
    )
   ®
 Results of Operations  Accessories Segment
    22




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##### Table of Contents



Third Quarter
    
    
    
    
    
    Nine-monthEnded
    
    
    % of
    
    
    Period Ended
    
    
    % of
    
    
    Increase/(all amounts are in 000s)
    
    April 2, 2011
    
    
    Net Sales
    
    
    April 3, 2010
    
    
    Net Sales
    
    
    (Decrease)Net sales
    
    $
    2,361
    
    
    
    100
    
    
    $
    
    
    
    
    
    
    
    $
    2,361Gross profit
    
    
    1,486
    
    
    
    62.9
    
    
    
    
    
    
    
    
    
    
    
    1,486Operating profit
    
    
    815
    
    
    
    34.5
    
    
    
    
    
    
    
    
    
    
    
    815
  Seasonality
  Looking ahead to the remainder of Fiscal 2011 and beyond
  Liquidity and Capital Resources
     23




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##### Table of Contents



Operating Activities
     
    
    The decreases in net accounts receivable of $800 thousand and $1.0 million in the
Nine-month period of Fiscal 2011 and the Nine-month period of Fiscal 2010, respectively,
primarily reflected the seasonal nature of our footwear business. The difference between
the change for the Nine-month period of 2011 and the change for the Nine-month period of
Fiscal 2010 reflected primarily the impact of reduced shipments and the timing of customer
collections and deductions.
    
    Net inventories increased by $1.4 million and $5.6 million during the Nine-month period
of Fiscal 2011 and Fiscal 2010, respectively. The relative change for the Nine-month period
of Fiscal 2011 was in line with the seasonal nature of our footwear business. The increase
for the Nine-month period of Fiscal 2010 reflected primarily a return to more normal
inventory levels as well as changes typical to the seasonal nature of our footwear
business.
    
    Accounts payable decreased by $1.7 million and $907 thousand during the Nine-month
period of Fiscal 2011 and Fiscal 2010, respectively. These changes were due primarily to
the timing of purchases and payment for finished goods inventory in our footwear products
and in line with the seasonality of our footwear business.
    
    Accrued expenses decreased by $1.8 million during the Nine-month period of Fiscal 2011
and increased by $1.9 million during the Nine-month period of Fiscal 2010. The decrease in
accrued expenses in the Nine-month period of Fiscal 2011 was primarily due to lower
incentive bonus accruals during Fiscal 2011 as compared to the Nine-month period of Fiscal
2010. The increase in accrued expenses during the Nine-month period of Fiscal 2010 was
primarily due to higher income tax accruals and higher incentive bonus accruals as compared
to the Nine-month period of Fiscal 2009.
 Investing Activities
  Financing Activities
   24




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2011 Liquidity
  Credit Agreement
      Other Long-Term Indebtedness and Current Installments of Long-Term Debt
 Item 8  Financial Statements and
Supplementary Data.
  25




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##### Table of Contents



Contractual Obligations
 Item 7  Managements Discussion and Analysis of Financial Condition and
Results of Operations
  AmountLong-term debt
    
    $
    29,668Less current installments
    
    
    4,311Long-term debt excluding current installments
    
    $
    25,357
  April 2011-March 2012
    
    $
    4,311April 2012-March 2013
    
    
    4,286April 2013-March 2014
    
    
    4,286April 2014-March 2015
    
    
    4,286April 2015-March 2016
    
    
    4,286March 2016 due at end of term loan
    
    
    8,213$
    29,668
 Critical Accounting Policies and Use of Significant Estimates
  Item 8  Financial Statements
and Supplementary Data. Form 10-K.
  26




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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 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 Third Quarter and Nine-month period of Fiscal 2011, we recognized
favorable reserve adjustments that benefited our earnings before income tax by $0 and $878
thousand, respectively, related to our customer incentive reserves of $1.8 million
established at July 3, 2010. During the Third Quarter and Nine-month period of Fiscal 2010,
we recognized favorable reserve adjustments that benefited our earnings before income tax by
$225 thousand and $612 thousand, respectively, related to our footwear segment customer
incentive reserves of $1.3 million established at June 27, 2009.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 is subjective and
requires certain assumptions. Actual charges for uncollectible amounts were not materially
different from our estimates during the Nine-month period of Fiscal 2011 or during the
Nine-month period of Fiscal 2010.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 Nine-month period of Fiscal 2011 and the
Nine-month period of Fiscal 2010, there were no significant write-downs to inventory
recorded.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 generating future taxable profit. In addition, we make
ongoing assessments of income tax exposures that may arise at the Federal, state or local
tax levels. U.S. GAAP principles require that a position taken or expected to be taken in
a tax return be recognized in the financial statements when it is more likely than not
(i.e., a likelihood of more than fifty percent) that the position would be sustained upon
examination by tax authorities. A recognized tax position is then measured at the largest
amount of benefit that has a greater than fifty percent likelihood of being realized upon
settlement. 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 Nine-month period of Fiscal 2011
or at the end of Fiscal 2010 at the Federal, state or local tax levels.d)
    
    We make 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, and we monitor these assumptions over the
course of the Fiscal year.
  27




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##### Table of Contents



e)
    
    We review the carrying value of our long-lived assets including property, plant
and equipment, and intangible assets with finite useful lives, for
impairment whenever events or change in circumstances warrant such
review. Impairment testing involves a comparison of the sum of the undiscounted future cash flows of
the asset or asset group to its respective carrying amount. If the sum of the undiscounted
future cash flows exceeds the carrying amount, then no impairment exists. If the carrying
amount exceeds the sum of the undiscounted future cash flows, then a second step is performed
to determine the amount of impairment, which would be recorded as an impairment charge in our
consolidated statements of earnings. There was no impairment indicators present during the
Nine-month period ended April 2, 2011.Goodwill and intangible assets with indefinite lives are not amortized, but instead will be
tested for impairment annually, during the Companys second fiscal quarter, or more
frequently if events or changes in circumstances indicate that impairment may be present.
Application of goodwill impairment testing involves judgment, including but not limited to,
the identification of reporting units and estimating the fair value of each reporting unit.
A reporting unit is defined as an operating segment or one level below an operating segment.
We test goodwill at the lower of the reporting unit or operating segment level. The goodwill
impairment test consists of comparing the fair value of each reporting unit, determined using
discounted cash flows, to each reporting units respective carrying value. If the estimated
fair value of a reporting unit exceeds its carrying value, there is no impairment. If the
carrying amount of the reporting unit exceeds its estimated fair value, goodwill impairment
is indicated. The amount of the impairment is determined by comparing the fair value of the
net assets of the reporting unit, excluding goodwill, to its estimated fair value, with the
difference representing the implied fair value of the goodwill. If the implied fair value of
the goodwill is lower than its carrying value, the difference is recorded as an impairment
charge in the consolidated statements of operations. No impairment indicators were present
with regard to our goodwill or intangible assets with indefinite useful lives at April 2,
2011.f)
    
    We manage interest rate volatility on our floating interest-rate term debt borrowing.
As a result of interest rate fluctuations, cash flow requirements on floating rate
borrowings increase or decrease and impact both expected cash outflows as well as
interest expense over time. We use a derivative instrument, an interest rate contract, as
part of our interest rate risk management strategy to manage cash flow exposure from
changes in interest rates. An interest rate contract generally involves the exchange of
fixed-rate and variable-rate interest payments between two parties, based on a common
notional principal amount and maturity date. Under an interest rate contract, we agree
with another party to exchange, at specified intervals, the difference between fixed-rate
and floating-rate interest amounts, which is calculated based on an agreed-upon notional
amount. A derivative instrument deemed highly effective qualifies for hedge accounting
treatment under generally accepted accounting standards, and accordingly, the effective
portion of unrealized gains and losses on interest rate swaps is deferred as a component
of accumulated other comprehensive income (loss). Any deferred portion is a component of
interest expense when we incur the interest expense. Any ineffective portion is directly
recorded as a component of interest expense.At the end of each Quarter, fair value of the interest rate contract is measured and
re-tested under generally accepted accounting standard criteria to determine and/or reconfirm
status with regards to being an effective cash flow hedge. If determined to be effective,
any gain or loss outstanding on the interest rate contract is recorded as an asset or
liability, with an offset to other comprehensive income (loss). If deemed ineffective as a
cash flow hedge, any gain or loss on the interest rate contract is recognized immediately in
earnings.g)
    
    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
Note (1) of the Notes to Consolidated Financial Statements in Item 8  Financial
Statements and Supplementary Data. of Part II of our 2010 Form 10-K.
   28




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##### Table of Contents



Recently Issued Accounting Standards
  
       
    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 the Company 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.
    29




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30




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##### Table of Contents



R.G. BARRY CORPORATION
RegistrantDate: May 11, 2011
    By:
    /s/ José G. IbarraJosé G. IbarraSenior Vice President  Finance and Chief Financial
Officer (Principal Financial Officer)
(Duly Authorized Officer)  31




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##### Table of Contents



Exhibit No.
    
    Description
    
    Location2.1
    
    
    Asset Purchase Agreement entered into as of January 27, 2011 , among
R. G. Barry International, Inc. (now known as Foot Petals, Inc.),
Foot Petals, LLC and Tina Aldatz
    
    Incorporated herein
by reference to
Exhibit 2.1 to the
Current Report on
Form 8-K of R.G.
Barry Corporation
dated and filed
January 28, 2011
(SEC File
No. 001-08769)2.2
    
    
    Asset Purchase Agreement, entered into on March 15, 2011, among
Barry Holding Co. (now known as Baggallini, Inc.), baggallini, Inc.,
Dixie B. Powers, as trustee and individually, and Elizabeth Ann
Simmons
    
    Incorporated herein
by reference to
Exhibit 2.1 to the
Current Report on
Form 8-K of R.G.
Barry Corporation
dated and filed
March 18, 2011 (SEC
File No. 001-08769)10.1
    
    
    Credit Agreement, dated March 1, 2011, between R.G. Barry
Corporation and The Huntington National Bank. As filed herewith,
includes all exhibits to the Credit Agreement, in their entirety.
    
    Filed herewith10.2
    
    
    Revolving Credit Agreement, entered into effective March 29, 2007
between R.G. Barry Corporation and The Huntington National Bank. As
filed herewith, includes all exhibits to the Revolving Credit
Agreement, in their entirety.
    
    Filed herewith10.3
    
    
    Change in Control Agreement between R.G. Barry Corporation and Jose
Ibarra, made to be effective as of January 7, 2011
    
    Incorporated herein
by reference to
Exhibit 10.1 to the
Current Report on
Form 8-K of R.G.
Barry Corporation,
dated and filed
January 13, 2011
(SEC File No.
001-08769)10.4
    
    
    Change in Control Agreement between R.G. Barry Corporation and Lee
Smith, made to be effective as of January 7, 2011
    
    Incorporated herein
by reference to
Exhibit 10.2 to the
Current Report on
Form 8-K of R.G.
Barry Corporation,
dated and filed
January 13, 2011
(SEC File No.
001-08769)10.5
    
    
    Change in Control Agreement between R.G. Barry Corporation and Glenn
Evans, made to be effective as of January 7, 2011
    
    Incorporated herein
by reference to
Exhibit 10.3 to the
Current Report on
Form 8-K of R.G.
Barry Corporation,
dated and filed
January 13, 2011
(SEC File No.
001-08769)10.6
    
    
    Change in Control Agreement between R.G. Barry Corporation and Greg
Ackard, made to be effective as of January 7, 2011
    
    Incorporated herein
by reference to
Exhibit 10.4 to the
Current Report on
Form 8-K of R.G.
Barry Corporation,
dated and filed
January 13, 2011
(SEC File No.
001-08769)31.1
    
    
    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)
    
    Furnished herewith
  32