##### 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 March 29, 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
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)13405 Yarmouth Road NW, Pickerington, Ohio
    
    43147(Address of principal executive offices)
    
    (Zip Code)
  (Registrants telephone number, including area code)
  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  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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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONITEM 1  Financial StatementsITEM 2  Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 3  Quantitative and Qualitative Disclosures About Market RiskITEM 4  Controls and ProceduresITEM 4T  Controls and ProceduresPART II  OTHER INFORMATIONITEM 1  Legal ProceedingsITEM 1A  Risk FactorsITEM 2  Unregistered Sales of Equity Securities and Use of ProceedsITEM 3  Defaults Upon Senior SecuritiesITEM 4  Submission of Matters to a Vote of Security HoldersITEM 5  Other InformationITEM 6  ExhibitsSIGNATURESINDEX TO EXHIBITSEX-31.1EX-31.2EX-32.1EX-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 2008
    
    52 weeks ending June 28, 2008Fiscal 2007
    
    52 weeks ended June 30, 20072006 transition period
    
    26 weeks ended July 1, 2006Nine months of fiscal 2008
    
    39 weeks ended March 29, 2008Nine months of fiscal 2007
    
    39 weeks ended March 31, 2007Third quarter of fiscal 2008
    
    13 weeks ended March 29, 2008Third quarter of fiscal 2007
    
    13 weeks ended March 31, 2007
 3




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March 29, 2008
    
    
    June 30, 2007ASSETSCash and cash equivalents
    
    $
    13,003
    
    
    $
    18,207Short-term investments
    
    
    15,000
    
    
    
    Accounts receivable (less allowances of $6,774 and $2,190, respectively)
    
    
    7,515
    
    
    
    6,860Inventory
    
    
    14,060
    
    
    
    14,639Deferred tax assets  current
    
    
    1,760
    
    
    
    6,243Prepaid expenses
    
    
    999
    
    
    
    949Assets held for disposal
    
    
    
    
    
    
    2,788Total current assets
    
    
    52,337
    
    
    
    49,686Property, plant and equipment, at cost
    
    
    10,099
    
    
    
    9,294Less accumulated depreciation and amortization
    
    
    7,066
    
    
    
    7,039Net property, plant and equipment
    
    
    3,033
    
    
    
    2,255Deferred tax assets  noncurrent
    
    
    8,453
    
    
    
    8,404Other assets
    
    
    3,184
    
    
    
    3,183Total assets
    
    $
    67,007
    
    
    $
    63,528LIABILITIES AND SHAREHOLDERS EQUITYShort-term notes payable
    
    $
    2,200
    
    
    $
    2,200Current installments of long-term debt
    
    
    83
    
    
    
    78Accounts payable
    
    
    5,421
    
    
    
    7,443Accrued expenses
    
    
    2,340
    
    
    
    3,412Liabilities associated with assets held for disposal
    
    
    
    
    
    
    2,357Total current liabilities
    
    
    10,044
    
    
    
    15,490Long-term debt, excluding current installments
    
    
    209
    
    
    
    272Accrued retirement costs and other
    
    
    10,852
    
    
    
    11,551Total liabilities
    
    
    21,105
    
    
    
    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 10,529 and 10,352 shares, respectively
(excluding treasury shares of 1,005 and 1,000, respectively)
    
    
    10,529
    
    
    
    10,352Additional capital in excess of par value
    
    
    15,489
    
    
    
    14,546Accumulated other comprehensive loss
    
    
    (4,457
    )
    
    
    (3,968
    )Retained earnings
    
    
    24,341
    
    
    
    15,285Total shareholders equity
    
    
    45,902
    
    
    
    36,215Total liabilities and shareholders equity
    
    $
    67,007
    
    
    $
    63,528
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Third Quarter
    
    
    Nine MonthsFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net sales
    
    $
    20,236
    
    
    $
    16,375
    
    
    $
    90,921
    
    
    $
    91,192Cost of sales
    
    
    12,248
    
    
    
    10,017
    
    
    
    53,132
    
    
    
    54,825Gross profit
    
    
    7,988
    
    
    
    6,358
    
    
    
    37,789
    
    
    
    36,367Selling, general and administrative expenses
    
    
    7,067
    
    
    
    6,592
    
    
    
    24,672
    
    
    
    23,361Gain on disposal of land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (878
    )Restructuring and asset impairment charges
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    163Operating profit (loss)
    
    
    921
    
    
    
    (325
    )
    
    
    13,117
    
    
    
    13,721Other income
    
    
    
    
    
    
    35
    
    
    
    50
    
    
    
    131Interest income (expense), net
    
    
    242
    
    
    
    171
    
    
    
    420
    
    
    
    (364
    )Income (loss) from continuing operations, before income tax
    
    
    1,163
    
    
    
    (119
    )
    
    
    13,587
    
    
    
    13,488Income tax expense (benefit)
    
    
    (45
    )
    
    
    (240
    )
    
    
    4,531
    
    
    
    (13,088
    )Earnings from continuing operations
    
    
    1,208
    
    
    
    121
    
    
    
    9,056
    
    
    
    26,576Earnings from discontinued operations, net of income taxes
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    241Net earnings
    
    $
    1,208
    
    
    $
    208
    
    
    $
    9,056
    
    
    $
    26,817Earnings per common share: continuing operationsBasic
    
    $
    0.12
    
    
    $
    0.01
    
    
    $
    0.87
    
    
    $
    2.65Diluted
    
    $
    0.11
    
    
    $
    0.01
    
    
    $
    0.85
    
    
    $
    2.56Earnings per
common share: discontinued operationsBasic
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    $
    0.02Diluted
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    $
    0.02Net earnings per common shareBasic
    
    $
    0.12
    
    
    $
    0.02
    
    
    $
    0.87
    
    
    $
    2.67Diluted
    
    $
    0.11
    
    
    $
    0.02
    
    
    $
    0.85
    
    
    $
    2.58Average number of common shares outstandingBasic
    
    
    10,484
    
    
    
    10,069
    
    
    
    10,435
    
    
    
    10,043Diluted
    
    
    10,663
    
    
    
    10,482
    
    
    
    10,669
    
    
    
    10,395
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Nine MonthsFiscal 2008
    
    
    Fiscal 2007Operating activities:Net earnings
    
    $
    9,056
    
    
    $
    26,817Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    442
    
    
    
    369Deferred income tax expense (benefit)
    
    
    4,309
    
    
    
    (13,713
    )Stock-based compensation expense
    
    
    510
    
    
    
    440Loss (gain) on disposal of property, plant and equipment, net
    
    
    24
    
    
    
    (852
    )Changes in:Accounts receivable
    
    
    (695
    )
    
    
    (4,569
    )Inventory
    
    
    579
    
    
    
    13,628Prepaid expenses and other
    
    
    (10
    )
    
    
    704Accounts payable
    
    
    (2,021
    )
    
    
    (4,648
    )Accrued expenses
    
    
    (1,121
    )
    
    
    (1,406
    )Accrued retirement costs and other, net
    
    
    (699
    )
    
    
    (1,155
    )Net cash provided by operating activities
    
    
    10,374
    
    
    
    15,615Investing activities:Purchase of short-term investments, net
    
    
    (15,000
    )
    
    
    Purchases of property, plant and equipment
    
    
    (1,251
    )
    
    
    (540
    )Proceeds from sale of property, plant and equipment
    
    
    6
    
    
    
    888Proceeds from sale of subsidiary, net
    
    
    66
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (16,179
    )
    
    
    348Financing activities:Repayment of short-term and long-term debt
    
    
    (58
    )
    
    
    (228
    )Proceeds from common shares issued
    
    
    659
    
    
    
    202Net cash provided by (used in) financing activities
    
    
    601
    
    
    
    (26
    )Effect of exchange rates on cash and cash equivalents
    
    
    
    
    
    
    14Net (decrease) increase in cash and cash equivalents
    
    
    (5,204
    )
    
    
    15,951Cash and cash equivalents at the beginning of the period
    
    
    18,207
    
    
    
    988Cash and cash equivalents at the end of the period
    
    $
    13,003
    
    
    $
    16,939Supplemental cash flow disclosures:Interest paid
    
    $
    115
    
    
    $
    651Income taxes paid, net of taxes refunded
    
    
    191
    
    
    
    236
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Third Quarter and Nine Months of Fiscal 2008 and the Third Quarter and Nine Months of Fiscal 2007
(dollar amounts in thousands, except per share data)
   Accounting for the Impairment or Disposal of
Long-Lived Assets
       Shared-Based Payment
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Third Quarter and Nine Months of Fiscal 2008 and the Third Quarter and Nine Months 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
    
    
    (49,400
    )
    
    
    (121,900
    )
    
    
    3.84Expired/Cancelled
    
    
    (11,600
    )
    
    
    
    
    
    
    3.79Outstanding at March 29, 2008
    
    
    219,100
    
    
    
    314,000
    
    
    $
    6.49Options exercisable at March 29, 2008
    
    
    203,100
    
    
    
    254,000
  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 March 29, 2008
    
    
    172,200
    
    
    $
    8.66
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Third Quarter and Nine Months of Fiscal 2008 and the Third Quarter and Nine Months of Fiscal 2007
(dollar amounts in thousands, except per share data)
     Nine MonthsFiscal 2008
    
    
    Fiscal 2007Computed expected tax expense
    
    $
    4,656
    
    
    $
    4,709State income tax expense, net of federal benefit
    
    
    457
    
    
    
    394Change in valuation allowance
    
    
    
    
    
    
    (18,273
    )Deferred tax benefit true-up adjustment
    
    
    (524
    )
    
    
    Other, net
    
    
    (58
    )
    
    
    202Total expense (benefit)
    
    $
    4,531
    
    
    $
    (12,968
    )Total expense allocated to discontinued operations
    
    
    
    
    
    
    120Total expense (benefit) on continuing operations
    
    $
    4,531
    
    
    $
    (13,088
    )
  , Accounting for Income Taxes,
  Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement 109
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Third Quarter and Nine Months of Fiscal 2008 and the Third Quarter and Nine Months of Fiscal 2007
(dollar amounts in thousands, except per share data)
    Third Quarter
    
    
    Nine MonthsFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Numerator:Net earnings
    
    $
    1,208
    
    
    $
    208
    
    
    $
    9,056
    
    
    $
    26,817Denominator:Weighted average common shares outstanding
    
    
    10,484
    
    
    
    10,069
    
    
    
    10,435
    
    
    
    10,043Effect of potentially dilutive
securities: stock options and RSUs
    
    
    179
    
    
    
    413
    
    
    
    234
    
    
    
    352Weighted average common shares
outstanding, assuming dilution
    
    
    10,663
    
    
    
    10,482
    
    
    
    10,669
    
    
    
    10,395Basic net earnings per common share
    
    $
    0.12
    
    
    $
    0.02
    
    
    $
    0.87
    
    
    $
    2.67Diluted net earnings per common share
    
    $
    0.11
    
    
    $
    0.02
    
    
    $
    0.85
    
    
    $
    2.58
    March 29, 2008
    
    
    June 30, 2007Raw materials
    
    $
    108
    
    
    $
    158Finished goods
    
    
    13,952
    
    
    
    14,481Total inventory
    
    $
    14,060
    
    
    $
    14,639
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R.G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
for the Third Quarter and Nine Months of Fiscal 2008 and the Third Quarter and Nine Months of Fiscal 2007
(dollar amounts in thousands, except per share data)
  Third Quarter
    
    
    Nine MonthsFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Service cost
    
    $
    11
    
    
    $
    19
    
    
    $
    33
    
    
    $
    56Interest cost
    
    
    573
    
    
    
    445
    
    
    
    1,719
    
    
    
    1,334Expected return on plan assets
    
    
    (539
    )
    
    
    (370
    )
    
    
    (1,617
    )
    
    
    (1,111
    )Net amortization
    
    
    106
    
    
    
    106
    
    
    
    319
    
    
    
    320Total pension expense
    
    $
    151
    
    
    $
    200
    
    
    $
    454
    
    
    $
    599
   Third Quarter
    
    
    Nine MonthsFiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net earnings
    
    $
    1,208
    
    
    $
    208
    
    
    $
    9,056
    
    
    $
    26,817Pension related adjustment
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    21
    
    
    
    (365
    )
    
    
    111Total comprehensive income
    
    $
    1,208
    
    
    $
    229
    
    
    $
    8,567
    
    
    $
    26,928
  March 29, 2008
    
    
    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 Third Quarter and Nine Months of Fiscal 2008 and the Third Quarter and Nine Months of Fiscal 2007
(dollar amounts in thousands, except per share data)
        , Fair Value Measurements Accounting for Leases .
 Business Combinations , Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB
No.151.
 12




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Introduction
   Results of Continuing Operations
      13




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Results of Discontinued Operations
  Seasonality
  Looking ahead to the remainder of fiscal 2008 and beyond
  14




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Liquidity and Capital Resources
     Operating Activities
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§
    
    Net accounts receivable increased by $700 thousand and by $4.6 million during the nine
months of fiscal 2008 and fiscal 2007, respectively. The increases in net accounts receivable
during these reporting periods were due primarily to the seasonality of our business. The
increase in net accounts receivable for the current period versus the same prior year period
primarily reflects the impact of higher returns allowance reserves in the current year
associated with transitioning of product with our largest customer during the third quarter of
fiscal 2008.
 §
    
    Net inventories decreased by $600 thousand during the nine months of fiscal 2008 and
primarily reflects the net effect of the timing of relative purchases over the period. The
decrease in net inventories of $13.6 million during the nine months 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 $2.0 million and $4.6 million during the nine months of
fiscal 2008 and nine months 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 the product transition
initiative with our largest customer.
 §
    
    Accrued expenses decreased by $1.1 million and $1.4 million during the nine months of
fiscal 2008 and nine months 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
 
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Bank Facility
 Bank Facility
  
  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
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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 related receivable is probable;
    
    persuasive evidence of a sale arrangement exists; and
    
    the sales price is fixed or determinable.
       18




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Recently Issued Accounting Standards
 , Fair Value Measurements Accounting for Leases .
 Business Combinations , Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB
No.151.
 19




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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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Our North America business, which is our primary business, is dependent on our ability to continue
sourcing products from outside North America.
 ®
  Our concentration of customers could have a material adverse effect on us, and our success is
dependent on the success of our customers.
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The footwear industry is highly competitive.
  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.
  
    
   
   
   
   22




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R.G. BARRY CORPORATION
RegistrantDate: May 9, 2008
    By:
    /s/ Daniel D. VirenDaniel D. VirenSenior Vice President  Finance, Chief Financial
Officer and Secretary (Principal Financial Officer)
(Duly Authorized Officer) 23




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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
 24