Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
(1)
|
Summary of Significant Accounting Policies
|
|
(a)
|
Principal Business Activity
|
R.G. Barry Corporation, an Ohio corporation, is engaged, with its subsidiaries, including Foot Petals, Inc. and Baggallini, Inc. (collectively, the Company), in designing, sourcing, marketing
and distributing footwear, foot and shoe care products and hand bags, tote bags and other travel accessories. The Company operates in two reportable segments: (1) Footwear that encompasses primarily slippers, sandals, hybrid and fashion
footwear; and (2) Accessories with products including foot and shoe care products, handbags, tote bags and other travel accessories. The Companys products are sold predominantly in North America through the accessory sections of
department stores, national chain stores, warehouse clubs, specialty and independent stores, television shopping networks, e-tailing/internet based retailers, discount stores and mass merchandising channels of distribution.
The Companys reporting period is a fifty-two-week or fifty-three-week period (fiscal year), ending annually on the
Saturday nearest June 30. For definitional purposes, as used herein, the terms listed below include the respective periods noted:
|
|
|
Fiscal 2013
|
|
52 weeks ended June 29, 2013
|
Fiscal 2012
|
|
52 weeks ended June 30, 2012
|
Fiscal 2011
|
|
52 weeks ended July 2, 2011
|
|
(b)
|
Principles of Consolidation
|
The financial statements include the accounts of the Company. All inter-company balances and transactions, where appropriate, have been eliminated in consolidation.
The Companys financial statements have been prepared in conformity with U.S. generally accepted accounting principles
(GAAP), and accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
|
(d)
|
Cash and Cash Equivalents
|
Cash includes deposits with banks and other financial institutions, which are accessible at any time without prior notice or penalty. Cash equivalents include $18,539 and $13,620 in money market accounts
at June 29, 2013 and June 30, 2012, respectively, with original maturities of three months or less.
|
(e)
|
Short-Term Investments
|
At June 29, 2013, as part of its cash management and investment program, the Company maintained a portfolio of $17,694 in short-term investments, including $11,705 in marketable investment securities
consisting of variable rate demand notes and $5,989 in other short-term investments. The marketable investment securities are classified as available-for-sale. These marketable investment securities are carried at cost, which approximates fair
value. The other short-term investments are classified as held-to-maturity securities and include several commercial paper investments, which matured in August, 2013. Held-to-maturity debt
43
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
securities are those debt securities as to which the Company has the ability and intent to hold until maturity. Held-to-maturity debt securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts.
At June 30, 2012, as part of its cash management and investment
program, the Company maintained a portfolio of $25,599 in short-term investments, including $17,145 in marketable investment securities consisting of variable rate demand notes and $8,454 in other short-term investments. The marketable investment
securities are classified as available-for-sale. These marketable investment securities are carried at cost, which approximates fair value. The other short-term investments are classified as held-to-maturity securities and include several commercial
paper investments, which matured in August, 2012. Held-to-maturity debt securities are those debt securities as to which the Company has the ability and intent to hold until maturity. Held-to-maturity debt securities are recorded at amortized cost,
adjusted for the amortization or accretion of premiums or discounts.
Inventory is valued at the lower of cost or market, with cost determined on the first-in, first-out (FIFO) basis.
|
(g)
|
Depreciation and Amortization
|
Depreciation and amortization expense has been computed using the straight-line method over the estimated useful lives of the assets. Depreciation and amortization expense is reflected as part of selling,
general and administrative expenses in the accompanying consolidated statements of income. For fiscal 2013, fiscal 2012, and fiscal 2011, depreciation expenses of $1,086, $1,348, and $1,378, respectively, have been reported in selling, general and
administrative expenses in the accompanying consolidated statements of income.
|
(h)
|
Trademarks, Patents and Acquired Customer Relationships
|
The Company incurs costs in obtaining and perfecting trademarks and patents related to its products and production-related processes. These costs are generally amortized over a period subsequent to asset
acquisition not to exceed five years. The value of acquired customer relationships is amortized over their projected economic life using the straight-line method.
|
(i)
|
Revenue Recognition and Trade Accounts Receivable
|
The Company recognizes revenue when the following criteria are met:
|
|
|
goods are shipped from its warehouse and other third-party distribution locations, at which point the Companys 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.
|
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. In certain circumstances, the Company sells to its customers under special arrangements, which in certain instances
provide for return privileges, as well as discounts, promotions and other sales incentives. When selling under these special arrangements, the Company reduces its measurement of revenue by the estimated cost of potential future returns and allowable
retailer promotions and sales incentives. The Company bases its estimates for sales returns
44
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
and promotions and sales incentive allowances on current and historical trends and experience.
Allowances established for returns were approximately $618 and $587 at the end of fiscal 2013 and fiscal 2012, respectively, and are classified in trade accounts receivable on the accompanying
consolidated balance sheets; these allowances were for specific spring season programs initiated with certain customers in each respective fiscal year. During fiscal 2013 and fiscal 2012, the Company recorded approximately $2,192 and $4,654,
respectively, as the sales value of merchandise returned by customers.
Allowances for promotions, cooperative advertising and
other sales incentives established at the end of fiscal 2013 and fiscal 2012 were approximately $1,903 and $1,142, respectively, and are classified in trade accounts receivable on the accompanying consolidated balance sheets. Charges to revenue for
consumer promotion, cooperative advertising and other sales incentive activities, including support for display fixtures, for fiscal 2013, fiscal 2012, and fiscal 2011 were approximately $8,075, $10,611 and $13,828, respectively.
|
(j)
|
Distribution and Warehousing Costs
|
Distribution and warehousing costs for finished product, including occupancy costs, are classified within selling, general and administrative expenses in the accompanying consolidated statements of
income. These costs amounted to $7,256, $7,763, and $6,872 for fiscal 2013, fiscal 2012, and fiscal 2011, respectively.
|
(k)
|
Advertising and Promotion
|
The Company uses a variety of programs to advertise and promote the sale of its products to customers and consumers. Customer advertising is expensed as incurred. The cost of consumer advertising is
expensed when first used. For fiscal 2013, fiscal 2012, and fiscal 2011, advertising and promotion expenses of $2,290, $3,308, and $4,924, respectively, have been reported in selling, general and administrative expenses in the accompanying
consolidated statements of income.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
In assessing the realizability of deferred tax assets, the
Companys management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income
or the ability to carry back tax losses for recovery against prior years with taxable income. Management considers the scheduled reversal of deferred items, projected future taxable income and tax planning strategies in making this assessment.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.
Recognized income tax positions are measured at the
45
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Companys
policy is to recognize and classify any interest and penalties associated with unrecognized tax benefits relating to uncertain tax positions as part of the Companys income tax expense.
|
(m)
|
Per Common Share Information
|
Basic net earnings per common share are based on the weighted average number of common shares outstanding during each reporting period. Diluted net earnings per common share are based on the weighted
average number of common shares outstanding as well as, when their effect is dilutive, potential common shares consisting of certain common shares subject to stock options and restricted stock units.
The Company recognizes the stock-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period. All of the stock-based compensation is
accounted for as an equity instrument, and expense is recognized over the service period for the entire award. This recognition is subject to the requirement that the cumulative amount of stock-based compensation expense recognized at any point in
time must be at least equal to the portion of the grant-date fair value of the award that is vested at that date. The Company also issues performance-based restricted stock units, where a defined portion of the award, if earned, is to be settled in
common shares and a portion is to be settled in cash with the amount to be paid equivalent in market value to the common shares underlying the restricted stock units granted at the time of settlement. This cash portion of the award is
treated as a liability award, with mark to market adjustments made in expense recognition over the term of the award for those units to be settled in cash payment to the respective grantee. The time-based portion and the portion of the
performance-based award to be settled by cash payment are recognized in expense ratably over the three-year term of the grant, with expense related to units underlying the cash payment portion adjusted based on changes in market value of common
shares over that period prior to settlement. The portion of the performance-based award to be settled by issuance of common shares is recognized in expense over the grant term using a tranche method for the respective segments expected to be
settled.
The R.G. Barry Corporation Amended and Restated 2005 Long-Term Incentive Plan (the 2005 Plan) is the only
equity-based compensation plan under which future awards may be made to employees of the Company and non-employee directors of R.G. Barry Corporation other than the employee stock purchase plan in which employees of the Company may participate, as
described in further detail in Note (12) Shareholders Equity. The Companys previous equity-based compensation plans remained in effect with respect to the then outstanding awards following the approval of the 2005
Plan.
During fiscal 2013, fiscal 2012, and fiscal 2011, the Company recognized net excess federal, state and local tax benefit
of $286, $123, and $128, respectively, associated with stock-based compensation and recognized this excess benefit as an addition to the paid-in capital account. Excess tax benefits are recognized only when they impact taxes paid or payable.
|
(o)
|
Fair Value Measurements
|
Fair value measurements of assets and liabilities are recognized or disclosed in the financial statements based upon a fair value hierarchy that prioritizes the inputs to valuation techniques
46
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest
priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
|
|
|
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.
|
The level in the fair value hierarchy within which a fair value measurement falls is based on the lowest level input that is significant
to the fair value measurement in its entirety.
|
(p)
|
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
|
The carrying value of long-lived assets including property, plant and equipment and intangible assets with finite useful lives, are
reviewed for impairment whenever events or changes 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 the consolidated statements of income. There were no impairment indicators present during the fiscal year ended June 29, 2013.
Assets to be disposed of, if any, would be presented separately in the consolidated balance sheets, reported at the lower of the carrying
amount or fair value less costs to sell, and would no longer be depreciated.
Purchased goodwill and intangible assets with
indefinite lives, such as trade names, are not amortized, but instead are tested for impairment annually, during the 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. Goodwill is tested at the reporting unit level. The goodwill impairment test consists of comparing the fair value of each reporting unit, determined using discounted cash flows, to each reporting units 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 income.
The Company adopted ASU 2011-8
IntangiblesGoodwill and Other (Topic 350): Testing Goodwill for Impairment,
and early adopted
ASU 2012-2,
Intangibles-Goodwill
47
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment
, and performed a qualitative assessment for its annual impairment test evaluation during the second quarter
of fiscal 2013 on goodwill and indefinite life intangible assets. In conducting the qualitative assessment, the Company considered relevant events and circumstances that affect the fair value or carrying amount of a reporting unit and indefinite
life intangible assets. Such events and circumstances could include macroeconomic conditions, industry and market considerations, overall financial performance, entity and reporting unit specific events, and capital markets pricing. The Company
considered the extent to which each of the adverse events and circumstances identified affect the comparison of a reporting unit and indefinite life intangible assets fair value with its carrying amount. The Company placed more weight on the
events and circumstances that most affect a reporting unit and indefinite life intangible assets fair value or the carrying amount of its net assets. The Company considered positive and mitigating events and circumstances that may affect its
determination of whether it is more likely than not that the fair value of a reporting unit and indefinite life intangible assets are less than its carrying amount. The Company also considered recent valuations of its reporting units and indefinite
life intangible assets, including the difference between the most recent fair value estimate and the carrying amount. These factors were all considered by management in reaching its conclusion about whether to perform the first step of the
impairment test. If management had concluded that further testing was required, the Company would have performed a quantitative valuation to estimate the fair value of its reporting units and indefinite life intangible assets.
After assessing all relevant events and circumstances and their potential impact on significant inputs to the fair value determination,
the Company determined that it is not more likely than not that the reporting units carrying value exceeded its fair value during fiscal 2013.
|
(q)
|
Allowances Granted to Resellers
|
The Company provided consideration to customers in the form of discounts and other allowances, which were reflected as a reduction of net sales of approximately $9,607, $9,746, and $12,150 for fiscal
2013, fiscal 2012, and fiscal 2011, respectively.
|
(r)
|
Derivative Instruments and Hedging
|
A derivative instrument, an interest rate contract, is used as part of the Companys 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, the Company agrees 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 GAAP, and accordingly, the effective portion of unrealized gains and losses on interest rate swaps accounted for as a cash flow hedge is deferred as a component of accumulated other comprehensive income (loss). Any
deferred portion is a component of interest expense when the interest expense is incurred. Any ineffective portion is directly recorded as a component of interest expense.
At the end of each quarter, the interest rate contract is recorded on the consolidated balance sheet at fair value and re-tested under GAAP 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 to other comprehensive income
48
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
(loss). If some or the entire interest rate contract is deemed ineffective as a cash flow hedge, any gain or loss on the ineffective portion of the interest rate contract is recognized
immediately in earnings.
|
(s)
|
Recently Issued Accounting Standards
|
In December 2011, the FASB issued ASU 2011-11,
Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.
This update requires additional disclosures about offsetting and
related arrangements on assets and liabilities to enable users of financial statements to understand the effect of such arrangements on an entitys financial position as reported. This amendment is effective for fiscal 2014, and adoption of
this standard change will only affect the footnote disclosures within the consolidated financial statements. Once adopted, these disclosure provisions will apply retrospectively for all comparative periods presented.
In February 2013, the FASB issued ASU 2013-2,
Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income.
This update requires that the effect of significant reclassifications out of accumulated other comprehensive income be reported on the respective line items in net earnings if the amount being reclassified is required under
U.S. generally accepted principles to be reclassified in its entirety in the same reporting period to net earnings. For reclassifications involving other amounts, cross references would be required to other disclosures provided under generally
accepted accounting principles on such items. This update is effective prospectively for annual reporting periods beginning after December 15, 2012 and interim periods within those years. Since this update addresses only financial reporting
disclosures, the Company does not expect it to have a direct material impact on the Companys financial statements.
49
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
(2)
|
Fair Value Measurements
|
Fair Value of Financial Instruments
Cash, cash equivalents, short-term investments, accounts receivable, accounts payable, accrued expenses, and short-term notes payable, as
reported in the consolidated financial statements, approximate their fair value because of the short-term maturity of those instruments. The fair value of the Companys long-term debt is based on the present value of expected cash flows,
considering expected maturities and using current interest rates available to the Company for borrowings with similar terms. The carrying amount of the Companys long-term debt approximates its fair value. The fair value of the Companys
long-term debt is disclosed in Note (6) Short-term Notes Payable and Long-Term Debt.
The following
table presents assets and liabilities that were measured at fair value on a recurring basis at June 29, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using:
|
|
|
|
Carrying Amount
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
11,705
|
|
|
|
|
|
|
$
|
11,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,705
|
|
|
|
|
|
|
$
|
11,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contract
|
|
$
|
301
|
|
|
|
|
|
|
$
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
301
|
|
|
|
|
|
|
$
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents assets and liabilities that were measured at fair value on a recurring basis
at June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using:
|
|
|
|
Carrying Amount
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
17,145
|
|
|
|
|
|
|
$
|
17,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,145
|
|
|
|
|
|
|
$
|
17,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contract
|
|
$
|
472
|
|
|
|
|
|
|
$
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
472
|
|
|
|
|
|
|
$
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Inventory by category at June 29, 2013 and June 30, 2012 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Raw materials
|
|
$
|
|
|
|
$
|
666
|
|
Finished goods
|
|
|
24,239
|
|
|
|
20,483
|
|
|
|
|
|
|
|
|
|
|
Total Inventory
|
|
$
|
24,239
|
|
|
$
|
21,149
|
|
|
|
|
|
|
|
|
|
|
Inventory was valued at the lower of cost or market at the end of fiscal 2013 and the end of fiscal 2012;
adjustments to market at the end of each of these periods were $485 and $582, respectively.
Inventory adjustments to reduce
cost to market recognized as a part of cost of sales were $560, $776, and $2,114 in fiscal 2013, fiscal 2012, and fiscal 2011, respectively.
(4)
|
Property, Plant and Equipment
|
Property, plant and equipment at cost at June 29, 2013 and June 30, 2012 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Estimated
life in years
|
|
Land and improvements
|
|
$
|
290
|
|
|
$
|
279
|
|
|
|
515
|
|
Buildings and improvements
|
|
|
3,782
|
|
|
|
3,782
|
|
|
|
545
|
|
Machinery and equipment
|
|
|
8,114
|
|
|
|
6,050
|
|
|
|
210
|
|
Leasehold improvements
|
|
|
960
|
|
|
|
906
|
|
|
|
26
|
|
Construction in progress
|
|
|
170
|
|
|
|
1,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
$
|
13,316
|
|
|
$
|
12,238
|
|
|
|
|
|
Less total accumulated depreciation
|
|
|
9,138
|
|
|
|
8,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
|
4,178
|
|
|
$
|
4,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Goodwill and Other Intangible Assets
|
The Company uses the acquisition method of accounting for any business acquisitions and recognizes intangible assets
separately from goodwill. The acquired assets and assumed liabilities in an acquisition are measured and recognized based on their estimated fair value at the date of acquisition, with goodwill representing the excess of the consideration
transferred over the fair value of the identifiable net assets.
Goodwill and indefinite life intangible assets included the
following:
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
Trade names
|
|
Balance as of July 2, 2011
|
|
$
|
15,510
|
|
|
$
|
9,200
|
|
Acquired during fiscal 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2012
|
|
$
|
15,510
|
|
|
$
|
9,200
|
|
Acquired during fiscal 2013
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 29, 2013
|
|
$
|
15,622
|
|
|
$
|
9,200
|
|
|
|
|
|
|
|
|
|
|
51
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Other intangible assets included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 29, 2013
|
|
|
|
Weighted
average
amortization
period
|
|
|
Gross
Carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net carrying
amount
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
9.4 years
|
|
|
$
|
15,738
|
|
|
$
|
(3,901
|
)
|
|
$
|
11,837
|
|
Trademarks, patents and fees
|
|
|
5 years
|
|
|
|
937
|
|
|
|
(662
|
)
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortizing intangible assets
|
|
|
|
|
|
$
|
16,675
|
|
|
$
|
(4,563
|
)
|
|
$
|
12,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012
|
|
|
|
Weighted
average
amortization
period
|
|
|
Gross
Carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net carrying
amount
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
9.4 years
|
|
|
$
|
15,600
|
|
|
$
|
(2,198
|
)
|
|
$
|
13,402
|
|
Trademarks, patents and fees
|
|
|
5 years
|
|
|
|
728
|
|
|
|
(600
|
)
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortizing intangible assets
|
|
|
|
|
|
$
|
16,328
|
|
|
$
|
(2,798
|
)
|
|
$
|
13,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognized aggregate customer relationships and trademarks, patents and fees amortization
expense of $1,765, $1,739 and $625 in fiscal 2013, fiscal 2012 and fiscal 2011, respectively, and reported that expense as part of selling, general and administrative expenses in the accompanying consolidated statements of income.
Based on the Companys amortization methods, remaining customer relationships and trademarks, patents and fees costs will be
recognized as amortization expense of $1,798, $1,789, $1,780, $1,766 and $1,549 in each of the next five years, respectively. The Company would accelerate the expensing of these costs should circumstances change and an impairment condition be
determined for customer relationships, trademarks or patents that have a remaining value.
(6)
|
Short-term Notes Payable and Long-term Debt
|
On March 1, 2011, the Company and The Huntington National Bank (Huntington) entered into an unsecured
Credit Agreement (the New Facility). The New Facility replaced the previously existing unsecured revolving credit agreement between the Company and Huntington dated March 29, 2007 (as amended, the Prior Credit
Agreement), which would have expired December 31, 2011. The Prior Credit Agreement with Huntington was terminated in connection with the New Facility.
Under the terms of the New Facility, Huntington is obligated to advance funds to the Company for a period of three years under a revolving credit facility (the Revolving Credit Facility). The
Company may have outstanding indebtedness of up to $5,000 under the Revolving Credit Facility
52
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
from January through June of each calendar year and up to $10,000 from July through December of each calendar year. Under the terms of the New Facility, the Company may request that Huntington
increase the Revolving Credit Facility by an amount of up to $5,000. The termination and maturity date of the Revolving Credit Facility is March 1, 2014. The interest rate on the Revolving Credit Facility is a rate equal to the 30-day LIBOR
rate plus 1.75% and the applicable rate on this Revolving Credit Facility was 1.94% at June 29, 2013. Additionally, the Company agreed to pay a quarterly fee equal to 0.25% of the daily average unused amount of the Revolving Credit Facility, as
well as a one-time $25 deemed to be paid facility fee effective as of March 1, 2011 in connection with the Revolving Credit Facility. The facility fee is being amortized over the term of the Revolving Credit Facility. Further, the Revolving
Credit Facility must be without any outstanding borrowings for at least 30 consecutive days during each period commencing on July 1 and continuing through June 30 of the following year. At June 29, 2013, there were no outstanding
borrowings under the Revolving Credit Facility. At June 29, 2013, the Company had available borrowing capacity under the Revolving Credit Facility of $5,000.
Under the terms of the New Facility, the Company borrowed $30,000 in funds made available under a term loan facility (the Term Loan Facility). Under the Term Loan Facility, Huntington
disbursed $15,000 on March 1, 2011 and the remaining $15,000 on March 31, 2011. The Company started making equal monthly principal payments in the amount of $357, together with accrued interest, beginning on April 1, 2011, with the
then remaining outstanding balance and accrued interest due and payable on March 1, 2016. The interest rate under the Term Loan Facility is a rate equal to LIBOR plus 1.85%. As required under the terms of the New Facility, the Company entered
into an interest rate contract that provided for a fixed interest rate of 3.94% on a notional amount equal to fifty percent of the outstanding principal balance of the term loan. See Note (7) Derivative Instruments and Hedging
Activities.
The Company paid Huntington a one-time facility commitment fee of $75 in connection with the Term Loan
Facility, and this fee is being amortized over the term of the term loan. The applicable interest rate on the Term Loan Facility at June 29, 2013 was 2.04% based on a 30-day LIBOR rate of .19% on that date.
Under the terms of the New Facility, the Company is required to satisfy certain financial covenants, including (a) satisfying a
minimum fixed charge coverage ratio test of not less than 1.1 to 1.0, which has been and will continue to be calculated quarterly on a trailing 12-month basis beginning with the fiscal quarter ended March 31, 2012, (b) satisfying a funded
debt leverage ratio test of not greater than 2.25 to 1.00, which has been and will continue to be calculated quarterly beginning with the fiscal quarter ended on March 31, 2012 and (c) maintaining a consolidated net worth of at least
$52,000, increased annually by an amount equal to 50% of the Companys consolidated net earnings subsequent to June 29, 2013. At June 29, 2013, the Company was in compliance with all of these financial covenants.
The fair value of the Companys long-term debt is based upon the present value of expected cash flows, considering expected
maturities and using current interest rates available to the Company for borrowings with similar terms. The carrying amount of the Companys long-term debt approximates its fair value. Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 29, 2013
|
|
|
June 30, 2012
|
|
Long-term debt
|
|
$
|
20,357
|
|
|
$
|
24,643
|
|
Less current installments
|
|
|
4,286
|
|
|
|
4,286
|
|
|
|
|
|
|
|
|
|
|
Long-term debt excluding current installments
|
|
$
|
16,071
|
|
|
$
|
20,357
|
|
|
|
|
|
|
|
|
|
|
53
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
The aggregate minimum principal maturities of the long-term debt for each of the next
three years following fiscal 2013 are as follows:
|
|
|
|
|
2014
|
|
$
|
4,286
|
|
2015
|
|
|
4,286
|
|
2016
|
|
|
3,571
|
|
2016 due at end of term loan
|
|
|
8,214
|
|
|
|
|
|
|
|
|
$
|
20,357
|
|
|
|
|
|
|
(7)
|
Derivative Instruments and Hedging Activities
|
The Company may utilize derivative financial instruments to manage exposure to certain risks related to its ongoing
operations. The primary risk managed through the use of derivative instruments is interest rate risk. In January 2011, the Company entered into an interest rate contract with an initial notional amount of $15,000 and a maturity date of March 1,
2016 to hedge the changes in cash flows attributable to changes in the LIBOR rate associated with the Term Loan Facility. Under this interest rate contract, the Company pays a fixed interest rate of 3.94% and receives a variable rate based on LIBOR
plus 1.85%. The notional amount of this interest rate contract is required to be 50% of the amount of the term loan through the expiration of the term loan under the Term Loan Facility described in Note (6) Short-term Notes Payable
and Long-term Debt.
The Companys objective is to manage the impact of interest rate changes on cash flows and the
market value of its borrowings under the floating rate term loan. In addition, the Company may enter into interest rate contracts to further manage exposure to interest rate variations related to borrowings and to lower overall borrowing costs. The
Company does not use derivative instruments for trading or speculative purposes. The Companys derivative instrument is designated as a hedging instrument, which is adjusted to fair value at the end of each reporting period with the effective
portion of the adjustment recorded to other comprehensive income. Any ineffective portion is recorded in earnings.
The Company
is exposed to counterparty credit risk on any derivative instrument. Accordingly, the Company has established and maintains strict counterparty credit guidelines and enters into any derivative instrument only with a major financial institution. The
Company does not have significant exposure to any counterparty and management believes the risk of loss is remote and, in any event, would not be material.
Refer to Note (2) Fair Value Measurements for additional information regarding the fair value of the derivative instrument.
The following table summarizes the fair value of the Companys derivative instrument and the line items in which it was recorded in
the consolidated balance sheets at June 29, 2013 and June 30, 2012:
54
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivative Fair Value
|
|
|
|
Balance Sheet Location
|
|
at June 29, 2013
|
|
|
at June 30, 2012
|
|
Derivative designated as hedging instrument:
|
|
|
|
|
|
|
|
|
|
|
Interest rate contract
|
|
Accrued expenses
|
|
$
|
156
|
|
|
$
|
186
|
|
|
|
Accrued retirement costs and other
|
|
|
145
|
|
|
|
268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
301
|
|
|
$
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges
The Company may enter into derivative instruments to hedge exposure to changes in cash flows attributable to interest rate fluctuations associated with certain forecasted transactions. These derivative
instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on any such derivative instrument is reported as a component of other comprehensive income (OCI) and reclassified into
earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized in
earnings immediately.
The following table summarizes the loss recognized in OCI and the loss reclassified from accumulated OCI
into income before income tax for the derivative instrument designated as a cash flow hedge during the fiscal year ended June 29, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loss
Recognized
in OCI
(Effective
Portion)
|
|
|
Location of Loss
Reclassified from
Accumulated
OCI (Effective
Portion)
|
|
Loss
Reclassified
from
Accumulated
OCI (Effective
Portion)
|
|
|
Location of
Loss
(Ineffective
Portion)
Excluded from
Effectiveness
Testing
|
|
Loss
(Ineffective
Portion)
Excluded from
Effectiveness
Testing
|
|
Interest rate contract
|
|
$
|
41
|
|
|
Interest expense
|
|
$
|
212
|
|
|
Interest expense
|
|
$
|
|
|
The following table summarizes the loss recognized in OCI and the loss reclassified from accumulated OCI
into earnings for the derivative instrument designated as a cash flow hedge during the fiscal year ended June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loss
Recognized
in OCI
(Effective
Portion)
|
|
|
Location of Loss
Reclassified from
Accumulated
OCI (Effective
Portion)
|
|
Loss
Reclassified
from
Accumulated
OCI (Effective
Portion)
|
|
|
Location of
Loss
(Ineffective
Portion)
Excluded from
Effectiveness
Testing
|
|
Loss
(Ineffective
Portion)
Excluded from
Effectiveness
Testing
|
|
Interest rate contract
|
|
$
|
458
|
|
|
Interest expense
|
|
$
|
250
|
|
|
Interest expense
|
|
$
|
|
|
55
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
The estimated net amount of the loss in accumulated OCI at June 29, 2013 expected
to be reclassified into income before income tax within the next twelve months is $156.
The Company occupies certain distribution and office sales facilities under cancelable and noncancelable operating
lease arrangements. A summary of the noncancelable operating lease commitments at June 29, 2013 is as follows:
|
|
|
|
|
2014
|
|
$
|
557
|
|
2015
|
|
|
201
|
|
2016
|
|
|
1
|
|
|
|
|
|
|
|
|
$
|
759
|
|
|
|
|
|
|
Substantially all of these operating lease agreements have no further contractual renewals and require
the Company to pay insurance, taxes and maintenance expenses. Rent expense under cancelable and non-cancelable operating lease arrangements in fiscal 2013, fiscal 2012, and fiscal 2011 was $765, $1,098 and $1,028, respectively.
Income tax expense for fiscal 2013, fiscal 2012, and fiscal 2011, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Current expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
6,768
|
|
|
$
|
6,538
|
|
|
$
|
2,959
|
|
State
|
|
|
1,161
|
|
|
|
1,197
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,929
|
|
|
|
7,735
|
|
|
|
3,396
|
|
Deferred expense
|
|
|
325
|
|
|
|
976
|
|
|
|
932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
8,254
|
|
|
$
|
8,711
|
|
|
$
|
4,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The difference between income taxes computed by applying the statutory federal income tax rates of 35%,
35%, and 34% in fiscal 2013, fiscal 2012, and fiscal 2011, respectively, and income tax expense reported in the consolidated statements of income is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Computed expected tax expense
|
|
$
|
7,529
|
|
|
$
|
8,141
|
|
|
$
|
4,025
|
|
State income taxes expense, net of federal income tax
|
|
|
785
|
|
|
|
915
|
|
|
|
361
|
|
Revaluation of net deferred tax assets
|
|
|
|
|
|
|
(338
|
)
|
|
|
|
|
Other, net
|
|
|
(60
|
)
|
|
|
(7
|
)
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
8,254
|
|
|
$
|
8,711
|
|
|
$
|
4,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences and loss carryforwards that give rise to significant portions of
the deferred tax assets and deferred tax liabilities are presented below.
56
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
1,190
|
|
|
$
|
895
|
|
Accrued expenses
|
|
|
1,435
|
|
|
|
1,366
|
|
Pension liability
|
|
|
5,421
|
|
|
|
6,806
|
|
Interest rate contract liability
|
|
|
106
|
|
|
|
175
|
|
Capital loss carryforward
|
|
|
|
|
|
|
508
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
8,152
|
|
|
|
9,750
|
|
Less valuation allowance
|
|
|
|
|
|
|
(508
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
|
8,152
|
|
|
|
9,242
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accrued pension costs
|
|
|
2,505
|
|
|
|
2,559
|
|
Acquisition intangible assets and expenses
|
|
|
650
|
|
|
|
270
|
|
Prepaid insurance
|
|
|
63
|
|
|
|
70
|
|
Property, plant and equipment
|
|
|
479
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
3,697
|
|
|
|
3,009
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
4,455
|
|
|
$
|
6,233
|
|
|
|
|
|
|
|
|
|
|
During fiscal 2012, the Company concluded, based on its forecast of future operations and estimated
federal, state and local effective tax rates, the likely rate at which net temporary differences would reverse had changed. Accordingly, deferred tax assets and liabilities, as of the beginning of fiscal 2012, were revalued at a higher tax rate
resulting in a deferred tax benefit of $338, which was recorded during the fourth quarter of fiscal 2012.
The net temporary
differences incurred to date will reverse in future periods as the Company generates taxable earnings. The Company believes it is more likely than not that the results of future operations will generate sufficient taxable earnings to realize the net
deferred tax assets recorded.
During fiscal 2013, the capital loss carryforward related to the 2007 sale of Fargeot expired
unused, consequently the capital loss carry forward deferred tax asset and the related valuation reserve of $508 were reversed.
At the end of fiscal 2013, fiscal 2012 and fiscal 2011, there were no net operating loss carryforwards available for U.S. federal, state,
and local income tax purposes.
The Company did not record an accrual for tax related uncertainties or unrecognized tax
positions at the end of fiscal 2013 or the end of fiscal 2012. The Company does not expect a change to the reserve for uncertain tax positions within the next twelve months that would have a material impact on the consolidated financial statements.
The Company recorded no interest or penalties during or at the end of fiscal 2013, fiscal 2012, and fiscal 2011 in either its consolidated statement of income or consolidated balance sheet.
The Company files a consolidated U.S. Federal income tax return and consolidated and separate company income tax returns in various state
and local jurisdictions. Generally, the Company is no longer subject to income tax examinations by federal tax authorities through the tax year ended July 2, 2011 and by state and local tax authorities for the tax years through June 28,
2008.
57
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Accrued expenses at June 29, 2013 and June 30, 2012 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Salaries and wages
|
|
$
|
3,129
|
|
|
$
|
3,537
|
|
Other taxes
|
|
|
68
|
|
|
|
147
|
|
Current pension liabilities
|
|
|
660
|
|
|
|
655
|
|
Other
|
|
|
1,042
|
|
|
|
1,362
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,899
|
|
|
$
|
5,701
|
|
|
|
|
|
|
|
|
|
|
(11)
|
Employee Retirement Plans
|
The Company maintains a tax qualified pension plan, the Associates Retirement Plan (ARP). The Company
intends to fund the minimum amounts required under the Employee Retirement Income Security Act of 1974 (ERISA). The Company also sponsors a tax nonqualified pension plan, the Supplemental Retirement Plan (SRP), for certain officers
and other key employees as designated by R.G. Barry Corporations Board of Directors. The SRP is unfunded, noncontributory and provides for the payment of monthly retirement benefits. Benefits are based on a formula applied to the
recipients final average monthly compensation, reduced by a certain percentage of their social security benefits. For certain participants, the SRP provides an alternative benefit formula for years worked past the normal retirement age assumed
by the SRP. Effective as of close of business on March 31, 2004, both the ARP and SRP were frozen.
The funded status of
the ARP and the SRP and the accrued retirement costs, measured on June 29, 2013 and June 30, 2012, respectively, were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARP
|
|
|
SRP
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at the beginning of the year
|
|
$
|
35,721
|
|
|
$
|
32,778
|
|
|
$
|
7,710
|
|
|
$
|
7,620
|
|
Interest cost
|
|
|
1,430
|
|
|
|
1,644
|
|
|
|
306
|
|
|
|
379
|
|
Actuarial (gain) loss
|
|
|
(1,674
|
)
|
|
|
3,675
|
|
|
|
(115
|
)
|
|
|
397
|
|
Benefits paid
|
|
|
(2,331
|
)
|
|
|
(2,376
|
)
|
|
|
(659
|
)
|
|
|
(686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at the end of the year
|
|
$
|
33,146
|
|
|
$
|
35,721
|
|
|
$
|
7,242
|
|
|
$
|
7,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the year
|
|
$
|
32,610
|
|
|
$
|
29,238
|
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
1,936
|
|
|
|
2,639
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
936
|
|
|
|
3,286
|
|
|
|
659
|
|
|
|
686
|
|
Expenses
|
|
|
(176
|
)
|
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(2,331
|
)
|
|
|
(2,376
|
)
|
|
|
(659
|
)
|
|
|
(686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of the year
|
|
$
|
32,975
|
|
|
$
|
32,610
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of the year
|
|
$
|
(171
|
)
|
|
$
|
(3,111
|
)
|
|
$
|
(7,242
|
)
|
|
$
|
(7,710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(660
|
)
|
|
$
|
(655
|
)
|
Noncurrent liabilities
|
|
|
(171
|
)
|
|
|
(3,111
|
)
|
|
|
(6,582
|
)
|
|
|
(7,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension liability at end of year
|
|
$
|
(171
|
)
|
|
$
|
(3,111
|
)
|
|
$
|
(7,242
|
)
|
|
$
|
(7,710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss-pretax for net actuarial loss
|
|
$
|
11,701
|
|
|
$
|
15,034
|
|
|
$
|
2,134
|
|
|
$
|
2,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARP
|
|
|
SRP
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Other changes in plan assets and benefit obligations recognized in other comprehensive loss-pretax
|
|
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
|
$
|
(1,635
|
)
|
|
$
|
3,139
|
|
|
$
|
(116
|
)
|
|
$
|
397
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
Net actuarial losses
|
|
|
(1,699
|
)
|
|
|
(1,292
|
)
|
|
|
(100
|
)
|
|
|
(85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in comprehensive loss
|
|
$
|
(3,334
|
)
|
|
$
|
1,847
|
|
|
$
|
(216
|
)
|
|
$
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains and losses on assets reflect the differences between expected and actual rates of return
on pension plan assets. Actuarial gains and losses on pension obligations primarily reflect the effect of changes in discount rate on the measure of pension liabilities at the end of each fiscal year and demographic differences between actual and
projected mortality and other factors. The actuarial loss reported for pension obligations in fiscal 2013 reflects primarily the decrease of 106 basis points in the discount rate from the end of fiscal 2012 through fiscal 2013. The estimated net
actuarial loss for the defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost during fiscal 2014 are $1,375 and $93, respectively.
At June 29, 2013, expected benefit payments to plan participants in the ARP and the SRP for each of the next five years and the
five-year period thereafter in the aggregate are:
|
|
|
|
|
|
|
|
|
|
|
ARP
|
|
|
SRP
|
|
2014
|
|
$
|
2,399
|
|
|
$
|
660
|
|
2015
|
|
|
2,368
|
|
|
|
695
|
|
2016
|
|
|
2,383
|
|
|
|
688
|
|
2017
|
|
|
2,375
|
|
|
|
677
|
|
2018
|
|
|
2,374
|
|
|
|
664
|
|
2019-2023
|
|
|
11,616
|
|
|
|
3,002
|
|
59
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Weighted average assumptions used to determine net costs for both the ARP and the SRP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.14
|
%
|
|
|
5.20
|
%
|
|
|
5.02
|
%
|
Expected return on plan assets
|
|
|
6.00
|
%
|
|
|
6.75
|
%
|
|
|
7.90
|
%
|
Components of Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
1,736
|
|
|
$
|
2,023
|
|
|
$
|
1,974
|
|
Expected return on plan assets
|
|
|
(1,799
|
)
|
|
|
(1,926
|
)
|
|
|
(2,043
|
)
|
Net amortization
|
|
|
1,799
|
|
|
|
1,390
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pension expense
|
|
$
|
1,736
|
|
|
$
|
1,487
|
|
|
$
|
1,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Weighted average assumptions used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.58
|
%
|
|
|
4.14
|
%
|
|
|
5.20
|
%
|
The ARP is funded on a periodic basis as required under ERISA/IRS guidelines. The general principles
guiding investment of pension plan assets are those embodied under ERISA. These principles include discharging the Companys investment responsibilities for the exclusive benefit of plan participants and in accordance with the prudent
expert standards and other ERISA rules and regulations. Investment objectives for the Companys pension plan assets are to optimize the long-term return on plan assets while maintaining an acceptable level of risk, diversify assets among
asset classes and investment styles and maintain a long-term focus. The plan asset allocation shown below is consistent with the Companys investment policy objectives and reflects the ongoing transition of the asset portfolio from an
equity-based investment portfolio to a debt-security investment portfolio. This change over time is designed to better match assets and anticipated cash outflows with the underlying future expected payment streams associated with the Companys
ARP obligation. With the assistance of a consulting firm, the plan fiduciaries are responsible for selecting investment managers, setting asset allocation targets and monitoring asset allocation and investment performance.
The qualified plan assets invested as of the measurement date for fiscal 2013 and for fiscal 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Cash and equivalents
|
|
|
2
|
%
|
|
|
2
|
%
|
Domestic equities
|
|
|
19
|
%
|
|
|
18
|
%
|
Domestic fixed income securities
|
|
|
64
|
%
|
|
|
65
|
%
|
Foreign equities
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
Total pension plan assets invested
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
60
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
The table below highlights assets held in trust in the ARP, and the fair value
categories applicable to the various investments held at June 29, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using:
|
|
|
|
Carrying
Amount
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
706
|
|
|
$
|
706
|
|
|
$
|
|
|
|
$
|
|
|
Domestic equities
|
|
|
6,096
|
|
|
|
6,096
|
|
|
|
|
|
|
|
|
|
Domestic fixed income securities
|
|
|
21,127
|
|
|
|
21,127
|
|
|
|
|
|
|
|
|
|
Foreign equities
|
|
|
5,046
|
|
|
|
5,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pension plan assets
|
|
$
|
32,975
|
|
|
$
|
32,975
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below highlights assets held in trust in the ARP, and the fair value categories applicable to
the various investments held at June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using:
|
|
|
|
Carrying
Amount
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
762
|
|
|
$
|
762
|
|
|
$
|
|
|
|
$
|
|
|
Domestic equities
|
|
|
5,833
|
|
|
|
5,833
|
|
|
|
|
|
|
|
|
|
Domestic fixed income securities
|
|
|
21,231
|
|
|
|
21,231
|
|
|
|
|
|
|
|
|
|
Foreign equities
|
|
|
4,784
|
|
|
|
4,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pension plan assets
|
|
$
|
32,610
|
|
|
$
|
32,610
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The expected return on plan assets used in the pension computations for the qualified ARP is based on
managements best judgment of future anticipated performance of those invested assets based on past long-term experience and judgment on how future long-term performance will occur.
The Companys SRP is unfunded and payments, as required, are made when due from the Companys general funds. In fiscal 2014, the
Company anticipates total payments and qualified plan contributions of $1,314 related to its SRP and ARP.
61
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
The discount rate was determined based on an analysis of interest rates for
high-quality, long-term corporate debt at each measurement date. In order to appropriately match the bond maturities with expected future cash payments, the Company utilizes differing bond portfolios to estimate the discount rates for the defined
benefit plans. The weighted average discount rate used to determine the defined benefit plans obligation as of the balance sheet date is the rate in effect at the measurement date. The same rate is also used to determine the defined benefit plans
expense for the following fiscal year.
The Company sponsors a 401(k) plan for all its eligible salaried and non-salaried
employees. Effective January 1, 2005, the Company adopted a 3% non-contributory Safe Harbor 401 provision for all eligible plan participants. The Companys contributions in cash to the 401(k) plan were $243, $269, and $267 for fiscal 2013,
fiscal 2012, and fiscal 2011, respectively.
(12)
|
Shareholders Equity
|
As of June 29, 2013, there were approximately 106 employees of the Company and seven non-employee directors of
R.G. Barry Corporation who were eligible to participate in the 2005 Plan.
The 2005 Plan authorizes the issuance of 1,000,000
common shares, plus:
|
|
|
the number of common shares that were authorized to be the subject of awards under the 1997 Incentive Stock Plan (the 1997 Plan) and the
2002 Stock Incentive Plan (the 2002 Plan), but which had not yet been granted as of May 20, 2005; and
|
|
|
|
any common shares underlying awards granted under the 1997 Plan and the 2002 Plan, which are forfeited after May 20, 2005.
|
At June 29, 2013, the number of common shares available for future grants pursuant to the 2005 Plan was
313,000.
The selection of participants and the nature and size of awards granted under the 2005 Plan is within the discretion
of the Compensation Committee of R.G. Barry Corporations Board of Directors (the Committee), in the case of grants to employees of the Company or the full Board of Directors, in the case of grants to non-employee directors of R.G.
Barry Corporation. The 2005 Plan provides for the following types of awards, each as defined in the 2005 Plan:
|
|
|
nonqualified stock options (NQs) and incentive stock options (ISOs) that qualify under Section 422 of the Internal Revenue
Code of 1986, as amended;
|
|
|
|
stock appreciation rights;
|
|
|
|
restricted stock and restricted stock units (RSUs); and
|
|
|
|
stock grants, stock units and cash awards.
|
Grants of restricted stock, RSUs, stock units and cash awards may, as determined by the Committee or the full Board of Directors, as appropriate, also be performance-based awards, as defined in the 2005
Plan.
If an award granted under the 2005 Plan is forfeited, cancelled, terminated, relinquished, exchanged or otherwise
settled without the issuance of common shares or the payment of cash equal to the difference between the fair market value of the award and any exercise price, the common shares associated with that award will be available for future grants. The
maximum number of common shares with respect to which awards may be issued under the 2005 Plan to any individual during any calendar year is 200,000. The common shares issued pursuant to the 2005 Plan may consist of authorized and unissued common
shares or treasury shares.
62
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Prior to the 2005 Plan, the Company had various equity-based compensation plans, under
which ISOs and NQs had been granted, some of which remain outstanding. All outstanding ISOs and NQs are currently exercisable for periods of up to ten years from the date of grant at exercise prices of not less than the fair market value of the
underlying common shares at the grant date.
The Company recorded, as part of selling, general and administrative expenses,
$1,694 and $1,555 of stock-based compensation expense for fiscal 2013 and fiscal 2012, respectively. This amount includes expense from all ISOs, NQs and RSUs granted whether to be settled with the issuance of common shares or by equivalent cash
payment, and the value of common shares issued for services rendered by members of the Board of Directors of R.G. Barry Corporation.
The total unrecognized compensation cost of RSUs granted but not yet vested as of June 29, 2013 was approximately $906. The Company expects to recognize the total remaining compensation cost with
respect to these RSUs over the weighted-average period of approximately two years.
Total unrecognized compensation cost
of stock options granted, but not yet vested, as of June 29, 2013 was $7. This amount is expected to be recognized over the remaining pro-rata vesting period of one year associated with these stock option grants. The following assumptions were
used to value these stock options:
|
|
|
|
|
Dividend yield
|
|
|
2.6
|
%
|
Expected volatility
|
|
|
48.4
|
%
|
Risk-free interest rate
|
|
|
1.4
|
%
|
Expected term
|
|
|
3 years
|
|
The risk-free interest rate was based on the United States Treasury daily yield curve rates for the
expected term of the stock options. The expected volatility was based on the historical volatility of the common shares of R.G. Barry Corporation.
63
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Plan activity for grants under the 2005 Plan and the other equity-based compensation
plans under which ISOs and NQs have been granted was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
common shares
subject to ISOs
|
|
|
Number of
common shares
subject to NQs
|
|
|
Weighted-
average exercise
price
|
|
Outstanding at July 3, 2010
|
|
|
36,000
|
|
|
|
105,500
|
|
|
$
|
6.11
|
|
Granted
|
|
|
|
|
|
|
12,300
|
|
|
|
11.36
|
|
Exercised
|
|
|
(13,300
|
)
|
|
|
(5,000
|
)
|
|
|
5.85
|
|
Expired/Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at July 2, 2011
|
|
|
22,700
|
|
|
|
112,800
|
|
|
$
|
6.63
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(15,200
|
)
|
|
|
(94,200
|
)
|
|
|
6.43
|
|
Expired/Cancelled
|
|
|
|
|
|
|
(1,600
|
)
|
|
|
12.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2012
|
|
|
7,500
|
|
|
|
17,000
|
|
|
$
|
7.12
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(7,500
|
)
|
|
|
|
|
|
|
3.27
|
|
Expired/Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 29, 2013
|
|
|
|
|
|
|
17,000
|
|
|
$
|
8.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at June 29, 2013
|
|
|
|
|
|
|
13,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding
|
|
|
Options exercisable
|
|
Range of
exercise
prices
|
|
Number
outstanding at
June 29, 2013
|
|
|
Weighted-
average
remaining
contractual
life (years)
|
|
|
Weighted-
average
exercise
price
|
|
|
Number
exercisable at
June 29, 2013
|
|
|
Weighted-
average
exercise
price
|
|
$2.51 5.00
|
|
|
6,300
|
|
|
|
0.2
|
|
|
$
|
4.78
|
|
|
|
6,300
|
|
|
$
|
4.78
|
|
5.01 10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.01 15.00
|
|
|
10,700
|
|
|
|
7.7
|
|
|
|
11.18
|
|
|
|
7,100
|
|
|
|
11.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,000
|
|
|
|
|
|
|
|
|
|
|
|
13,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic values of the stock options exercisable and outstanding at the end of fiscal 2013 were $108
and $126, respectively. The intrinsic value of stock options exercised during fiscal 2013 was $75.
At the end of fiscal 2013,
fiscal 2012, and fiscal 2011, the stock options outstanding under these equity-based compensation plans were held by 4, 5 and 9 individuals, respectively, and had expiration dates ranging from 2013 to 2021.
64
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Consistent with its non-employee directors compensation policy, the Company also
awarded an aggregate of 18,711 common shares (i.e., unrestricted stock) with immediate vesting to the non-employee directors of R.G. Barry Corporation during the second quarter of fiscal 2013. The aggregate fair value of this award of common shares
was $257 based on the market price of the Companys common shares at the date of grant, and was included as part of the total stock-based compensation expense cited above.
The intrinsic value of RSUs that vested during fiscal 2013 was $1,771.
During
fiscal 2013 and fiscal 2012, the Company granted performance-based RSUs to certain members of management. Each performance-based RSU is equivalent to one common share. The number of RSUs eligible for settlement to participants is ultimately based on
the level of diluted earnings per share achieved by the Company, at certain established minimum, target and maximum levels, for the fiscal year in which such performance-based RSUs are granted. If the minimum level of diluted earnings per share is
not achieved for the fiscal year of grant, all of the performance-based RSUs underlying the award will be forfeited. If diluted earnings per share exceed the minimum level, the number of RSUs underlying the award eligible for settlement will be
determined when the annual financial results are finalized by the Company and one-third of those RSUs will be settled.
The
performance-based RSUs described in the preceding paragraph will be settled, if eligible, through an issuance of common shares for 50% of the performance-based RSUs and through cash payment for the other 50% of the performance-based RSUs valued at
the fair value of a common share at the time of settlement.
The remaining performance-based RSUs eligible for settlement will
vest to the participants based on continued service rendered to the Company over the following two-fiscal-year periods, with annual pro rata vesting based on employment during the relevant fiscal year and settlement occurring at the end of each
fiscal year. Except in instances of death or retirement where pro rata vesting would be applied, participants must be employed by the Company at the time of settlement in order to be vested in any portion of the award otherwise to be settled.
Based on the diluted earnings per share achieved by the Company for fiscal 2013 and fiscal 2012, the number of total
performance-based RSUs eligible for settlement was computed at 63,000 and 105,200, respectively, of which 50% was accounted for as an equity award and 50% was accounted for as a cash settlement award. The fair value of the equity awards for fiscal
2013 and fiscal 2012 was determined based on the weighted average closing market price of a common share at the date of grant of $14.74 and $10.51, respectively. Similarly, the fair value of the cash settlement awards was initially based on the
market price of a common share at the date of grant but is subject to periodic revaluation as changes occur in the market price of a common share over the vesting period of the awards.
In addition, consistent with its employee compensation policy, the Company granted an aggregate of 19,300 time-based RSUs, which vest in
equal annual installments over three years, to certain members of management.
At the end of fiscal 2013, fiscal 2012, and
fiscal 2011, RSUs outstanding under the 2005 Plan were held by 31, 27 and 26 employees, respectively, and had vesting dates ranging from 2014 to 2018. These RSU vesting dates were subject to partial acceleration on an annual basis if certain Company
financial performance objectives were achieved for the applicable fiscal year.
65
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
The following is a summary of the status of the Companys time-based RSUs as of
June 29, 2013, June 30, 2012, and July 2, 2011 and activity during the fiscal years then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
RSUs
|
|
|
Weighted
average
grant-
date fair
value
|
|
|
RSUs
|
|
|
Weighted
average
grant-
date fair
value
|
|
|
RSUs
|
|
|
Weighted
average
grant-
date fair
value
|
|
Unvested at beginning of the year
|
|
|
324,900
|
|
|
$
|
8.43
|
|
|
|
319,900
|
|
|
$
|
8.24
|
|
|
|
314,000
|
|
|
$
|
7.49
|
|
Granted
|
|
|
19,400
|
|
|
|
14.74
|
|
|
|
24,100
|
|
|
|
10.51
|
|
|
|
124,500
|
|
|
|
9.92
|
|
Vested
|
|
|
(102,200
|
)
|
|
|
8.38
|
|
|
|
(4,200
|
)
|
|
|
6.46
|
|
|
|
(94,600
|
)
|
|
|
8.05
|
|
Forfeited/Cancelled
|
|
|
(17,100
|
)
|
|
|
8.47
|
|
|
|
(14,900
|
)
|
|
|
8.40
|
|
|
|
(24,000
|
)
|
|
|
7.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at the end of the year
|
|
|
225,000
|
|
|
$
|
10.59
|
|
|
|
324,900
|
|
|
$
|
8.43
|
|
|
|
319,900
|
|
|
$
|
8.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity for fiscal 2013 with respect to performance-based RSUs, with future settlement at vesting in
common shares, was as follows:
|
|
|
|
|
|
|
|
|
|
|
Number
of
common shares
underlying RSUs
|
|
|
Grant Date
Fair
Value
|
|
Unvested at June 30, 2012
|
|
|
51,900
|
|
|
$
|
10.51
|
|
Granted, based on diluted earnings per share for the Company for fiscal 2013
|
|
|
31,800
|
|
|
|
14.74
|
|
Vested
|
|
|
(17,300
|
)
|
|
|
10.51
|
|
Forfeited/Cancelled
|
|
|
(1,400
|
)
|
|
|
12.09
|
|
|
|
|
|
|
|
|
|
|
Unvested at June 29, 2013
|
|
|
65,000
|
|
|
$
|
12.53
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2013 grants to various members of management were accounted for as cash settlement awards (based
on expected diluted earnings per share by the Company for fiscal 2013) for which the fair value of the awards is subject to initial valuation and subsequent periodic revaluation at the end of each reporting period based on the corresponding market
price of a common share of the Company.
66
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
(13)
|
Net Earnings per Common Share
|
The following table presents a reconciliation of the denominator used for each period in computing basic and diluted
earnings per common share, with common shares in the table represented in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
13,257
|
|
|
$
|
14,549
|
|
|
$
|
7,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
11,352
|
|
|
|
11,207
|
|
|
|
11,097
|
|
Effect of potentially dilutive securities: employee stock options and RSUs
|
|
|
178
|
|
|
|
207
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, assuming dilution
|
|
|
11,530
|
|
|
|
11,414
|
|
|
|
11,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per common share
|
|
$
|
1.17
|
|
|
$
|
1.30
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per common share
|
|
$
|
1.15
|
|
|
$
|
1.27
|
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company excludes stock options to purchase common shares from the calculation of diluted earnings per
common share when they are anti-dilutive, measured using the average market price of the underlying common shares during that fiscal year. Stock options excluded from the computation of diluted net earnings per common share for fiscal 2013, fiscal
2012, and fiscal 2011 were 0, 3,000, and 5,000, respectively.
(14)
|
Preferred Share Purchase Rights
|
On May 1, 2009, the Board of Directors of R.G. Barry Corporation declared a dividend distribution of one Preferred
Share Purchase Right (Right) for each common share then outstanding to shareholders of record on May 15, 2009. Under certain conditions, each Right may be exercised to purchase from R.G. Barry Corporation a unit consisting of one
one-hundredth of a share (a Unit) of Series II Junior Participating Class A Preferred Shares, par value $1 per share, at an initial exercise price of $25 per Unit, subject to adjustment. The Rights initially will be attached to R.G.
Barry Corporations common shares. The Rights will separate from the common shares and a Distribution Date will occur upon the earlier of (a) 10 business days after a public announcement that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of R.G. Barry Corporations outstanding common shares (Share Acquisition Date), other than as a result of repurchases of common
shares by R.G. Barry Corporation or certain inadvertent actions by institutional or certain other shareholders, or (b) 10 business days (or such later date as the Board of Directors of R.G. Barry Corporation shall determine) after the
commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 15% or more of R.G. Barry Corporations outstanding common shares. The Rights are not exercisable until the Distribution Date.
In the event that any person becomes the beneficial owner of 15% or more of the then outstanding common shares of R.G. Barry
Corporation, each holder of a Right will thereafter be entitled to receive, upon exercise, common shares of R.G. Barry Corporation (or in certain circumstances, cash, property or other securities of R.G. Barry Corporation) having a market value
equal to two times the exercise price of the Right. However, following the occurrence of the event described in
67
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
the preceding sentence, all Rights that are beneficially owned by any Acquiring Person will be null and void. In the event that, at any time following the Share Acquisition Date, R.G. Barry
Corporation is acquired in a merger or other business combination transaction in which R.G. Barry Corporation is not the surviving corporation or 50% or more of the Companys consolidated assets, cash flow or earning power is sold or
transferred, the holder of a Right (except Rights which have been previously voided as described above) will be entitled to receive, upon exercise of the Right, the number of shares of common stock of the acquiring company which at the time of such
transaction will have a market value equal to two times the exercise price of the Right.
The Rights, which do not have any
voting or dividend rights, expire on May 1, 2014, and may be redeemed by R.G. Barry Corporation at a price of $0.01 per Right at any time until 10 business days following the Share Acquisition Date. The Board of Directors may also exchange the
Rights at a ratio of one common share or one one-hundredth of a Preferred Share per Right.
Each Class A Preferred Share
entitles the holder thereof to one-tenth of one vote, while Class B Preferred Shares, should they become authorized for issuance by action of R.G. Barry Corporations Board of Directors, entitle the holders thereof to ten votes. The preferred
shares are entitled to a preference in liquidation. None of the preferred shares have been issued.
Acquisition of assets of Moseylife Company Limited (Mosey)
On March 29, 2013, the Company purchased selected assets including accounts receivable, finished goods inventory, trade names and
various other assets and paid $1,236 in cash in its acquisition of the business assets of Mosey. Mosey develops and markets handbags that, feature more fashion elements and higher retail prices and are targeted toward a younger
demographic than those sold by Baggallini. Mosey is managed and reported within the Companys Baggallini business unit as part of the Accessories segment. The product lines, customer bases and core values of the Company and this acquired
business have numerous synergies. As a result, this acquisition is expected to be an integral part of the Companys long-range vision and strategic growth plans for its Accessories segment. The goodwill of $112 arising from this acquisition
consists of the value of synergies and economies of scale expected from combining the operations of the Company and Mosey. All of the goodwill was assigned to the Companys Accessories segment and will be deductible for income tax purposes.
68
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
The following table summarizes the consideration paid for certain assets of Mosey and
the amounts of the assets acquired at the acquisition date.
|
|
|
|
|
At March 29, 2013
|
|
|
|
Fair value of total consideration transferred
|
|
$
|
1,236
|
|
|
|
|
|
|
Acquisition-related cost (included in selling, general and administrative expenses)
|
|
$
|
72
|
|
|
|
|
|
|
Recognized amounts of assets acquired:
|
|
|
|
|
Accounts receivable
|
|
$
|
320
|
|
Inventory
|
|
|
656
|
|
Fixed assets, primarily computer equipment
|
|
|
10
|
|
Identifiable intangible assets
|
|
|
138
|
|
|
|
|
|
|
Total identifiable assets acquired
|
|
|
1,124
|
|
|
|
|
|
|
Goodwill
|
|
|
112
|
|
|
|
|
|
|
|
|
$
|
1,236
|
|
|
|
|
|
|
Moseys net sales and net earnings were not significant in respect of the Companys
consolidated statement of income for fiscal 2013. Any pro forma net sales and net earnings of the combined entity, had the acquisition date been July 1, 2012, or July 3, 2011, were likewise not significant to any combined view of pro forma
Company consolidated statements of income for fiscal 2013 and fiscal 2012, respectively.
(16)
|
Related-party Transactions
|
Under an existing agreement, the Company is obligated for up to two years after the death of the chairman of the
Company to purchase, if the estate elects to sell, up to $4,000 of the Companys common shares owned by the chairman at the time of his death, at their fair market value. For a period of 24 months following the chairmans death, the
Company has a right of first refusal to purchase any common shares owned by the chairman at the time of his death if his estate elects to sell such common shares and has the right to purchase such common shares on the same terms and conditions as
the estate proposes to sell such common shares to a third party. To fund its potential obligation to purchase such common shares, the Company maintains two insurance policies on the life of the chairman. The cumulative cash surrender value of the
policies approximates $2,964, which is included in other assets in the accompanying consolidated balance sheets.
The Company primarily markets footwear and accessories products sold predominantly in North America and has two
reportable segments, which include: (1) Footwear that encompasses primarily slippers, sandals, hybrid and fashion footwear; and (2) Accessories with products including foot and shoe care products, handbags, tote bags and other travel
accessories. The accounting policies of the reportable segments are the same, except that the disaggregated information has been prepared using certain management reports, which by their very nature require estimates.
The two reportable segments are comprised of three individual operating Business Units (BUs): (1) footwear; (2) Foot
Petals (foot and shoe care products); and (3) Baggallini (handbags, tote bags and travel products).
69
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Each Business Unit is led by a Business Unit President, with the President reporting to
the Chief Executive Officer (CEO) of R.G. Barry Corporation. Each Business Unit President has financial performance responsibility for the operating unit.
While many selling, general and administrative (SGA) expenses are directly charged to each operating unit, certain shared services expenses are incurred and allocated to the respective
operating units based on estimated usage of such corporate support. Operating profit as measured for each segment includes sales, cost of sales and direct and allocated SGA expenses. This segment measure of operating profit or loss, as defined, is
the primary indicator of financial performance used by management.
Other corporate expenses incurred are deemed to be
applicable to the Company as a whole and are not allocated to any specific business segment. These unallocated expenses primarily include areas such as the Companys corporate and governance functions, including the CEO, the Chief Financial
Officer and the Board of Directors, as well as such expense areas as annual accrued incentive bonus, incentive stock compensation, pension, professional fees and similar corporate expenses. Segment operating profit, as reported below, is based on
the same definition of operating profit as described above.
Total segment assets for fiscal 2012 and fiscal 2011 have been
revised from prior years disclosures to conform to the fiscal 2013 presentation of cash and cash equivalents and short-term investments as corporate unallocated assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
Footwear
|
|
|
Accessories
|
|
|
Unallocated
Corporate
|
|
|
Total
|
|
Net sales
|
|
$
|
108,334
|
|
|
$
|
38,679
|
|
|
$
|
|
|
|
$
|
147,013
|
|
Gross profit
|
|
|
43,006
|
|
|
|
20,938
|
|
|
|
|
|
|
|
63,944
|
|
Depreciation and amortization
|
|
|
237
|
|
|
|
1,926
|
|
|
|
644
|
|
|
|
2,807
|
|
Operating profit
|
|
|
23,736
|
|
|
|
7,543
|
|
|
|
(10,299
|
)
|
|
|
20,980
|
|
Total assets
|
|
|
26,390
|
|
|
|
53,169
|
|
|
|
50,694
|
|
|
|
130,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
Footwear
|
|
|
Accessories
|
|
|
Unallocated
Corporate
|
|
|
Total
|
|
Net sales
|
|
$
|
123,336
|
|
|
$
|
32,602
|
|
|
$
|
|
|
|
$
|
155,938
|
|
Gross profit
|
|
|
48,901
|
|
|
|
18,268
|
|
|
|
|
|
|
|
67,169
|
|
Depreciation and amortization
|
|
|
486
|
|
|
|
1,885
|
|
|
|
674
|
|
|
|
3,045
|
|
Operating profit
|
|
|
28,247
|
|
|
|
6,096
|
|
|
|
(10,970
|
)
|
|
|
23,373
|
|
Total assets
|
|
|
24,740
|
|
|
|
49,466
|
|
|
|
54,060
|
|
|
|
128,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
Footwear
|
|
|
Accessories
|
|
|
Unallocated
Corporate
|
|
|
Total
|
|
Net sales
|
|
$
|
118,844
|
|
|
$
|
10,724
|
|
|
$
|
|
|
|
$
|
129,568
|
|
Gross profit
|
|
|
41,776
|
|
|
|
6,387
|
|
|
|
|
|
|
|
48,163
|
|
Depreciation and amortization
|
|
|
580
|
|
|
|
528
|
|
|
|
783
|
|
|
|
1,891
|
|
Operating profit
|
|
|
16,909
|
|
|
|
2,987
|
|
|
|
(8,216
|
)
|
|
|
11,680
|
|
Total assets
|
|
|
28,113
|
|
|
|
50,737
|
|
|
|
37,129
|
|
|
|
115,979
|
|
70
Notes to Consolidated Financial Statements
R.G. Barry Corporation and Subsidiaries
(dollar amounts in thousands, except per common share data)
Net sales as reported in the consolidated statements of income relate primarily to
markets in the United States of America. At June 29, 2013 and June 30, 2012, substantially all of the Companys long-lived assets were located in the United States of America.
For fiscal 2013, fiscal 2012, and fiscal 2011, one customer and its affiliates accounted for approximately 26%, 29%, and 32%,
respectively, of the Companys consolidated net sales. This customer and its affiliates are primarily in the Footwear segment.
(18)
|
Contingent Liabilities
|
The Company is from time to time involved in claims and litigation considered normal in the course of its business.
While it is not feasible to predict the ultimate outcome, in the opinion of management, the resolution of pending legal proceedings is not expected to have a material effect on the Companys financial position, results of operations or cash
flows.
(19)
|
Accounts Receivable Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
Beginning
of Year
|
|
|
Current Charges
to Expenses
|
|
|
Other
Adjustments
|
|
|
Deductions
|
|
|
Balance at
End of Year
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/2013
|
|
$
|
57
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
15
|
|
|
$
|
46
|
|
6/30/2012
|
|
|
229
|
|
|
|
234
|
|
|
|
|
|
|
|
406
|
|
|
|
57
|
|
7/02/2011
|
|
|
228
|
|
|
|
28
|
|
|
|
|
|
|
|
27
|
|
|
|
229
|
|
Returns Allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/2013
|
|
$
|
587
|
|
|
$
|
2,223
|
|
|
$
|
|
|
|
$
|
2,192
|
|
|
$
|
618
|
|
6/30/2012
|
|
|
1,088
|
|
|
|
4,153
|
|
|
|
|
|
|
|
4,654
|
|
|
|
587
|
|
7/02/2011
|
|
|
1,431
|
|
|
|
3,711
|
|
|
|
|
|
|
|
4,054
|
|
|
|
1,088
|
|
Promotions Allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/2013
|
|
$
|
1,142
|
|
|
$
|
10,360
|
|
|
$
|
(181
|
)
|
|
$
|
9,419
|
|
|
$
|
1,902
|
|
6/30/2012
|
|
|
2,205
|
|
|
|
10,611
|
|
|
|
(851
|
)
|
|
|
10,823
|
|
|
|
1,142
|
|
7/02/2011
|
|
|
1,787
|
|
|
|
13,828
|
|
|
|
(935
|
)
|
|
|
12,475
|
|
|
|
2,205
|
|
The amounts under the Other Adjustments column in the table above reflect the difference
between estimates made at the end of the prior fiscal year and actual claims processed during the applicable fiscal year.
71
Quarterly Financial Data (Unaudited)
(in thousands, except per common share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2013
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Net sales
|
|
$
|
47,233
|
|
|
$
|
48,505
|
|
|
$
|
25,803
|
|
|
$
|
25,472
|
|
Gross profit
|
|
|
20,917
|
|
|
|
20,554
|
|
|
|
11,852
|
|
|
|
10,621
|
|
Net earnings
|
|
|
6,134
|
|
|
|
5,301
|
|
|
|
1,541
|
|
|
|
281
|
|
Basic net earnings per common share
|
|
|
0.54
|
|
|
|
0.47
|
|
|
|
0.14
|
|
|
|
0.02
|
|
Diluted net earnings per common share
|
|
|
0.54
|
|
|
|
0.46
|
|
|
|
0.13
|
|
|
|
0.02
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,282
|
|
|
|
11,372
|
|
|
|
11,377
|
|
|
|
11,377
|
|
Diluted
|
|
|
11,454
|
|
|
|
11,564
|
|
|
|
11,532
|
|
|
|
11,522
|
|
|
|
|
|
|
Fiscal 2012
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Net sales
|
|
$
|
50,230
|
|
|
$
|
55,599
|
|
|
$
|
25,114
|
|
|
$
|
24,995
|
|
Gross profit
|
|
|
22,253
|
|
|
|
22,997
|
|
|
|
11,193
|
|
|
|
10,725
|
|
Net earnings
|
|
|
6,890
|
|
|
|
6,351
|
|
|
|
834
|
|
|
|
474
|
|
Basic net earnings per common share
|
|
|
0.62
|
|
|
|
0.57
|
|
|
|
0.07
|
|
|
|
0.04
|
|
Diluted net earnings per common share
|
|
|
0.61
|
|
|
|
0.56
|
|
|
|
0.07
|
|
|
|
0.04
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,137
|
|
|
|
11,179
|
|
|
|
11,245
|
|
|
|
11,268
|
|
Diluted
|
|
|
11,305
|
|
|
|
11,364
|
|
|
|
11,444
|
|
|
|
11,471
|
|
The above information is a summary of unaudited quarterly results of operations of the Company for fiscal
2013 and fiscal 2012. The sum of the quarterly net earnings per common share data in the table above may not equal the results for the applicable fiscal year due to rounding and, where applicable, the impact of dilutive securities on the annual
versus the quarterly net earnings per common share calculations.
The Company acquired business assets and operations of Foot
Petals, LLC in January, 2011 and business assets and operations of Baggallini, Inc. in March 2011. Results for each of the acquired businesses were included in the results above from the dates of the respective acquisition.