10-Q 1 0001.txt QUARTERLY REPORT - R&B, INC. -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q ------------------- |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 23, 2000 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------- Commission file number 0-18914 R&B, INC. Incorporated pursuant to the Laws of the Commonwealth of Pennsylvania ------------------- IRS - Employer Identification No. 23-2078856 3400 East Walnut Street, Colmar, Pennsylvania 18915 (215) 997-1800 ------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| As of November 1, 2000 the Registrant had 8,355,116 common shares, $.01 par value, outstanding. -------------------------------------------------------------------------------- Page 1 of 14 R & B, INC. INDEX TO QUARTERLY REPORT ON FORM 10-Q September 23, 2000 Page Part I -- FINANCIAL INFORMATION Item 1.Consolidated Financial Statements (unaudited) Statements of Income: Thirteen Weeks Ended September 23, 2000 and September 25, 1999.............................. 3 Thirty-nine Weeks Ended September 23, 2000 and September 25, 1999.............................. 4 Balance Sheets....................................... 5 Statements of Cash Flows............................. 6 Notes to Financial Statements........................ 7 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 9 Part II -- OTHER INFORMATION Item 1.Legal Proceedings.................................... 13 Item 6.Exhibits and Reports on Form 8-K..................... 13 Signature .............................................. 14 Page 2 of 14 PART I. FINANCIAL INFORMATION R&B, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
For the Thirteen Weeks Ended ----------------------------- September 23, September 25, (in thousands, except per share data) 2000 1999 ------------------------------------------------------------------------------------------- Net Sales $49,700 $59,495 Cost of goods sold 31,351 38,620 ------------------------------------------------------------------------------------------- Gross profit 18,349 20,875 Selling, general and administrative expenses 15,172 17,235 ------------------------------------------------------------------------------------------- Income from operations 3,177 3,640 Interest expense, net 1,322 1,717 ------------------------------------------------------------------------------------------- Income before taxes 1,855 1,923 Provision for taxes 644 663 ------------------------------------------------------------------------------------------- Net Income $ 1,211 $ 1,260 ------------------------------------------------------------------------------------------- Earnings Per Share Basic $0.14 $0.15 Diluted 0.14 0.15 ------------------------------------------------------------------------------------------- Average Shares Outstanding Basic 8,428 8,392 Diluted 8,510 8,462
The accompanying Notes are an integral part of these Consolidated Financial Statements. Page 3 of 14 R&B, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
For the Thirty-nine Weeks Ended ----------------------------- September 23, September 25, (in thousands, except per share data) 2000 1999 ------------------------------------------------------------------------------------------- Net Sales $152,185 $183,459 Cost of goods sold 96,591 115,624 ------------------------------------------------------------------------------------------- Gross profit 55,594 67,835 Selling, general and administrative expenses 44,915 54,329 ------------------------------------------------------------------------------------------- Income from operations 10,679 13,506 Interest expense, net 4,658 5,229 ------------------------------------------------------------------------------------------- Income before taxes 6,021 8,277 Provision for taxes 2,101 2,886 ------------------------------------------------------------------------------------------- Net Income $ 3,920 $ 5,391 ------------------------------------------------------------------------------------------- Earnings Per Share Basic $0.47 $0.64 Diluted 0.46 0.64 ------------------------------------------------------------------------------------------- Average Shares Outstanding Basic 8,420 8,369 Diluted 8,509 8,418 -------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of these Consolidated Financial Statements. Page 4 of 14 R&B, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 23, December 25, (in thousands, except share data) 2000 1999 --------------------------------------------------- ----------------- ----------------- (unaudited) Assets Current Assets: Cash and cash equivalents $ 2,899 $ 1,467 Accounts receivable, less allowance for doubtful accounts and customer credits of $9,336 and $8,764 41,267 49,979 Inventories 55,185 70,272 Deferred income taxes 3,162 4,574 Prepaids and other current assets 3,591 2,543 --------------------------------------------------- ----------------- ----------------- Total current assets 106,104 128,835 --------------------------------------------------- ----------------- ----------------- Property, Plant and Equipment, net 24,836 22,919 Intangible Assets 31,671 33,212 Other Assets 3,194 3,038 --------------------------------------------------- ----------------- ----------------- Total $165,805 $188,004 --------------------------------------------------- ----------------- ----------------- Liabilities and Shareholders' Equity Current Liabilities: Current portion of long-term debt $ 2,948 $ 11,910 Accounts payable 12,803 12,867 Accrued compensation 3,114 2,820 Other accrued liabilities 4,563 4,626 --------------------------------------------------- ----------------- ----------------- Total current liabilities 23,428 32,223 Long-Term Debt 68,428 85,283 Deferred Income Taxes 2,372 2,264 Commitments and Contingencies Shareholders' Equity: Common stock, par value $.01; authorized 25,000,000 shares; issued 8,508,916 and 8,393,796 85 84 Additional paid-in capital 33,811 33,517 Cumulative translation adjustments (1,053) (181) Retained earnings 38,734 34,814 Total shareholders' equity 71,577 68,234 --------------------------------------------------- ----------------- ----------------- Total $165,805 $188,004 --------------------------------------------------- ----------------- -----------------
The accompanying Notes are an integral part of these Consolidated Financial Statements. Page 5 of 14 R&B, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the Thirty-nine Weeks Ended -------------------------------------- September 23, September 25, (in thousands) 2000 1999 --------------------------------------------------------------- ------------------ ------------------- Cash Flows from Operating Activities: Net income $ 3,920 $ 5,391 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 5,826 5,524 Provision for doubtful accounts 451 653 Provision for deferred income taxes 1,548 - Changes in assets and liabilities: Accounts receivable 7,955 (2,480) Inventories 14,334 ( 16,557) Prepaids and other current assets (1,099) (868) Other assets (173) (1,705) Accounts payable 234 5,648 Other accrued liabilities 310 (114) --------------------------------------------------------------- ------------------ ------------------- Cash provided by (used in) operating activities 33,306 (4,508) --------------------------------------------------------------- ------------------ ------------------- Cash Flows from Investing Activities: Property, plant and equipment additions (6,500) (5,919) Cash (used in) investing activities (6,500) (5,919) --------------------------------------------------------------- ------------------ ------------------- Cash Flows from Financing Activities: Net (repayment) proceeds of revolving credit (26,852) 12,297 Repayments of term loans and capital lease obligations (341) (1,228) Proceeds from capital lease obligations 1,524 - Proceeds from common stock issuances 295 379 --------------------------------------------------------------- ------------------ ------------------- Cash (used in) provided by financing activities (25,374) 11,448 --------------------------------------------------------------- ------------------ ------------------- Net Increase in Cash and Cash Equivalents 1,432 1,021 Cash and Cash Equivalents, Beginning of Period 1,467 915 --------------------------------------------------------------- ------------------ ------------------- Cash and Cash Equivalents, End of Period $ 2,899 $ 1,936 --------------------------------------------------------------- ------------------ ------------------- Supplemental Cash Flow Information Cash paid for interest expense $ 4,572 $ 4,931 Cash paid for income taxes $ 1,135 $ 3,027
The accompanying Notes are an integral part of these Consolidated Financial Statements. Page 6 of 14 R&B, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 23, 2000 AND SEPTEMBER 25, 1999 (UNAUDITED) 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. However, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the thirty-nine week period ended September 23, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending December 30, 2000. For further information, refer to the financial statements and footnotes thereto included in R&B, Inc.'s (the "Company") Annual Report on Form 10-K for the year ended December 25, 1999. 2. Restructuring Charges In the fourth quarter of fiscal 1999, the Company recorded a restructuring charge of $11.4 million ($7.5 million after tax or $0.90 per share) to reflect costs primarily related to inventory write downs associated with the elimination of a significant number of underperforming products, as well as the closing of a warehouse and production facility in Carrollton, Georgia, and a work force reduction of 158 people. A total of $9.8 million, representing inventory write downs, was charged to cost of sales and $1.6 million was charged to selling, general and administrative expenses. There were no significant changes to the plan in fiscal 2000. During the first nine months of fiscal 2000, the Company disposed of approximately $4.4 million in inventory related to the restructuring, completed the planned workforce reduction, and closed the Company's warehouse and production facility in Carrollton, Georgia. The following summarizes the restructuring charge and activity through September 23, 2000:
Employee Facility Inventory Termination Shutdown (in thousands) Disposals Benefits Costs Total --------- ----------- --------- ------- Initial Charge $ 9,800 $ 475 $ 1,125 $11,400 Costs Incurred - 1999 - (124) (300) (424) Balance at December 25, 1999 9,800 351 825 10,976 Costs Incurred - 2000 (4,398) (235) (174) (4,807) Balance at September 23, 2000 $ 5,402 $ 116 $ 651 $ 6,169
3. Inventories Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of the Company's products. Inventories were as follows: September 23, December 25, (in thousands) 2000 1999 ------------------- --------------- --------------- Bulk product $15,536 $20,665 Finished product 35,599 45,136 Packaging materials 4,050 4,471 ------------------- --------------- --------------- Total $55,185 $70,272 ------------------- --------------- --------------- Page 7 of 14 4. Intangible Assets Intangible assets consist primarily of goodwill which is amortized over periods of 10 to 40 years. Total accumulated amortization as of September 23, 2000 was $7.3 million. Amortization expense of these assets was $0.4 million in the third quarter of 2000 and 1999, and $1.2 million for the thirty-nine week periods ended September 23, 2000 and September 25, 1999. 5. Earnings Per Share Earnings per share is computed under Statement of Financial Accounting Standards No. 128, "Earnings Per Share". The Company has included basic and diluted earnings per share on the face of the Statements of Income for each period presented. Weighted average shares for "diluted" earnings per share includes the assumption of the exercise of all potentially dilutive securities ("in the money" stock options). Page 8 of 14 R&B, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Over the periods presented, the Company has focused its efforts on providing an expanding array of new product offerings and strengthening its relationships with its customers. To that end, the Company has made significant investments to increase market penetration, primarily in the form of product development, customer service and customer credits and allowances. The Company calculates its net sales by subtracting credits and allowances from gross sales. Credits and allowances include costs for co-operative advertising, product returns, discounts given to customers who purchase new products for inclusion in their stores, and the cost of competitors' products that are purchased from the customer in order to induce a customer to purchase new product lines from the Company. The credits and allowances are designed to increase market penetration and increase the number of product lines carried by customers by displacing competitors' products within customers' stores and promoting consolidation of customers' suppliers. The Company may experience significant fluctuations from quarter to quarter in its results of operations due to the timing of orders placed by the Company's customers. Generally, the second and third quarters have the highest level of customer orders, but the timing of the introduction of new products and product lines to customers may cause significant fluctuations from quarter to quarter. Results of Operations The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in the Company's Consolidated Statements of Income.
As a Percentage of Sales --------------------------------------------------------------------- For the Thirteen Weeks Ended For the Thirty-nine Weeks Ended --------------------------------- ----------------------------------- September 23, September 25, September 23, September 25, 2000 1999 2000 1999 ----------------------- --------------- ---------------- ---------------- ------------------ Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 63.1 64.9 63.5 63.0 ----------------------- --------------- ---------------- ---------------- ------------------ Gross profit 36.9 35.1 36.5 37.0 Selling, general and administrative expenses 30.5 29.0 29.5 29.6 ----------------------- --------------- ---------------- ---------------- ------------------ Income from operations 6.4 6.1 7.0 7.4 Interest expense, net 2.7 2.9 3.0 2.9 ----------------------- --------------- ---------------- ---------------- ------------------ Income before taxes 3.7 3.2 4.0 4.5 Provision for taxes 1.3 1.1 1.4 1.6 ----------------------- --------------- ---------------- ---------------- ------------------ Net income 2.4% 2.1% 2.6% 2.9% ----------------------- --------------- ---------------- ---------------- ------------------
Thirteen Weeks Ended September 23, 2000 Compared to Thirteen Weeks Ended September 25, 1999 Net sales decreased to $ 49.7 million for the thirteen weeks ended September 23, 2000 from $59.5 million for the same period in 1999, a decrease of 16.5%. The decline in sales is the result of continued consolidation in the automotive aftermarket, inventory adjustments by our customers and the Company's strategic decision to eliminate unprofitable products. A portion of the sales decline was also attributable to the lift support business that was sold in the first quarter of 2000. Net sales in fiscal 1999 from this program were approximately $13 million. During the third quarter of 2000 the Company began shipping its "Pik-a-Nut" brand of hardware and general fasteners to Wal-Mart. Third quarter 2000 revenues from this initiative offset the sales decline from the sale of the lift support business. Cost of goods sold for the thirteen weeks ended September 23, 2000 decreased to $31.4 million from $38.6 million for the same period in 1999, a decrease of 18.7%. The cost of goods sold decline is primarily attributable to Page 9 of 14 the lower sales levels recorded in the third quarter of 2000. As a percentage of net sales, gross profit for the thirteen weeks ended September 23, 2000 increased to 36.9% from 35.1% for the thirteen weeks ended September 25, 1999. The increase in gross profit percentage is the result of the sale of the Company's lower-margin lift support inventory in the first quarter of 2000 and savings achieved as a result of the restructuring plan announced at the end of fiscal 1999. Selling, general and administrative expenses for the thirteen weeks ended September 23, 2000 decreased to $15.2 million from $17.2 million for the thirteen weeks ended September 25, 1999, a decrease of 11.6%. The decrease in selling, general and administrative costs in the third quarter of 2000 was primarily the result of lower sales levels and cost savings realized from a cost reduction and restructuring plan initiated by the Company at the end of fiscal 1999. The net cost savings in the three months ended September 23, 2000 were partially offset by start up costs associated with a program to provide hardware and general use fasteners to a Wal-Mart. Interest expense, net, decreased to $1.3 million for the thirteen weeks ended September 23, 2000 from $1.7 million for the thirteen weeks ended September 25, 1999. This decrease resulted from lower borrowing levels in the current year. Provisions for income taxes were $0.6 million for the thirteen weeks ended September 23, 2000 and $0.7 million for the same period in 1999. The Company's effective tax rate increased to 34.7% in 2000 from 34.5% in 1999 due to slightly higher state tax provisions in the current year. Thirty-nine Weeks Ended September 23, 2000 Compared to Thirty-nine Weeks Ended September 25, 1999 Restructuring Charges - In the fourth quarter of fiscal 1999, the Company recorded a restructuring charge of $11.4 million ($7.5 million after tax of $0.90 per share) to reflect costs primarily related to inventory write downs associated with the elimination of a significant number of underperforming products, as well as the closing of a warehouse and production facility in Carrollton, Georgia, and a work force reduction of 158 people. A total of $9.8 million, representing inventory write downs, was charged to cost of sales and $1.6 million was charged to selling, general and administrative expenses. There were no significant changes to the plan in fiscal 2000. During the first nine months of 2000, the Company disposed of approximately $4.4 million in inventory related to the restructuring, completed the planned workforce reduction and closed the Company's warehouse and production facility in Carrollton, Georgia. Sale of Lift Support Inventory - During the first quarter of fiscal 2000, the Company sold all of its inventory and certain other assets related to its lift support product line as a result of a strategic decision to eliminate this product line. Results for the thirty-nine weeks ended September 23, 2000 include non-recurring revenues and gross profit of $5.5 million and $1.6 million, respectively attributable to the sale of the inventory and related assets. The first quarter 2000 gain on the sale was $1.6 million ($1.1 million after tax or $0.13 per share). Net sales decreased to $152.2 million for the thirty-nine weeks ended September 23, 2000 from $183.5 million for the same period in 1999, a decrease of 17.1%. The decline in sales is the result of continued consolidation in the automotive aftermarket, inventory adjustments by our customers and the Company's strategic decision to eliminate unprofitable products. The Company estimates that sales in the nine months ended September 23, 3000 were reduced by approximately $18.0 million as a result of it launching fewer but more profitable new initiatives and its 1999 decision to eliminate unprofitable products in its core business. A portion of the sales decline was also attributable to the lift support business that was sold in the first quarter of 2000. Net sales in fiscal 1999 from this program were approximately $13 million. During the third quarter of 2000 the Company began shipping its "Pik-a-Nut" brand of hardware and general use fasteners to Wal-Mart. Third quarter 2000 revenues from this initiative offset the sales decline from the sale of the lift support business. Cost of goods sold for the thirty-nine weeks ended September 23, 2000 decreased to $96.6 million from $115.6 million for the same period in 1999, a decrease of 16.4%. As a percent of net sales, gross profit for the thirty- nine weeks ended September 23, 2000 decreased to 36.5% from 37.0 % for the thirty-nine weeks ended September 25, 1999. The reduction in gross profit percentage is primarily the result of a lower gross profit on the non-recurring lift support line sale in the first quarter of fiscal 2000. Selling, general and administrative expenses for the thirty-nine weeks ended September 23, 2000 decreased to $44.9 million from $54.3 million for the thirty-nine weeks ended September 25, 1999, a decrease of 17.3%. As a Page 10 of 14 percent of net sales, selling, general and administrative expenses decreased slightly to 29.5% in 2000 from 29.6% in 1999. However, actual selling, general and administrative expenses as a percentage of net sales before lift support sale revenue (which had no such costs attributable to it) were 30.6% in the nine months ended September 23, 2000. This increase from 1999's level of 29.6% is primarily attributable to the decline in sales, as the Company was not able to reduce fixed selling, general and administrative expenses adequately to offset the sales decline. In addition, the Company incurred start up costs in the nine months ended September 23, 2000 associated with a program to provide hardware and general use fasteners to Wal-Mart. Interest expense, net, decreased to $4.7 million for the thirty-nine weeks ended September 23, 2000 from $5.2 million for the thirty-nine weeks ended September 25, 1999. This decrease resulted from lower borrowing levels in the current year. Provisions for income taxes of $2.1 million for the thirty-nine weeks ended September 23, 2000 and $2.9 million for the same period in 1999. The Company's effective tax rate in both periods was 34.9%. Liquidity and Capital Resources The Company has financed its growth through the combination of cash flow from its operations, issuance of senior notes and borrowings under its credit facilities and industrial revenue bonds. Working capital was $82.7 million as of September 23, 2000 and $96.6 million as of December 25, 1999. The Company believes that the cash generated from operations and borrowings under its revolving credit facility will be sufficient to meet the Company's working capital needs and to fund expansion for the foreseeable future. Net cash provided by operating activities of $33.3 million for the thirty-nine weeks ended September 23, 2000 compared to net cash used in operating activities of $4.5 million in the comparable period in 1999. During 2000, net income, non-cash provisions for depreciation, amortization, doubtful accounts and deferred taxes as well as lower accounts receivable and inventory levels and increases in accounts payable and other liabilities provided $34.9 million in positive cash flow. These increases were partially offset by $1.6 million in cash used to increase prepaid expenses and other assets. During 1999, net income, increases in accounts payable and non-cash provisions for depreciation, amortization and doubtful accounts provided $17.2 million in positive cash flow, however these increases were more than offset by $21.7 million in cash used primarily to fund increases in accounts receivable and inventory. Net cash used in investing activities amounted to $6.5 million for the thirty-nine weeks ended September 23, 2000 and $5.9 in 1999. In both periods, additions to property, plant and equipment were the primary uses of cash. Net cash used in financing activities was $25.4 million for the thirty-nine weeks ended September 23, 2000 compared to net cash provided by financing activities of $11.4 million in the comparable period in 1999. During 2000, cash generated from operating activities net of investing activities was used to reduce borrowing levels. In addition, the Company received proceeds from a capital lease obligation of $1.5 million. During 1999, revolving credit facility borrowings provided $12.3 million in cash which was used to fund cash used in operating and investing activities. Senior Notes. In August 1998, the Company completed a private placement of $60 million in 6.81% Senior Notes due August 21, 2008 on an unsecured basis. The ten-year Notes bear a 6.81 percent fixed interest rate, payable quarterly, with an initial four-year interest only period. Revolving Credit Facility. In connection with the Notes, the Company amended its $35 million revolving credit facility with First Union National Bank and National City Bank. As amended, the commitment for the line was extended for a five-year term on an unsecured basis with interest at Libor plus 125 basis points. Proceeds from the Notes were used, among other things, to pay down the term debt portions of the bank credit facilities previously advanced to the Company by the bank syndicate. In May 2000, the Company amended the revolving credit facility. The terms of the amended agreement include revisions to certain debt coverage covenants, required the Company to obtain $1.0 million in new financing and provides for mandatory reductions in the facility to $20.0 million and $15.0 million by December 31, 2000 and June 30, 2001, respectively. In addition, the amendment provides for an increase in the facility's interest rate to a maximum of Libor plus 300 basis points. Upon an occurrence of an Event of Default, as defined in the loan agreement, the banks, at their option, may require a lien on substantially all of the Company's assets. The Company satisfied its Page 11 of 14 requirement to obtain $1.0 million in new financing by securing a $1.0 million subordinated loan from Richard and Steven Berman, the President and Executive Vice President of the Company, respectively. The subordinated loan bears interest at prime plus 100 basis points with interest only payments during the term of the loan. The loan is due on April 30, 2002 unless repaid earlier in accordance with the terms of the amended revolving credit facility. Borrowings outstanding under the revolving credit facility amounted to $1.5 million at September 23, 2000. The Company believes that the amended facility together with cash generated from operations will provide sufficient funding to meet the Company's working capital needs for the foreseeable future. Industrial Revenue Bonds. Construction of the Company's Warsaw, Kentucky facility in 1990 was funded by the Bonds. The Bonds bear interest at an annual rate of 4% payable monthly and require annual principal payments of $300,000 or $350,000 in alternating years with the final payment due July, 2009. Bond borrowings amounted to $3.0 million at September 23, 2000. Capitalized Leases. The Company's leases for its Pennsylvania and Georgia facilities are recorded as capitalized leases in the Company's financial statements. In addition, the Company has entered into three sale/leaseback transactions relating to computer hardware and software. The aggregate amount outstanding under all capital leases amounted to $5.1 million at September 23, 2000. Foreign Currency Fluctuations. Approximately 35% of the Company's products are purchased from a variety of foreign countries. The products generally are purchased through purchase orders with the purchase price specified in U.S. dollars. Accordingly, the Company does not have exposure to fluctuation in the relationship between the dollar and various foreign currencies between the time of execution of the purchase order and payment for the product. However, to the extent that the dollar decreased in value in relation to foreign currencies in the future, the price of the product in dollars for new purchase orders may increase. The Company attempts to lessen the impact of these currency fluctuations by resourcing its purchases to other countries. Impact of Inflation The Company has not generally been adversely affected by inflation. The Company believes that price increases resulting from inflation generally could be passed on to its customers, since prices charged by the Company are not set by long-term contracts. Cautionary Statement Regarding Forward Looking Statements Certain statements periodically made by or on behalf of the Company and certain statements contained herein including statements in Management's Discussion and Analysis of Financial Condition and Results of Operation; such as statements regarding litigation; and certain other statements contained herein regarding matters that are not historical fact are forward looking statements(as such term is defined in the Securities Act of 1933), and because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward looking statements. Factors that cause actual results to differ materially include but are not limited to those factors discussed in the Company's Annual Report on Form 10-K under "Business -Investment Considerations." Quantitative and Qualitative Disclosure about Material Risk The Company's market risk is the potential loss arising from adverse changes in interest rates. With the exception of the Company's revolving credit facility, long-term debt obligations are at fixed interest rates and denominated in U.S. dollars. The Company manages its interest rate risk by monitoring trends in interest rates as a basis for determining whether to enter into fixed rate or variable rate agreements. Under the terms of the Company's revolving credit facility, a change in either the lender's base rate of LIBOR would affect the rate at which the Company could borrow funds thereafter. The Company believes that the effect of any such change would be minimal. Although the Company continues to evaluate derivative financial instruments to manage foreign currency exchange rate changes, the Company does not currently hold derivatives for managing these risks of for trading purposes. Page 12 of 14 PART II: OTHER INFORMATION Item 1. Legal Proceedings In addition to commitments and obligation which arise in the ordinary course of business, the Company is subject to various claims and legal actions from time to time involving contracts, competitive practices, trademark rights, product liability claims and other matters arising out of the conduct of the Company's business. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description 27 Financial Data Schedule (b) Reports on Form 8-K None Page 13 of 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. R & B, INC. Date November 3, 2000 Richard Berman --------------------------- ----------------- Richard Berman President Date November 3, 2000 Mathias J. Barton --------------------------- ------------------ Mathias J. Barton Chief Financial Officer and Principal Accounting Officer Page 14 of 14