• continue efforts to strengthen the relationships with our retailing partners and open distribution of our products in new retail channels;

• further enhance the image of our brands; and

• expand our portfolio of licensed brands.

During fiscal 2009, we accomplished the following:
• We achieved a 3.9 percent increase in our consolidated net sales, as compared to fiscal 2008, despite an unprecedented and very challenging economic and retail environment experienced during the 2008 holiday season.

• We earned approximately $11.2 million from continuing operations before income taxes.

• We did not use our Bank Facility, as described under the caption "Liquidity and Capital Resources" below, during fiscal 2009 and ended the year with no outstanding indebtedness under the Bank Facility.

• We reported cash and cash equivalents on hand of approximately $14.3 million and short-term investments of approximately $25.0 million at the end of fiscal 2009.

• Our total on-hand inventory investment was lower by 22 percent at the end of fiscal 2009 as compared to the end of fiscal 2008.

Looking Ahead to Fiscal 2010 and Beyond
Looking ahead to fiscal 2010 and beyond, we will continue to pursue strategically driven initiatives that are designed to provide measurable and sustainable net sales and profit growth. We remain confident in our business and begin the year with a strong balance sheet, healthy brands and a business plan that focuses on growth and profitability well beyond the next 12 months, but we know that fiscal 2010 will continue to be a challenging environment from a general economic and business perspective. We continue to see short-term economic volatility manifesting itself in the following:
i) caution among retailers who are delaying or reducing orders in an effort to limit their days of on-hand inventory and subsequently creating noteworthy shifts in our quarterly sales patterns;

ii) losses of retail floor space due to downsizings and bankruptcies; and

iii) volatility in the cost structure of our suppliers.

We are continuing to address these issues. For our fiscal 2010 buying cycle, oil prices have returned to more traditional levels, manufacturing capacity has loosened, and we expect our fiscal 2010 gross profit percentage to return to a more traditional level. Because our business continues to be highly seasonal and dependent on the holiday selling season, there is significant inherent risk and cyclicality in our business. See the discussion under the caption "Item 1A. Risk Factors"in this 2009 Form 10-K.
Fiscal 2009 Results from Continuing Operations Compared to Fiscal 2008 The discussion in this section compares our results of operations for fiscal 2009 to those in fiscal 2008. Each dollar amount and percentage change noted below reflects the change between these periods unless otherwise indicated. During fiscal 2009, consolidated net sales increased by $4.3 million or 3.9%. The net sales increase was primarily due to increased shipments to our customers in the warehouse club and catalog and Internet channels, partially offset by decreased shipments reported to customers in the mass merchandising, department store, specialty and independent store channels. The volume changes reflect our continued success with product offerings and sales initiatives with customers in the warehouse club channel as well as catalog and Internet-based customers. In addition, these volume changes reflect the effect of the very challenging economic and retail climate experienced with most of our customers during most of fiscal 2009.
Gross profit decreased by $1.5 million. Gross profit as a percent of net sales was 38.2 percent in fiscal 2009 and 41.1 percent in fiscal 2008. The decreases in both gross profit dollars and as a percent of net sales were due primarily to increases in the average product cost experienced year over year. The increase in average product cost was driven primarily by an increase in oil prices and changes in the exchange rate of Chinese currency, which negatively impacted the fall selling season as orders to purchase goods were placed beginning in April 2008. The product price increases, combined with an intense promotional selling environment in a tough retail economic climate, were major factors in our gross profit results for fiscal 2009.
Selling, general and administrative ("SG&A") expenses increased by $845 thousand or 2.6 percent. As a percent of net sales, SG&A expenses were 29.0 percent for fiscal 2009 versus 29.3 percent for fiscal 2008. The net increase in SG&A expenses was due primarily to the following:
• a $1.1 million increase in payroll and related expenses, which reflected the Company's organizational growth and repositioning as part of our long-term strategic direction;

• a $463 thousand increase in customer bad debt expense, reflecting the impact of several customer bankruptcies during fiscal 2009; and

• a $191 thousand net increase in a variety of other expense areas.

The expense increases noted above were partially offset by the following:
• a $909 thousand decrease in advertising expense, incurred in fiscal 2008 as part of the initial launch of our newer brand initiatives undertaken that year.

For fiscal 2008, we reported a gain of approximately $1.4 million from an insurance recovery. No similar event occurred during fiscal 2009. The increase in interest income of $71 thousand resulted from the increase in our invested funds during fiscal 2009, which were available due to our profitability and liquidity over the last twelve months.
Interest expense decreased by $14 thousand. Due to our continuing profitability over time, we had no borrowings under our Bank Facility, as described further under the caption "Liquidity and Capital Resources" below.
Based on the results of operations noted above, we reported earnings of approximately $7.0 million in fiscal 2009, or $0.65 per diluted common share, compared to $9.8 million in fiscal 2008, or $0.92 per diluted share. Fiscal 2008 Results from Continuing Operations Compared to Fiscal 2007 The discussion in this section compares our results of operations for fiscal 2008 to those in fiscal 2007. Each dollar amount and percentage change noted below reflects the change between these periods unless otherwise indicated. During fiscal 2008, consolidated net sales increased by $4.2 million or approximately 4.0 percent. The net sales increase was principally due to the following: increased volumes in our mass, warehouse club, catalog, Internet-based customers, specialty, and independent retail channels; increases in the average wholesale prices associated primarily with our new brand and product introductions; partially offset by a decrease in volume to customers in the department store channel. These volume changes reflected several factors: a very successful transitioning of product initiative and sales growth reported with Wal-Mart; outstanding sell-through rate with a major warehouse club customer; as well as the impact of the market introduction of new brand lines and product extension; offset in part by the impact of a difficult retailing environment during the fiscal year, particularly in the department stores sector.
Gross profit increased by $3.2 million. Gross profit as a percent of net sales was 41.1 percent in fiscal 2008 and 39.7 percent in fiscal 2007. The increases in both gross profit dollars and as a percent of net sales were due primarily to the increase in sales volumes and to the effect of higher average wholesale selling prices of product in comparison to the average product cost increases experienced over those reporting periods. The increase in average wholesale selling prices was reflective of our new brand initiatives and product introductions undertaken in fiscal 2008 as well as our successful experience with a key warehouse club customer.
The increase in average wholesale selling prices during fiscal 2008 was partially offset by continuing increases in our product cost, which resulted from the increase in the price of oil and the strengthening of the Chinese Yuan against the U.S. Dollar. Oil prices affect the raw materials that go into our products, as well as freight costs incurred in transporting the goods to the U.S. Although our purchases of finished goods from third-party manufacturers were contracted in U.S. Dollars, the strengthening of the Chinese Yuan against the U.S. Dollar influenced vendor pricing.

SG&A expenses increased by $1.8 million or approximately 6 percent. As a percent of net sales, SG&A expenses were 29.3 percent for fiscal 2008 versus 28.8 percent for fiscal 2007. The net increase in SG&A expenses was due primarily to the following:
• a $700 thousand increase in advertising expense in support of a variety of promotional activities for our core and new brands;

• a $700 thousand increase in expenses in merchandising materials, trade shows, and samples related expenses in support of our new brandlines and additional marketing and selling initiatives undertaken during the fiscal year;

• a $600 thousand increase in payroll and related expenses; and

• a $300 thousand net increase in other expense areas.

The expense increases noted above were offset by the following:
• a $500 thousand reduction in insurance expense due to lower rates, lower inventory volumes and actions taken to improve our insurance coverage efficacy.

For fiscal 2008, we reported a gain of approximately $1.4 million from insurance recovery. On April 10, 2008, our leased distribution facility in Texas was struck by a tornado, which resulted in a loss of a portion of our inventory stored in that facility. We insured our entire finished goods inventory in all locations at the expected wholesale value. The gain realized in fiscal 2008 represented the difference between the carrying costs of the damaged inventory versus the insurance proceeds approximating such inventory's wholesale value. In addition, this storm resulted in damage to the leased facility and a portion of our warehouse equipment in the facility. The facility and equipment damaged were fully insured at replacement cost. Activities to repair or replace the facility and equipment were ongoing at the close of fiscal 2008. None of the gain recognized in fiscal 2008 related to insurance recovery related to either the leased facility or affected equipment in that facility.
A gain of $878 thousand on the disposal of 4.4 acres of land was reflected in our Consolidated Statement of Income for fiscal 2007. This property is adjacent to our headquarters office and was not being used as part of our business activities. No similar transaction occurred in fiscal 2008.
During fiscal 2007, we recorded $179 thousand in restructuring charges primarily due to professional fees associated with the application process of liquidating our subsidiaries in Mexico. No restructuring related activities occurred during fiscal 2008.
The increase in interest income of $235 thousand resulted from the increase in our invested funds during fiscal 2008, which were available due to our continued profitability and liquidity during fiscal 2008.
The interest expense decrease of $516 thousand or 81 percent was due primarily to our continued profitability during fiscal 2008, which resulted in no borrowings under our Bank Facility, as described further under the caption "Liquidity and Capital Resources" below.
Based on the results of operations noted above, we reported earnings from continuing operations of $9.8 million in fiscal 2008, or $0.92 per diluted common share, compared to $25.7 million in fiscal 2007 or $2.46 per diluted share. The earnings from continuing operations of $25.7 million for fiscal 2007 included the tax benefit of approximately $13.6 million with respect to the reversal of the deferred tax asset valuation allowance. As reported previously, we recorded a valuation allowance reflecting the full reservation of the value of our deferred tax assets at the end of fiscal 2003 because we deemed then that it was more likely than not that our deferred tax assets would not be realized. In the second quarter of fiscal 2007, we determined, based on the existence of sufficient positive evidence, represented primarily by three years of cumulative income before restructuring charges, that a valuation allowance against net deferred tax assets was no longer required because it was more likely than not that the deferred tax assets would be realized in future periods.

Discontinued Operations
At the end of fiscal 2007, our Board of Directors approved a plan to sell our 100 percent ownership in Fargeot. This action strategically aligned all elements of our operations with the current business model, which includes, among other key components, the 100 percent outsourcing of our product needs from third-party manufacturers. As a result of this action, Fargeot's business, which had been the only business in our Barry Europe operating segment, was reclassified as discontinued operations for fiscal 2007. Since the disposal of Fargeot, we have operated under one segment, Barry North America. Our results of operations for fiscal 2009 and fiscal 2008 did not reflect any transactions with respect to Fargeot's disposal. Selected financial data relating to the discontinued operations of Fargeot for fiscal 2007 are as follows (dollar amounts in thousands, except per common share data):

                                                                     2007

      Net sales                                                     $ 8,490
      Loss on net assets held for sale as discontinued operations     1,240
      Loss from discontinued operations before income tax              (751 )
      Loss from discontinued operations, net of income tax             (590 )
      Basic loss per common share: discontinued operations            (0.06 )

      Diluted loss per common share: discontinued operations        $ (0.06 )

In July 2007, we completed the sale of Fargeot for approximately $480 thousand. The net value of the business at the close of fiscal 2007 was estimated at $474 thousand. We reported a loss from discontinued operations of $590 thousand in fiscal 2007, which included both the results of the Fargeot operations and an impairment loss of $1.2 million, resulting from the sale of Fargeot. Further details of the sale are included in Note (18) of the Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data." in this 2009 Form 10-K.
Based on the results from continuing and discontinued operations discussed above, we reported net earnings of approximately $9.8 million or $0.92 per diluted common share and $25.1 million or $2.40 per diluted common share for fiscal 2008 and fiscal 2007, respectively. Liquidity and Capital Resources
Our primary source of revenue and cash flow is our operating activities in North America. When cash inflows are less than cash outflows, we also have access to amounts under our Bank Facility, as described further below in this section, subject to its terms. We may seek to finance future capital investment programs through various methods, including, but not limited to, cash flow from operations and borrowings under our current or additional credit facilities. Our liquidity requirements arise from the funding of our working capital needs, which include primarily inventory, other operating expenses and accounts receivable, funding of capital expenditures and repayment of our indebtedness. Generally, most of our product purchases from third-party manufacturers are acquired on an open account basis, and to a lesser extent, through trade letters of credit. Such trade letters of credit are drawn against our Bank Facility at the time of shipment of the products and reduce the amount available under our Bank Facility when issued.

Total cash and cash equivalents were $14.3 million at June 27, 2009, compared to $14.2 million at June 28, 2008. Short-term investments were $25.0 million at June 27, 2009, compared to $11.9 million at June 28, 2008.
At June 27, 2009, as part of our cash management and investment program, we maintained a portfolio of $25.0 million in short-term investments, including $18.5 million in marketable investment securities consisting of variable rate demand notes and $6.5 million 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 corporate bonds which have individual maturity dates ranging from July to December 2009.
All references made in the following section are on a consolidated basis. Amounts with respect to Fargeot, which have been reclassified as discontinued operations in our Consolidated Statements of Income, have been included, as applicable, in the operating, investing and financing activities sections of this liquidity and capital resources analysis. The net effect of the sale of Fargeot has been reflected as a non-cash impairment loss in our Consolidated Statement of Cash Flows for fiscal 2007. Operating Activities
During fiscal 2009, our operations generated $17.3 million in cash. This operating cash flow was primarily the result of our net earnings for the period adjusted for non-cash activities such as deferred income tax expense of $3.5 million, depreciation and stock-based compensation expense of $775 thousand and $938 thousand, respectively, and changes in our working capital accounts as well as payments on our pension and other obligations. In fiscal 2009, significant changes in working capital accounts included lower amounts of accounts receivable and inventory, as discussed in more detail below. During fiscal 2008, our operations generated $8.7 million in cash. This operating cash flow was primarily the result of our net earnings for the period adjusted for non-cash activities such as deferred income tax expense of $4.6 million, depreciation and stock-based compensation expense of $641 thousand and $698 thousand, respectively, and changes in our working capital accounts as well as payments on our pension and other obligations. In fiscal 2008, significant changes in working capital accounts included higher amounts of accounts receivable and lower accounts payable and accrued expenses, offset by lower amounts of inventory, as discussed in more detail below. During fiscal 2007, our operations generated $16.1 million of cash. This operating cash flow was primarily the result of our net earnings for the period adjusted for non-cash activities such as the deferred income tax and valuation adjustment of $14.6 million, impairment loss on the sale of Fargeot of $1.2 million, gain on the sale of land of $878 thousand and changes in our working capital accounts. In fiscal 2007, significant changes in working capital accounts included lower amounts of inventories and lower amounts of accrued expenses, offset by higher amounts of accounts receivable.
Our working capital ratio, which is calculated by dividing total current assets by total current liabilities, was 6.2:1 at June 27, 2009, 5.7: 1 at June 28, 2008 and 3.2:1 at June 30, 2007. The increase in our working capital ratio from the end of fiscal 2007 to the end of fiscal 2009 was primarily driven by an increase in cash resulting from our profitability over those reporting periods.

Changes during fiscal 2009 in the primary components of working capital accounts were as follows:
• Net accounts receivable decreased by approximately $3.2 million during fiscal 2009. This decrease was primarily due to lower sales levels in the latter part of the period and the timing of approximately $600 thousand received in early July 2008 with respect to the insurance recovery related to the inventory damaged at our distribution facility in Texas.

• Net inventories decreased by $2.3 million during fiscal 2009, resulting from the timing of inventory purchases and customer shipments and our continuing efforts to manage our inventory more efficiently. We have continued to work closely with certain key retailers to promote our products in-season and aggressively liquidate our on-hand closeout inventories.

• Accounts payable decreased by $282 thousand during fiscal 2009, due primarily to the timing of incurring certain operational type expenses as well as the timing of our purchases from third-party manufacturers. As part of our business model, we continue to manage closely the timing of receipt of orders from our customers to the time we place these orders with our third-party manufacturers.

• Accrued expenses increased by $609 thousand during fiscal 2009, primarily due to increased short-term pension liabilities as compared to prior year.

Investing Activities
During fiscal 2009, investing activities used $14.5 million in cash. Purchases of short-term investments comprised $13.1 million of this amount. Capital expenditures were $1.4 million and primarily consisted of leasehold improvements to our New York showroom, warehouse equipment for our leased distribution facility in Texas and purchases of software and computer equipment. During fiscal 2008, investing activities used $13.4 million in cash. Purchases of short-term investments comprised $11.9 million of this amount. Capital expenditures, primarily involving heating and air conditioning units for the corporate offices and purchased software of $1.6 million, were made during the year, offset by $100 thousand in proceeds from the disposal of Fargeot and other equipment disposals.
During fiscal 2007, investing activities provided $257 thousand in cash. We received $890 thousand from the sale of land, which was offset by $633 thousand in capital expenditures, primarily involving computer hardware, software and various other furnishings and renovations in the corporate offices. Financing activities
During fiscal 2009, financing activities consumed $2.7 million in cash. This financing cash outflow was primarily due to the payment of a special cash dividend of $0.20 per common share, which amounted to approximately $2.7 million as part of a Company dividend program implemented in late fiscal 2009. In addition, approximately $500 thousand of debt was paid in fiscal 2009, with an offsetting inflow of approximately $500 thousand provided from the exercise of employee stock options and excess state and local tax benefits associated with vesting of restricted stock units and stock option exercises during the period. During fiscal 2008, financing activities provided $685 thousand in cash. This financing cash inflow resulted primarily from $764 thousand in cash provided from the exercise of employee stock options and realized excess state and local tax benefits associated with stock option exercises and restricted stock unit vesting. This amount was partially offset by the payment of approximately $79 thousand associated with our debt.
During fiscal 2007, financing activities provided $860 thousand in cash. This financing cash inflow resulted primarily from $1.1 million of cash provided from the exercise of employee stock options. This amount was partially offset by the payment of approximately $277 thousand with respect to our lines of credit.

2010 Liquidity
We believe our sources of cash and cash equivalents on-hand, short-term investments and funds available under our Bank Facility will be adequate to fund our operations and capital expenditures through fiscal 2010. Bank Facility
Our Company is party to an unsecured credit facility with The Huntington National Bank ("Huntington"). The original facility dated March 29, 2007 was modified on June 26, 2009. Under this modified facility ("Bank Facility"), Huntington is obligated to advance us funds for a period of two and a half years ending on December 31, 2012, subject to a one-year renewal option thereafter, up to the following amounts:

                              July to December       January to June
                Fiscal 2010       $12 million           $5 million
                Fiscal 2011       $10 million           $5 million
                Fiscal 2012       $8 million

The terms of the Bank Facility require the Company to satisfy certain financial covenants including (a) satisfying a minimum fixed charge coverage ratio of not less than 1.25 to 1.0 which is calculated on a trailing 12 months basis, and
(b) maintaining a consolidated tangible net worth of not less than $44 million, increased annually by 50% of the Company' consolidated net income after June 28, 2009. The Bank Facility must be rested for 30 consecutive days beginning in February of each year. Also, the borrowing under the Bank Facility may not exceed 80% of the Company's eligible accounts receivable and 50% of its eligible . . .