UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-6633
FOR BETTER LIVING, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-2598411
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
13620 LINCOLN WAY, #380 95603-3236
AUBURN, CALIFORNIA (Zip code)
(Address of principal executive offices)
(916) 823-9600
(Registrant's telephone number, including area code)
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 twelve 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
--- ---
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of May 15, 1995:
Common Stock, $.05 par value - 877,816 shares.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, April 1, 1995, and 3
and December 31, 1994
Condensed Consolidated Statements of Income for the Three
Months Ended April 1, 1995 and March 26, 1994 4
Condensed Consolidated Statements of Cash Flows for the 5
Three Months Ended April 1, 1995 and March 26, 1994
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 1, December 31,
1995 1994
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 1,790,000 $ 1,828,000
Available-for-sale securities .................... 139,000 1,559,000
Accounts receivable (less allowance for doubtful
accounts of $862,000 and $841,000 at
April 1, 1995 and December 31, 1994,
respectively) ............................ 9,823,000 9,350,000
Inventories ...................................... 8,848,000 8,406,000
Deferred income taxes ............................ 2,133,000 1,705,000
Other ............................................ 3,395,000 3,488,000
----------- -----------
Total current assets ........................... 26,128,000 26,336,000
----------- -----------
PROPERTY
Property - at cost ................................ 38,134,000 37,960,000
Less accumulated depreciation, depletion
and amortization ......................... 27,454,000 27,126,000
----------- -----------
Property - net ................................. 10,680,000 10,834,000
----------- -----------
AVAILABLE-FOR-SALE SECURITIES ...................... 1,516,000 1,605,000
----------- -----------
OTHER ASSETS ....................................... 733,000 729,000
----------- -----------
TOTAL ..................................... $39,057,000 $39,504,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings ............................ $ 2,850,000 $ 1,225,000
Current portion of long-term debt and capital
lease obligations ............................ 1,599,000 1,633,000
Accounts payable ................................. 4,355,000 5,029,000
Accrued salaries and wages ....................... 1,094,000 1,614,000
Deferred income .................................. 1,670,000 1,591,000
Other ............................................ 4,310,000 4,298,000
----------- -----------
Total current liabilities ...................... 15,878,000 15,390,000
----------- -----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS ....... 5,432,000 5,790,000
----------- -----------
OTHER LIABILITIES (primarily deferred compensation) 1,276,000 1,356,000
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock - par value $1.00 per share
(authorized, 150,000 shares; outstanding,
none)
Common stock - par value $.05 per
share (authorized, 2,500,000 shares;
outstanding, 877,816 shares) .................. 44,000 44,000
Additional paid-in capital ....................... 1,083,000 1,083,000
Net unrealized gains and losses on
available-for-sale securities, net of taxes ... 127,000 767,000
Retained earnings ................................ 15,217,000 15,074,000
----------- -----------
Total stockholders' equity ................... 16,471,000 16,968,000
----------- -----------
TOTAL ..................................... $39,057,000 $39,504,000
=========== ===========
See the accompanying notes to condensed consolidated financial statements.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
---------------------------
April 1, March 26,
1995 1994
------------ ------------
NET REVENUES .................................... $ 17,716,000 $ 15,214,000
------------ ------------
COST AND EXPENSES:
Cost of sales ................................. 10,749,000 9,730,000
Selling, general and administrative expenses .. 6,489,000 6,179,000
Interest expense .............................. 239,000 206,000
------------ ------------
Total cost and expenses ......................... 17,477,000 16,115,000
------------ ------------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR TAXES ........................... 239,000 (901,000)
PROVISION (BENEFIT) FOR TAXES ................... 96,000 (306,000)
------------ ------------
NET INCOME (LOSS) ............................... $ 143,000 $ (595,000)
============ ============
NET INCOME (LOSS) PER COMMON SHARE: ............. $ 0.16 $ (0.68)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ...................... 877,816 877,816
============ ============
CASH DIVIDENDS PER COMMON SHARE ................. $ 0.00 $ 0.00
============ ============
See the accompanying notes to condensed consolidated financial statements.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
--------------------------
April 1, March 26,
1995 1994
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $ 143,000 $ (595,000)
Depreciation, depletion and amortization ........ 503,000 542,000
Other ........................................... (3,277,000) (1,049,000)
----------- ----------
NET CASH USED IN OPERATING ACTIVITIES ............. (2,631,000) (1,102,000)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property ........................... (346,000) (366,000)
Purchases of available-for-sale securities ...... -- (377,000)
Proceeds from the sale of property and
available-for-sale securities ................ 1,718,000 --
----------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,372,000 (743,000)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings ............. 1,625,000 --
Proceeds from long-term borrowings .............. -- 7,000,000
Payment of long-term debt and capital lease
obligations .................................. (404,000) (5,922,000)
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......... 1,221,000 1,078,000
----------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS ......... (38,000) (767,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .. 1,828,000 4,209,000
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........ $1,790,000 $3,442,000
=========== ==========
CASH PAID DURING THE PERIOD FOR THE FOLLOWING:
Interest ........................................ $ 168,000 $ 320,000
=========== ==========
Income taxes paid (refunded) .................... $ (36,000) $ 357,000
=========== ==========
See the accompanying notes to condensed consolidated financial statements.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q, and
in the opinion of the Company include all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the financial
position, results of operations and changes in cash flows of the company
as of the dates and for the periods indicated. All significant
intercompany transactions have been eliminated. Certain amounts as
previously reported have been reclassified to conform to the current
period presentation.
2. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full fiscal year.
3. Inventories consist of the following:
April 1, December 31,
1995 1994
---------- ----------
Finished products $5,637,000 $5,404,000
Work-in-process 93,000 100,000
Raw materials and supplies 3,118,000 2,902,000
---------- ----------
Total inventories $8,848,000 $8,406,000
========== ==========
4. As described in the Company's Form 10-K for the fiscal year ended
December 31,1994 (see Note 6. of the Notes to Consolidated Financial
Statements), the Company was in violation of several financial covenants
at December 31, 1994 under both its Term Loan and Credit Agreement,
primarily as a result of the net loss it incurred in 1994. The Company
received written waivers in regard to these violations from both lenders
during the first quarter of 1995. In addition, the lender under the Term
Loan has agreed to reduce the requirements associated with certain
financial covenants for the first three quarters of 1995. In exchange for
its waiver, this lender has required that the company 1) pay an interest
premium of 1% from April 1, 1995 through the first quarter after the
Company has complied for two consecutive quarters with the original
financial covenants in the loan agreement and 2) be in compliance with the
original financial covenants at the end of fiscal year 1995.
In granting a waiver under the Credit Agreement, the lender under this
agreement has 1) raised its interest rate to the bank's reference rate plus
.5% effective March 22, 1995, 2) accelerated the expiration date of the
agreement to June 1, 1995, 3) required that the Company maintain certain
minimum amounts of cash and marketable securities, and 4) charged the
Company a $10,000 waiver fee.
The Company is currently in negotiations with an affiliate of the
lender under its Term Loan for a new working capital line of credit which
would replace the Credit Agreement. This new credit facility, if
consummated, would provide the Company $10 million of available funds on a
revolving basis and at an interest rate of prime plus 1.25%. The facility
would provide for a two-year commitment and would require that amounts
borrowed be collateralized by the Company's accounts
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
receivable, inventories and other assets. The Company's management believes
that it is likely that it will receive a firm commitment for this facility
from the lender and that the loan transaction can be completed by the end
of the second quarter of 1995. The lender under the Credit Agreement has
agreed to extend the expiration date of its commitment to coincide with the
closing of the new loan transaction.
Amounts outstanding under the Credit Agreement are reported as
short-term borrowings on the balance sheet.
5. The Company received, in prior periods, notices of proposed assessments
from the California Franchise Tax Board ("CFTB") relating to its 1978-1981
tax years. The principal issue raised in these notices was whether the
Company's oil and gas operations were part of a unitary business with the
other operations of the Company. The CFTB has taken the position that the
oil and gas operations were not unitary with these other operations and,
therefore, has disallowed for California income tax purposes losses
arising from oil and gas operations. The Company paid the assessed taxes
of $379,000 and associated interest of $946,000 in 1992. It filed suit in
1994 and received a favorable decision and judgment in April 1995 for
recovery of these amounts, plus interest. The timing of the refund of
these amounts is presently indeterminate since the CFTB has through June
5, 1995 to commence an appeal of the decision and judgment with the
California Court of Appeal. At this time, it is not known whether such an
appeal will be made. If the CFTB does appeal, the Company intends to
continue to vigorously pursue a refund.
Deductions similar to those disallowed by the CFTB for the 1978-1981
tax years were also taken by the Company in its subsequent tax years. The
CFTB has recently examined those subsequent periods and, as a result of its
examination, has issued a notice of proposed assessment of additional taxes
for tax years 1982-1987. The proposed assessment is for $272,000 in
additional taxes which would result in associated interest expense of
approximately $406,000 through the first quarter of 1995. The Company's
management believes that the ultimate outcome of this matter will not have
a material adverse effect on the Company's consolidated financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL REQUIREMENTS
For the three months ended April 1, 1995, cash and cash equivalents
decreased $38,000. The primary sources of cash during the period were $1,718,000
from the sale of property and available-for-sale securities and $1,625,000 from
short-term borrowings. Significant uses of cash were $2,631,000 for operating
activities, $404,000 for debt and capital lease obligation repayments and
$346,000 for purchases of property primarily for The Quikset Organization.
For the three months ended March 26, 1994, cash and cash equivalents
decreased $767,000. The primary source of cash during the period was $7,000,000
from long-term borrowings. Significant uses of cash during this fiscal period
included $5,922,000 for debt and capital lease obligation repayments, $1,102,000
for operating activities, $377,000 for purchases of available-for-sale
securities and $366,000 for purchases of property primarily for The Quikset
Organization.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
As described in Note 5 of the Notes to Condensed Consolidated Financial
Statements, the Company is currently in negotiations with a financial
institution for a new working capital line of credit. The Company's management
believes that it is likely that this new credit agreement will be consummated by
the end of the second quarter of 1995.
The Company's management believes that its liquidity position at April
1, 1995, together with funds anticipated to be generated from its operations and
available under its Credit Agreement will provide sufficient cash resources to
finance its operating activities.
RESULTS OF OPERATIONS
During the three months ended April 1, 1995, net revenues increased
$2,502,000 from the comparable period of the prior year. This primarily resulted
from an increase in other revenues of $1,165,000, increases in revenues of
$687,000 at The Quikset Organization and increases in revenues of $650,000 at
the Communications Group. The increase in other revenues resulted primarily from
the sale of available-for-sale securities which had been reported at market
value on the consolidated balance sheet as of December 31, 1994 in accordance
with Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". Most of these gains were
previously reported on the balance sheet in a separate component of
stockholders' equity, net of deferred income taxes. The increase at The Quikset
Organization was primarily due to an increase in revenues from its plastics
operation and Georgia concrete operation. The increase at the Communications
Group resulted primarily from increases in advertising and newsstand revenue
from its new Bike magazine as well as from several of its other magazines.
During the three months ended April 1, 1995, the Company recognized
income before taxes of $239,000, or an increase in pre-tax income of $1,140,000
from the comparable period of the prior year. This increase in pre-tax income
resulted primarily from an increase in other operating profit of $1,155,000 and
an increase in operating profit of $121,000 at the Communications Group,
partially offset by an increase in operating losses of $159,000 at The Quikset
Organization. The increase in other operating profit resulted primarily from an
increase in gains from dispositions of securities as described above. The
increase in operating profit at the Communications Group was primarily a result
of the increase in revenues from its various magazines. The increase in
operating losses at The Quikset Organization was primarily due to a decline in
gross margins and certain increases in selling, general and administrative
expenses.
Net gains recognized on the disposition of available-for-sale securities
for the three months ended April 1, 1995 and March 26, 1994 were $1,203,000 and
$0, respectively.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months ended April
1, 1995.
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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.
FOR BETTER LIVING, INC.
DATE: May 15, 1995 BY: Brian B. Ruttencutter
------------------- ---------------------------------------
Brian B. Ruttencutter
Secretary and Chief Financial Officer
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