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 June 29, 1996
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 August 12, 1996:
Common Stock, $.05 par value - 877,816 shares.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
INDEX
<CAPTION>
Part I. Financial Information Page No.
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<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, June 29, 1996, and 3
December 30, 1995
Condensed Consolidated Statements of Income for the Three Months 4
Ended June 29, 1996 and July 1, 1995 and for the Six Months
Ended June 29, 1996 and July 1, 1995
Condensed Consolidated Statements of Cash Flows for the Six Months Ended 5
June 29, 1996 and July 1, 1995
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results 7
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
<CAPTION>
June 29, December 30,
1996 1995
------------ --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,987,000 $ 1,528,000
Accounts receivable - trade (less allowance for doubtful accounts of $1,008,000
and $747,000 at June 29, 1996 and December 30, 1995, respectfully) 13,947,000 13,177,000
Inventories 9,093,000 8,401,000
Deferred income taxes 2,065,000 2,065,000
Other 5,173,000 3,881,000
------------ ------------
Total current assets $ 32,265,000 $ 29,052,000
------------ ------------
PROPERTY:
Property at cost 39,064,000 39,967,000
Less accumulated depreciation and amortization (29,029,000) (28,614,000)
------------ ------------
Property - net 10,035,000 11,353,000
------------ ------------
AVAILABLE-FOR-SALE SECURITIES 1,730,000 1,700,000
------------ ------------
OTHER ASSETS 428,000 477,000
------------ ------------
TOTAL $ 44,458,000 $ 42,582,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 1,094,000 $ 1,217,000
Accounts payable - trade 3,699,000 4,139,000
Accrued salaries and wages 1,392,000 1,941,000
Deferred income 2,169,000 1,860,000
Other 4,109,000 4,025,000
------------ ------------
Total current liabilities 12,463,000 13,182,000
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 14,078,000 11,718,000
------------ ------------
OTHER LIABILITIES (primarily deferred compensation) 978,000 1,039,000
------------ ------------
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
Unrealized net gains and losses on available-for-sale securities 219,000 214,000
Retained earnings 15,593,000 15,302,000
------------ ------------
Total stockholders' equity 16,939,000 16,643,000
------------ ------------
TOTAL $ 44,458,000 $ 42,582,000
============ ============
<FN>
See the accompanying notes to condensed consolidated financial statements.
</FN>
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- ------------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES $ 21,846,000 $ 19,503,000 $ 47,311,000 $ 37,219,000
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of sales 14,230,000 12,223,000 30,981,000 22,972,000
Selling, general and administrative expenses 7,403,000 6,590,000 14,932,000 13,079,000
Interest expense 389,000 309,000 765,000 548,000
------------ ------------ ------------ ------------
Total cost and expenses 22,022,000 19,122,000 46,678,000 36,599,000
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR TAXES (176,000) 381,000 633,000 620,000
PROVISION (BENEFIT) FOR TAXES (71,000) 183,000 254,000 279,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (105,000) $ 198,000 $ 379,000 $ 341,000
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE: $ (0.12) $ 0.23 0.43 $ 0.39
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 877,816 877,816 877,816 877,816
============ ============ ============ ============
CASH DIVIDENDS PER COMMON SHARE $ 0.10 $ 0.10 $ 0.10 $ 0.10
============ ============ ============ ============
<FN>
See the accompanying notes to condensed consolidated financial statements.
</FN>
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
--------------------------------
June 29, July 1,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 379,000 $ 341,000
Depreciation, depletion and amortization 818,000 1,004,000
Other (3,429,000) (4,463,000)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES $(2,232,000) $(3,118,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (1,109,000) (1,023,000)
Purchases of available-for-sale securities (373,000) --
Proceeds from the sale of property and available-for-sale securities 2,042,000 1,872,000
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 560,000 849,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 2,905,000 4,657,000
Payment of short-term debt (1,225,000)
Payment of long-term debt and capital lease obligations (686,000) (1,289,000)
Dividends Paid (88,000) (88,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,131,000 2,055,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 459,000 (214,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,528,000 1,828,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,987,000 $ 1,614,000
=========== ===========
CASH PAID DURING THE PERIOD FOR THE FOLLOWING:
Interest $ 649,000 $ 506,000
=========== ===========
Income taxes paid (refunded) $ 69,000 ($34,000)
=========== ===========
<FN>
See the accompanying notes to condensed consolidated financial statements.
</FN>
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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:
June 29, December 30,
1996 1995
---- ----
Finished products $5,952,000 $5,455,000
Work-in-process 350,000 337,000
Raw materials and supplies 2,791,000 2,609,000
---------- ----------
Total inventories $9,093,000 $8,401,000
========== ==========
4. 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 February 1995 for
recovery of these amounts, plus interest. The CFTB has appealed that
decision however, and the matter is now pending before the California Court
of Appeal. The Company expects a decision before the end of 1996.
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 $495,000 through the second quarter of 1996. 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.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. The Company renegotiated its revolving line of credit with its lender to
provide for an increase in the credit availability from $10 million to $20
million, a reduction in the interest rate from prime plus 1.25% to prime plus
1.00%, a two year extension of the agreement from June 27, 1997 to June 27, 1999
and a reduction in early termination fees in the event the Company chooses to
terminate the relationship before the end of the term. All other terms of the
credit agreement remain the same.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Requirements
For the six months ended June 29, 1996, cash and cash equivalents
increased $459,000. The primary sources of cash during the period were
$2,905,000 from long-term borrowings and $2,042,000 from the sale of property
and available-for-sale securities. Significant uses of cash were $2,232,000 for
operating activities, $1,109,000 for purchases of property primarily for The
Quikset Organization, $686,000 for debt and capital lease obligations repayments
and $373,000 for purchases of available-for-sale securities.
For the six months ended July 1, 1995, cash and cash equivalents
decreased $214,000. The primary sources of cash during the period were
$4,657,000 from long-term borrowings and $1,872,000 from the sale of property
and available-for-sale securities. Significant uses of cash were $3,118,000 for
operating activities, $1,289,000 for debt and capital lease obligation
repayments, $1,225,000 for short-term debt payments and $1,023,000 for purchases
of property primarily for The Quikset Organization.
The Company's management believes that its liquidity position at June
29, 1996, together with funds anticipated to be generated from its operations
and available under its Revolver will provide sufficient cash resources to
finance its operating activities.
Results of Operations
During the three months ended June 29, 1996, net revenues increased
$2,342,000 from the comparable period of the prior year. This primarily resulted
from increases in revenues of $2,158,000 at The Quikset Organization and
$253,000 at the Communications Group, partially offset by a decrease in other
operating revenues of $69,000. The increase at The Quikset Organization was
primarily due to increases in sales at its Texas concrete operations. The
increase at the Communications Group resulted primarily from increases in
advertising revenues at the majority of its magazines. The decrease in other
operating revenues was primarily due to a decrease in sales of
available-for-sale securities.
During the three months ended June 29, 1996, the Company recognized a
loss before taxes of $176,000, or a decrease in pre-tax income of $557,000 from
the comparable period of the prior year. This
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
decrease in pre-tax income resulted primarily from decreases in operating profit
of $220,000 at the Communications Group and $62,000 at The Quikset Organization,
in addition to a decrease in other operating profit of $95,000. The decrease in
operating profit at the Communications Group was primarily due to increased
production and paper costs. The decrease in operating profit at The Quikset
Organization was primarily a result of increased administrative costs and
warranty reserves. The decrease in other operating profit resulted primarily
from a decrease in gains from the disposition of available-for-sale securities.
Net gains recognized on the disposition of available-for-sale
investments for the three months ended June 29, 1996 and July 1, 1995 were $0
and $52,000, respectively.
During the six months ended June 29, 1996, net revenues increased
$10,091,000 from the comparable period of the prior year. This primarily
resulted from increases in revenues of $10,438,000 at The Quikset Organization
and $795,000 at the Communications Group, partially offset by a decrease in
other revenues of $1,142,000. The increase at The Quikset Organization was
primarily due to an increase in sales at its Texas concrete operation. The
increase at the Communications Group resulted primarily from increases in
advertising revenues at the majority of its magazines. The decrease in other
revenues was primarily due to a decrease in sales of available-for-sale
securities.
During the six months ended June 29, 1996, the Company recognized
income before taxes of $633,000, or an increase in pre-tax income of $13,000
from the comparable period of the prior year. This increase in pre-tax income
resulted primarily from an increase in operating profit of $1,826,000 at The
Quikset Organization, partially offset by a decrease in operating profit of
$294,000 at the Communications Group and a decrease in other operating profit of
$1,177,000. The increase in operating profit at The Quikset Organization was
primarily a result of the increase in revenues from its Texas concrete
operations. The decrease in operating profit at the Communications Group was
primarily due to increased production and paper costs. The decrease in other
operating profit was primarily due to a decrease in gains from dispositions of
securities.
Net gains recognized on the disposition of available-for-sale
investments for the six months ended June 29, 1996 and July 1, 1995 were $12,000
and $1,255,000, respectively.
The increase in interest expense in 1996 was primarily due to an
increase in borrowings under the Company's line of credit arrangement from the
comparable periods of the prior year.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed as part of this Report: The numbers refer
to the Exhibit Table of Item 601 of Regulation S-K.
3.1 Certificate of Incorporation. Incorporated by reference to
Exhibit 3.1 of the Registrant's Form 10-K for the year ended
December 30, 1995.
3.2 By-Laws of the Registrant. Incorporated by reference to Exhibit
3.2 of the Registrant's Form 10-K for the year ended December
30, 1995.
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed for the six months ended June 29,
1996.
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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: August 12, 1996 BY: Karl M. Stockbridge
------------------------ -------------------
Karl M. Stockbridge
Executive Vice President
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 1,987,000
<SECURITIES> 0
<RECEIVABLES> 13,947,000
<ALLOWANCES> 1,008,000
<INVENTORY> 9,093,000
<CURRENT-ASSETS> 32,265,000
<PP&E> 39,064,000
<DEPRECIATION> 29,029,000
<TOTAL-ASSETS> 44,458,000
<CURRENT-LIABILITIES> 12,463,000
<BONDS> 0
<COMMON> 44,000
0
0
<OTHER-SE> 16,895,000
<TOTAL-LIABILITY-AND-EQUITY> 44,458,000
<SALES> 47,027,000
<TOTAL-REVENUES> 47,311,000
<CGS> 30,981,000
<TOTAL-COSTS> 46,678,000
<OTHER-EXPENSES> 15,697,000
<LOSS-PROVISION> 409,000
<INTEREST-EXPENSE> 765,000
<INCOME-PRETAX> 633,000
<INCOME-TAX> 254,000
<INCOME-CONTINUING> 379,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 379,000
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
