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 September 28, 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 November 12, 1996:
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, 3
September 28, 1996, and December 30, 1995
Condensed Consolidated Statements of Income for 4
the Three Months Ended September 28, 1996 and
September 30, 1995 and the Nine Months Ended
September 28, 1996 and September 30, 1995
Condensed Consolidated Statements of Cash Flows 5
for the Nine Months Ended September 28, 1996 and
September 30, 1995
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 28, December 30,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,302,000 $ 1,528,000
Accounts receivable - trade (less allowance for doubtful accounts of
$870,000 and $747,000 at September 28, 1996 and December 30, 1995 , respectfully) 14,585,000 13,177,000
Inventories 10,039,000 8,401,000
Deferred income taxes 2,065,000 2,065,000
Other 5,052,000 3,881,000
------------ ------------
Total current assets $ 33,043,000 $ 29,052,000
------------ ------------
PROPERTY:
Property at cost 39,652,000 39,967,000
Less accumulated depreciation and amortization (29,277,000) (28,614,000)
------------ ------------
Property - net 10,375,000 11,353,000
------------ ------------
AVAILABLE-FOR-SALE SECURITIES 144,000 1,700,000
------------ ------------
OTHER ASSETS 541,000 477,000
------------ ------------
TOTAL $ 44,103,000 $ 42,582,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 1,150,000 $ 1,217,000
Accounts payable - trade 4,287,000 4,139,000
Accrued salaries and wages 2,248,000 1,941,000
Deferred income 2,186,000 1,860,000
Other 2,710,000 4,025,000
------------ ------------
Total current liabilities 12,581,000 13,182,000
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 13,664,000 11,718,000
------------ ------------
OTHER LIABILITIES (primarily deferred compensation) 1,024,000 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 20,000 214,000
Retained earnings 15,687,000 15,302,000
------------ ------------
Total stockholders' equity 16,834,000 16,643,000
------------ ------------
TOTAL $ 44,103,000 $ 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 Nine Months Ended
------------------------------ -----------------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $24,126,000 $21,841,000 $71,437,000 $59,060,000
----------- ----------- ----------- -----------
COST AND EXPENSES:
Cost of sales 15,646,000 13,849,000 46,627,000 36,821,000
Selling, general and administrative expenses 7,927,000 7,545,000 22,859,000 20,624,000
Interest expense 396,000 336,000 1,161,000 884,000
----------- ----------- ----------- -----------
Total cost and expenses 23,969,000 21,730,000 70,647,000 58,329,000
INCOME BEFORE PROVISION FOR TAXES 157,000 111,000 790,000 731,000
PROVISION FOR TAXES 63,000 63,000 317,000 342,000
----------- ----------- ----------- -----------
NET INCOME $ 94,000 $ 48,000 $ 473,000 $ 389,000
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE: $ 0.11 $ 0.05 $ 0.54 $ 0.44
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 877,816 877,816 877,816 877,816
----------- ----------- ----------- -----------
CASH DIVIDENDS PER COMMON SHARE $ 0.00 $ 0.00 $ 0.10 $ 0.10
=========== =========== =========== ===========
<FN>
See the accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
----------------------------
September 28, September 30,
1996 1995
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 473,000 $ 389,000
Depreciation, depletion and amortization 1,223,000 1,499,000
Other (5,110,000) (5,595,000)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES $(3,414,000) $(3,707,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (1,917,000) (1,309,000)
Purchases of available-for-sale securities (373,000) --
Proceeds from the sale of property and available-for-sale 3,714,000 1,884,000
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,424,000 575,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 3,071,000 5,179,000
Payment of short-term debt -- (1,225,000)
Payment of long-term debt and capital lease obligations (1,219,000) (1,258,000)
Dividends Paid (88,000) (88,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,764,000 2,608,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (226,000) (524,000)
----------- -----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,528,000 1,828,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,302,000 $ 1,304,000
=========== ===========
CASH PAID DURING THE PERIOD FOR THE FOLLOWING:
Interest $ 1,028,000 $ 615,000
=========== ===========
Income taxes paid (refunded) $ 46,000 ($ 568,000)
=========== ===========
<FN>
See the accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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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:
September 28, December 30,
1996 1995
Finished products $7,170,000 $5,455,000
Work-in-process 449,000 337,000
Raw materials and supplies 2,420,000 2,609,000
--------- ---------
Total inventories $10,039,000 $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 $514,000 through the third 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. During the second quarter of 1996 the Company renegotiated its
revolving line of credit with its lender to provide for: and increase in
the credit availability from $10 million to $20 million, a reduction the
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
Over the first nine months of 1996 $3,414,000 of cash was used by
operations, primarily due to a $1,744,000 increase in Accounts Receivable and a
$1,638,000 increase in Inventory. Cash generated from investing and financing
activities included $3,714,000 from the sale of property and available-for-sale
securities and $3,071,000 borrowed on the Company's line of credit. These funds
were used to support cash used by operations, $1,917,000 of capital
expenditures, $1,219,000 of debt payments, $373,000 for the purchase of
available-for-sale securities and $88,000 of dividend payments.
The Company's management believes that its liquidity position at
September 28, 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
For Better Living's third quarter earnings before taxes increased by
$46,000, or 41 percent, compared to the same period last year. This resulted
primarily from an increase in other operating profit of $301,000, partially
offset by decreases in operating profit of $103,000 at the Communications Group
and $116,000 at The Quikset Organization. The increase in other operating profit
was primarily due to an increase in gains on the sale of available-for-sale
securities. The decrease in operating profit at the Communications Group was
primarily due to the launch of its new magazine, Inside Golf. The decrease in
operating profit at the Quikset Organization was primarily due to a write-off of
inventory.
During the three months ended September 28, 1996, net revenues
increased $2,285,000, or 10 percent, from the comparable period of the prior
year. This primarily resulted from increases in revenues of $1,916,000 at The
Quikset Organization, $329,000 in other revenues and $41,000 at the
Communications Group. 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 increase in other revenues was primarily
due to an increase in sales of available-for-sale securities.
Net gains recognized on the disposition of available-for-sale
investments for the three months ended September 28, 1996 and September 30, 1995
were $318,000 and $0, respectively.
For the nine months ended September 28, 1996, income before taxes
increased $59,000 or 8 percent, compared to the same period last year. This
increase in pre-tax income was primarily the result of an increase in operating
profit of $1,710,000 at the Quikset Organization, partially offset by a $397,000
decrease in operating profit at the Communications Group and a decrease in other
operating profit of $876,000. The increase in operating profit at The Quikset
Organization was primarily a result of the increased 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 and the launch
of its new magazine, Inside Golf. The decrease in other operating profit was
primarily due to a decrease in gains from dispositions of securities.
During the nine months ended September 28, 1996, net revenues increased
$12,377,000 from the comparable period of the prior year. This primarily
resulted from increases in revenues of $12,354,000 at The Quikset Organization
and $836,000 at the Communications Group, partially offset by a decrease in
other revenues of $813,000. 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.
Net gains recognized on the disposition of available-for-sale
investments for the six months ended September 28, 1996 and September 30, 1995
were $330,000 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) Exhibits
27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months ended
September 28, 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: November 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> SEP-28-1996
<CASH> 1,302,000
<SECURITIES> 0
<RECEIVABLES> 14,585,000
<ALLOWANCES> 870,000
<INVENTORY> 10,039,000
<CURRENT-ASSETS> 33,043,000
<PP&E> 39,652,000
<DEPRECIATION> 29,277,000
<TOTAL-ASSETS> 44,103,000
<CURRENT-LIABILITIES> 12,581,000
<BONDS> 0
<COMMON> 44,000
0
0
<OTHER-SE> 16,790,000
<TOTAL-LIABILITY-AND-EQUITY> 44,103,000
<SALES> 70,722,000
<TOTAL-REVENUES> 71,437,000
<CGS> 46,627,000
<TOTAL-COSTS> 70,647,000
<OTHER-EXPENSES> 23,020,000
<LOSS-PROVISION> 336,000
<INTEREST-EXPENSE> 1,161,000
<INCOME-PRETAX> 790,000
<INCOME-TAX> 317,000
<INCOME-CONTINUING> 473,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473,000
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
