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 March 29, 1997
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 12, 1997:
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, March 29, 1997, and 3
December 28, 1996
Condensed Consolidated Statements of Operations for the 4
Three Months Ended March 29, 1997 and March 30, 1996
Condensed Consolidated Statements of Cash Flows for the 5
Three Months Ended March 29, 1997 and March 30, 1996
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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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 29, December 28,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 861,000 $ 1,518,000
Accounts receivable - trade (less allowance for doubtful accounts of $1,273,000
and $847,000 at March 29, 1997 and December 28, 1996 , respectfully) 15,281,000 17,259,000
Inventories 11,665,000 9,978,000
Deferred income taxes 1,873,000 1,873,000
Other 2,307,000 2,483,000
------------ ------------
Total current assets $ 31,987,000 $ 33,111,000
------------ ------------
PROPERTY:
Property at cost 41,101,000 40,379,000
Less accumulated depreciation and amortization (29,666,000) (29,271,000)
------------ ------------
Property - net 11,435,000 11,108,000
------------ ------------
AVAILABLE-FOR-SALE SECURITIES 163,000 164,000
------------ ------------
OTHER ASSETS 2,678,000 2,633,000
------------ ------------
TOTAL $ 46,263,000 $ 47,016,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 1,610,000 $ 1,624,000
Accounts payable - trade 5,741,000 4,647,000
Accrued salaries and wages 1,684,000 2,976,000
Deferred income 2,124,000 2,009,000
Other 2,600,000 2,273,000
------------ ------------
Total current liabilities 13,759,000 13,529,000
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 16,064,000 15,565,000
------------ ------------
OTHER LIABILITIES (primarily deferred compensation) 646,000 893,000
------------ ------------
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 32,000 33,000
Retained earnings 14,635,000 15,869,000
------------ ------------
Total stockholders' equity 15,794,000 17,029,000
------------ ------------
TOTAL $ 46,263,000 $ 47,016,000
============ =============
<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 OPERATIONS
Three Months Ended
----------------------------
March 29, March 30,
1997 1996
------------ ------------
NET REVENUES $ 21,561,000 $ 25,465,000
------------ ------------
COST AND EXPENSES:
Cost of sales 14,409,000 16,750,000
Selling, general and administrative expenses 8,799,000 7,529,000
Interest expense 414,000 376,000
------------ ------------
Total cost and expenses 23,622,000 24,655,000
------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR TAXES (2,061,000) 810,000
PROVISION (BENEFIT) FOR TAXES (826,000) 325,000
------------ ------------
NET INCOME (LOSS) $ (1,235,000) $ 485,000
============ ============
NET INCOME (LOSS) PER COMMON SHARE: $ (1.41) $ 0.55
============ ============
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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<TABLE>
FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
--------------------------------
March 29, March 30,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,235,000) $ 485,000
Depreciation, depletion and amortization 447,000 450,000
Other 394,000 (2,441,000)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES $ (394,000) $(1,506,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (739,000) (696,000)
Purchases of available-for-sale securities (373,000)
Proceeds from the sale of property and available-for-sale securities -- 2,116,000
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (739,000) 1,047,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 742,000 104,000
Payment of long-term debt and capital lease obligations (266,000) (370,000)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 476,000 (266,000)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (657,000) (725,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,518,000 1,528,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 861,000 $ 803,000
=========== ===========
CASH PAID DURING THE PERIOD FOR THE FOLLOWING:
Interest $ 366,000 $ 326,000
=========== ===========
Income taxes paid (refunded) $ 0 ($ 39,000)
=========== ===========
<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:
March 29, December 28,
1997 1996
-------- ------------
Finished Products $7,089,000 $6,585,000
Work-in-process 386,000 398,000
Raw Materials and
supplies 4,190,000 2,995,000
---------- ----------
Total Inventories $11,665,000 $ 978,000
=========== ==========
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 1997.
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 $556,000 through the first quarter of 1997. 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.
5. The Company was not in compliance with all covenants of the Term Loan at
the end of the first quarter. The Company has received a commitment from
the lender of the Term Loan to refinance the remaining balance of the Term
Loan and to extend additional debt. The lender has further proposed that
all loan covenants be removed. The Company anticipates that it will accept
the lender's proposal, or secure more favorable financing, during the
current fiscal year. Accordingly, the Company has classified its Term Loan
in accordance with the terms of the expected refinancing.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Requirements
Over the first three months of 1997 $394,000 of cash was used by
operations. Cash generated from financing activities included $742,000 borrowed
on the Company's line of credit. These funds were used to support cash used by
operations, $739,000 of capital expenditures and $266,000 of debt payments.
The Company's management believes that its liquidity position at March
29, 1997, 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. The Company is actively pursuing the refinance
of both its equipment and line of credit facilities and has already received
preliminary proposals from several lenders. The Company anticipates the
refinancing of its debt will be completed in the third quarter of the current
year.
Results of Operations
For Better Living's first quarter earnings before taxes decreased by
$2,871,000, or 354%, compared to the same period last year. Net revenues for the
period decreased $3,904,000, or 15%, from the comparable period of the prior
year. The decrease in earnings before taxes and revenues was due primarily to
the absence of two large projects at the Quikset Organization which were present
in 1996 and not repeated in 1997, and the continuing investment in Inside Golf
Magazine and circulation projects at the Communications Group.
The Quikset Organization's two large 1996 projects, CPS Primeco and San
Antonio City Public Services, did not have selling and marketing costs which are
normally present in Quikset's cost structure. Quikset's revenues, while lower
for the first quarter of 1997, reflect a more typical mix of Quikset revenues
which carry greater selling expense. Accordingly, selling, general and
administrative expenses for 1997 are greater than the first quarter of 1996,
even though overall revenues declined. The Quikset Organization continues to
pursue projects similar to CPS Primeco and San Antonio City Public Services
while continuing its growth of revenue from both traditional and new business
lines.
In the first quarter of 1997 the Communications Group continued to
increase the level of spending in its new magazine, Inside Golf, and in Bike
Magazine in an effort to increase circulation growth and the demand for
advertising space. These investments are reflected in higher selling, general
and administrative expenses.
Interest expense increased in 1997 primarily due to an increase in
borrowings under the line of credit arrangement from the comparable period of
the prior year.
Net gains recognized on the disposition of available-for-sale
securities for the three months ended March 29, 1997 and March 30, 1996 were $0
and $12,000, respectively.
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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 Amended 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 Amended 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 three months ended March
29, 1997.
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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 12, 1997 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-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 861,000
<SECURITIES> 0
<RECEIVABLES> 15,281,000
<ALLOWANCES> 1,273,000
<INVENTORY> 11,665,000
<CURRENT-ASSETS> 31,987,000
<PP&E> 41,101,000
<DEPRECIATION> 29,666,000
<TOTAL-ASSETS> 46,263,000
<CURRENT-LIABILITIES> 13,759,000
<BONDS> 0
<COMMON> 44,000
0
0
<OTHER-SE> 15,750,000
<TOTAL-LIABILITY-AND-EQUITY> 46,263,000
<SALES> 21,455,000
<TOTAL-REVENUES> 21,561,000
<CGS> 14,409,000
<TOTAL-COSTS> 23,622,000
<OTHER-EXPENSES> 9,213,000
<LOSS-PROVISION> 444,000
<INTEREST-EXPENSE> 414,000
<INCOME-PRETAX> (2,061,000)
<INCOME-TAX> (826,000)
<INCOME-CONTINUING> (1,235,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,235,000)
<EPS-PRIMARY> (1.41)
<EPS-DILUTED> (1.41)
</TABLE>
