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 28, 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 August 8, 1997:
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>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, June 28, 1997, and 3
December 28, 1996
Condensed Consolidated Statements of Operations for the Three
Months Ended 4 June 28, 1997 and June 29, 1996 and for the Six
Months Ended June 28, 1997 and June 29, 1996.
Condensed Consolidated Statements of Cash Flows for the Six Months Ended 5
June 28, 1997 and June 28, 1996
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 8
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 28, December 28,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 811,000 $ 1,518,000
Accounts receivable - trade (less allowance for doubtful accounts of $1,135,000
and $847,000 at June 28, 1997 and December 28, 1996, respectfully) 17,086,000 17,259,000
Inventories 11,396,000 9,978,000
Deferred income taxes 1,873,000 1,873,000
Other 3,077,000 2,483,000
------------ ------------
Total current assets $ 34,243,000 $ 33,111,000
------------ ------------
PROPERTY:
Property at cost 41,675,000 40,379,000
Less accumulated depreciation and amortization (29,378,000) (29,271,000)
------------ ------------
Property - net 12,297,000 11,108,000
------------ ------------
AVAILABLE-FOR-SALE SECURITIES -- 164,000
------------ ------------
OTHER ASSETS 2,664,000 2,633,000
------------ ------------
TOTAL $ 49,204,000 $ 47,016,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 250,000 $ --
Current portion of long-term debt and capital lease obligations 1,621,000 1,624,000
Accounts payable - trade 7,911,000 4,647,000
Accrued salaries and wages 1,851,000 2,976,000
Deferred income 2,349,000 2,009,000
Other 2,241,000 2,273,000
------------ ------------
Total current liabilities 16,223,000 13,529,000
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 16,429,000 15,565,000
------------ ------------
OTHER LIABILITIES (primarily deferred compensation) 791,000 893,000
------------ ------------
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 -- 33,000
Retained earnings 14,634,000 15,869,000
------------ ------------
Total stockholders' equity 15,761,000 17,029,000
------------ ------------
TOTAL $ 49,204,000 $ 47,016,000
============ ============
<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 OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ -------------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES $ 26,082,000 $ 21,846,000 $ 47,643,000 $ 47,311,000
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of sales 16,842,000 14,230,000 31,251,000 30,981,000
Selling, general and administrative expenses 8,631,000 7,403,000 17,430,000 14,932,000
Interest expense 469,000 389,000 883,000 765,000
------------ ------------ ------------ ------------
Total cost and expenses 25,942,000 22,022,000 49,564,000 46,678,000
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR TAXES 140,000 (176,000) (1,921,000) 633,000
PROVISION (BENEFIT) FOR TAXES 53,000 (71,000) (773,000) 254,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 87,000 $ (105,000) $ (1,148,000) $ 379,000
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE: $ 0.10 $ (0.12) $ (1.31) $ 0.43
============ ============ ============ ============
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 28, June 29,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(1,148,000) $ 379,000
Depreciation, depletion and amortization 972,000 818,000
Other 380,000 (3,429,000)
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 204,000 $(2,232,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (2,062,000) (1,109,000)
Purchases of available-for-sale securities -- (373,000)
Proceeds from the sale of property and available-for-sale securities 175,000 2,042,000
----------- -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,887,000) 560,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 1,416,000 2,905,000
Proceeds from short-term borrowings 250,000 --
Payment of long-term debt and capital lease obligations (602,000) (686,000)
Dividends paid (88,000) (88,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 976,000 2,131,000
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (707,000) 459,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,518,000 1,528,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 811,000 $ 1,987,000
=========== ===========
CASH PAID DURING THE PERIOD FOR THE FOLLOWING:
Interest $ 765,000 $ 649,000
=========== ===========
Income taxes $ 65,000 $ 69,000
=========== ===========
<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:
March 29, December 28,
1997 1996
------------ ------------
Finished Products $ 6,544,000 $ 6,585,000
Work-in-process 408,000 398,000
Raw Materials and supplies 4,445,000 2,995,000
------------ ------------
Total Inventories $ 11,397,000 $ 9,978,000
============ ============
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. The Company prevailed
at the California Court of Appeal and the State informed the Company that
it has no intention of petitioning the California Supreme Court to review
the decision of the Court of Appeal. Accordingly, the Superior Court ruling
is now a judgment in favor of the Company for approximately $2 million of
returned taxes and accrued interest. This event is not reflected in the
second quarter financial statements as the judgment became final in July.
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 $577,000 through the second quarter of 1997. In light of the
ruling in the 1978 through 1981 tax years the Company believes that these
assessments will be dismissed.
5. The Company was not in compliance with all covenants of the Term Loan at
the end of the second quarter. The Company has accepted a proposal from its
lender which will replace the Company's existing Term Loan and Revolver
with new term debt, a revolving line of credit and real
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
estate secured loans ("The Quikset Loans"). The Quikset Loans will be
secured entirely by assets of The Quikset Organization. Accordingly, the
Company has classified its Term Loan in accordance with the terms of the
expected refinancing.
6. In July 1997 the Company entered into an escrow agreement to purchase the
approximately 43 acre site of the Quikset - Associated Concrete Products
Santa Ana plant for $3.8 million. The Company intends to finance the
purchase through a new loan agreement using the site as collateral. The
Company intends to continue to operate the Quikset manufacturing facility
at current capacity and will evaluate options for any land surplus to its
concrete manufacturing needs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Requirements
Over the first six months of 1997 $204,000 of cash was provided by
operations. Cash generated from financing and investment activities included
$1,416,000 borrowed on the Company's line of credit, $250,000 of short-term
borrowings and $175,000 from the sale of property and available for sale
securities. These funds were used to support $2,062,000 of capital expenditures,
$602,000 of debt payments, and $88,000 of dividend payments.
The Company's management believes that its liquidity position at June
28, 1997, together with funds anticipated to be generated from its operations
and available under its proposed line of credit will provide sufficient cash
resources to finance its operating activities. As state in Note 5., the Company
has accepted a proposal from its current lender to refinance both its equipment
and line of credit facilities. 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 net revenues for the six months ended June 28, 1997
increased $332,000, or .7%, compared to the same period last year. Second
quarter revenues increased $4,236,000, or 19%. The increase in year to date
revenues was primarily due to growth in advertising and newsstand revenues at
the Communications Group, partially offset by a decrease in revenues at The
Quikset Organization. The increase in revenues for the second quarter was
largely due to increased demand at The Quikset Organization's California
concrete operations and its plastics operations and continued growth in
advertising and newsstand revenues at the Communications Group.
For the six months ended June 28, 1997, For Better Living's income
before taxes decreased $2,554,000, or 403%, compared to the same period last
year. Second quarter earnings before taxes increased $316,000, or 180%, compared
to the same period last year. The decrease in year to date earnings before taxes
was due primarily to a shortfall in revenues compared to 1996 for The Quikset
Organization and to increased selling, general and administrative expenses at
both The Quikset Organization and the Communications Group. The Quikset
Organization increased its selling, general and administrative expenses to
support continued growth in its revenue base. The Communications Group
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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. Increased demand at The Quikset
Organization's California concrete operations and its plastics operations was
the primary contributor to the earnings growth of the second quarter.
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 six months ended June 28, 1997 and June 29, 1996 were $52,000
and $12,000, respectively.
PART II. OTHER INFORMATION
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<CAPTION>
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.
<S> <C>
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
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(b) There were no reports on Form 8-K filed for the three months ended June 28,
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: August 8, 1997 BY: Karl M. Stockbridge
--------------------- -------------------
Karl M. Stockbridge
Executive Vice President
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 811,000
<SECURITIES> 0
<RECEIVABLES> 17,086,000
<ALLOWANCES> 1,135,000
<INVENTORY> 11,396,000
<CURRENT-ASSETS> 34,243,000
<PP&E> 41,675,000
<DEPRECIATION> 29,378,000
<TOTAL-ASSETS> 49,204,000
<CURRENT-LIABILITIES> 16,223,000
<BONDS> 0
0
0
<COMMON> 44,000
<OTHER-SE> 15,717,000
<TOTAL-LIABILITY-AND-EQUITY> 49,204,000
<SALES> 25,961,000
<TOTAL-REVENUES> 26,082,000
<CGS> 16,842,000
<TOTAL-COSTS> 25,942,000
<OTHER-EXPENSES> 9,100,000
<LOSS-PROVISION> 7,000
<INTEREST-EXPENSE> 469,000
<INCOME-PRETAX> 140,000
<INCOME-TAX> 53,000
<INCOME-CONTINUING> 87,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,000
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
