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 July 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 August 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, July 1, 1995, and
December 31, 1994 3
Condensed Consolidated Statements of Income for the Three
Months Ended July 1, 1995 and June 25, 1994 and the Six
Months Ended July 1, 1995 and June 25, 1994 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended July 1, 1995 and June 25, 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, December 31,
1995 1994
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,614,000 $ 1,828,000
Available-for-sale securities -- 1,559,000
Accounts receivable (less allowance for doubtful
receivables: 1995, $591,000: 1994, $785,000) 10,873,000 9,350,000
Inventories 8,584,000 8,406,000
Deferred income taxes 2,125,000 1,705,000
Other 3,665,000 3,488,000
----------- -----------
Total current assets 26,861,000 26,336,000
----------- -----------
PROPERTY
Property - at cost 38,790,000 37,960,000
Less accumulated depreciation, depletion and amortization 27,895,000 27,126,000
----------- -----------
Property - net 10,895,000 10,834,000
----------- -----------
AVAILABLE-FOR-SALE SECURITIES 1,575,000 1,605,000
OTHER ASSETS 786,000 729,000
----------- -----------
TOTAL $40,117,000 $39,504,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ -- $ 1,225,000
Current portion of long-term debt and capital
lease obligations 1,482,000 1,633,000
Accounts payable 4,608,000 5,029,000
Accrued salaries and wages 1,137,000 1,614,000
Deferred income 1,788,000 1,591,000
Other 4,038,000 4,298,000
----------- -----------
Total current liabilities 13,053,000 15,390,000
----------- -----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 9,331,000 5,790,000
----------- -----------
OTHER LIABILITIES (primarily deferred compensation) 1,140,000 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 139,000 767,000
Retained earnings 15,327,000 15,074,000
----------- -----------
Total stockholders' equity 16,593,000 16,968,000
----------- -----------
TOTAL $40,117,000 $39,504,000
=========== ===========
<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
Three Months Ended Six Months Ended
-------------------------- --------------------------
July 1, June 25, July 1, June 25,
1995 1994 1995 1994
------- -------- ------- --------
NET REVENUES $19,503,000 $18,554,000 $37,219,000 $33,768,000
----------- ----------- ----------- -----------
COST AND EXPENSES:
Cost of sales 12,223,000 11,741,000 22,972,000 21,471,000
Selling, general and administrative 6,590,000 6,352,000 13,079,000 12,531,000
Interest expense 309,000 216,000 548,000 422,000
----------- ----------- ----------- -----------
Total cost and expenses 19,122,000 18,309,000 36,599,000 34,424,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR TAXES 381,000 245,000 620,000 (656,000)
PROVISION (BENEFIT) FOR TAXES 183,000 83,000 279,000 (223,000)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 198,000 $ 162,000 $ 341,000 $ (433,000)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE: $0.23 $0.18 $0.39 $(0.49)
===== ===== ===== ======
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
Six Months Ended
---------------------------
July 1, June 25,
1995 1994
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 341,000 $ (433,000)
Depreciation, depletion and amortization 1,004,000 1,042,000
Other (4,463,000) (3,116,000)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (3,118,000) (2,507,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (1,023,000) (847,000)
Purchases of available-for-sale securities -- (627,000)
Proceeds from the sale of property and
available-for-sale securities 1,872,000 --
----------- -----------
NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES 849,000 (1,474,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term debt (1,225,000) --
Proceeds from long-term borrowings 4,657,000 7,450,000
Payment of long-term debt and capital
lease obligations (1,289,000) (6,350,000)
Dividends paid (88,000) (88,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,055,000 1,012,000
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (214,000) (2,969,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,828,000 4,209,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,614,000 $ 1,240,000
=========== ===========
CASH PAID DURING THE PERIOD FOR THE FOLLOWING:
Interest $506,000 $458,000
======== ========
Income taxes paid (refunded) $(34,000) $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:
July 1, December 31,
1995 1994
---------- ------------
Finished products $5,572,000 $5,404,000
Work-in-process 104,000 100,000
Raw materials and supplies 2,908,000 2,902,000
---------- ----------
Total inventories $8,584,000 $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 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.
In the quarter ended July 1, 1995, the Company entered into a new
revolving line of credit agreement ("Revolver") with an affiliate of the
lender under its Term Loan. This new facility replaced the Credit Agreement
which was paid in full in June 1995. The Revolver provides the Company up
to $10 million of available funds on a revolving basis (based on a
borrowing base formula, as defined) at an interest rate of prime plus
1.25%. The applicable prime rate as of July 1, 1995 was 9.00%. The Revolver
is collateralized by essentially all of the Company's accounts receivable,
inventories, property, plant and equipment (excluding land and buildings)
and certain intangible assets. The commitment under the Revolver may be
used to support letters of credit issued for the Company, the
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
face amounts of which are applied toward the total commitment. The Revolver
requires the Company to meet certain covenants including, among other
things, minimum tangible net worth (as defined). The initial term of the
Revolver expires June 27, 1997, but may be renewed for successive two-year
periods.
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 filed an appeal of the
decision and judgment with the California Court of 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 $421,000 through the second 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 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 obligations
repayments, $1,225,000 for short-term debt payments and $1,023,000 for purchases
of property primarily for The Quikset Organization.
For the six months ended June 24, 1994, cash and cash equivalents
decreased $2,969,000. The primary source of cash during the period was
$7,450,000 from long-term borrowings. Significant uses of cash during this
fiscal period included $6,350,000 for debt and capital lease obligations
repayments, $2,507,000 for operating activities, $847,000 for purchases of
property primarily for The Quikset Organization and $627,000 for purchases of
available-for-sale securities.
As described in Note 5 of the Notes to Condensed Consolidated
Financial Statements, during the quarter ended July 1, 1995 the Company
obtained a new revolving credit facility and repaid in full amounts
due under its Credit Agreement. The Company's management believes that
its liquidity position at July 1, 1995, together with funds anticipated
to be generated from its operations and available under its Revolver
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
will provide sufficient cash resources to finance its operating activities.
RESULTS OF OPERATIONS
During the three months ended July 1, 1995, net revenues increased
$949,000 from the comparable period of the prior year. This primarily resulted
from an increase in revenues of $1,179,000 at the Communications Group partially
offset by a decrease in revenues at The Quikset Organization of $343,000. The
increase at the Communications Group resulted primarily from increases in
advertising and newsstand revenues from its new Bike magazine as well as from
several of its other magazines. The decrease at The Quikset Organization was
primarily due to a decrease in revenues from its Georgia concrete operation.
During the three months ended July 1, 1995, the Company recognized
income before taxes of $381,000, or an increase in pre-tax income of $136,000
from the comparable period of the prior year. This increase in pre-tax income
resulted primarily from an increase in operating profit of $512,000 at the
Communications Group and an increase in other operating profit of $175,000,
partially offset by a decrease in operating profit of $494,000 at The Quikset
Organization. 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 other operating profit resulted primarily from an increase in gains
from dispositions of securities. The decrease in operating profit at The Quikset
Organization was primarily due to the decrease in revenues described above, a
decline in gross margins and increases in selling expenses.
Net gains recognized on the disposition of available-for-sale
securities for the three months ended July 1, 1995 and June 25, 1994 were
$52,000 and $0, respectively.
During the six months ended July 1, 1995, net revenues increased
$3,451,000 from the comparable period of the prior year. This primarily resulted
from an increase in revenues of $1,829,000 at the Communications Group, an
increase in other revenues of $1,278,000, and an increase in revenues of
$344,000 at The Quikset Organization. The increase at the Communications Group
resulted primarily from increases in advertising and newsstand revenues
associated with its new Bike magazine as well as from several of its other
magazines. 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 Texas concrete
operation.
During the six months ended July 1, 1995, the Company recognized income
before taxes of $620,000, or an increase in pre-tax income of $1,276,000 from
the comparable period of the prior year. This increase in pre-tax income
resulted primarily from an increase in other operating profit of $1,330,000 and
an increase in operating profit of $633,000 at the Communications Group,
partially offset by a decrease in operating profit of $653,000 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 increases in selling expenses.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The increase in interest expense in 1995 was primarily due to an
increase in the interest rates associated with its Term Loan and Credit
Agreement and an increase in borrowings under its Credit Agreement during the
current period.
Net gains recognized on the disposition of available-for-sale
investments for the six months ended July 1, 1995 and June 25, 1994 were
$1,255,000 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 July 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: August 15, 1995 BY: Brian B. Ruttencutter
------------------- --------------------------------------
Brian B. Ruttencutter
Secretary and Chief Financial Officer
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