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 30, 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 November 14, 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, September 30, 1995, 3
and December 31, 1994
Condensed Consolidated Statements of Income for the 4
Three Months Ended September 30, 1995 and September 24, 1994
and the Nine Months Ended September 30, 1995 and
September 24, 1994
Condensed Consolidated Statements of Cash Flows for the 5
Nine Months Ended September 30, 1995 and September 24, 1994
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
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
September 30, December 31,
1995 1994
------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 1,304,000 $ 1,828,000
Available-for-sale securities .................... -- 1,559,000
Accounts receivable (less allowance for doubtful
receivables: 1995, $637,000: 1994, $785,000).. 13,649,000 9,350,000
Inventories ...................................... 8,173,000 8,406,000
Deferred income taxes ............................ 2,097,000 1,705,000
Other ............................................ 2,983,000 3,488,000
----------- -----------
Total current assets........................... 28,206,000 26,336,000
----------- -----------
PROPERTY
Property - at cost ............................... 39,000,000 37,960,000
Less accumulated depreciation, depletion and
amortization................................... 28,256,000 27,126,000
----------- -----------
Property - net ................................. 10,744,000 10,834,000
----------- -----------
AVAILABLE-FOR-SALE SECURITIES ...................... 1,645,000 1,605,000
OTHER ASSETS ....................................... 817,000 729,000
----------- -----------
TOTAL ....................................... $41,412,000 $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 ............................. 1,348,000 1,633,000
Accounts payable ................................. 4,376,000 5,029,000
Accrued salaries and wages ....................... 1,619,000 1,614,000
Deferred income .................................. 1,775,000 1,591,000
Other ............................................ 4,470,000 4,298,000
----------- -----------
Total current liabilities ...................... 13,588,000 15,390,000
----------- -----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS ....... 10,058,000 5,790,000
----------- -----------
OTHER LIABILITIES (primarily deferred compensation) 1,083,000 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 ... 181,000 767,000
Retained earnings ................................ 15,375,000 15,074,000
----------- -----------
Total stockholders' equity ..................... 16,683,000 16,968,000
----------- -----------
TOTAL ....................................... $41,412,000 $39,504,000
=========== ===========
See the accompanying notes to condensed consolidated financial statements.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
NET REVENUES ................................. $ 21,841,000 $ 18,389,000 $ 59,060,000 $ 52,157,000
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of sales .............................. 13,849,000 11,267,000 36,821,000 32,738,000
Selling, general and administrative expenses 7,545,000 6,890,000 20,624,000 19,421,000
Interest expense ........................... 336,000 214,000 884,000 636,000
------------ ------------ ------------ ------------
Total cost and expenses ...................... 21,730,000 18,371,000 58,329,000 52,795,000
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR TAXES ........................ 111,000 18,000 731,00 (638,000)
PROVISION (BENEFIT) FOR TAXES ................ 63,000 6,000 342,000 (217,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) ............................ $ 48,000 $ 12,000 $389,000 $ (421,000)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE: .......... $0.05 $0.01 $0.44 $(0.48)
===== ===== ===== ======
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>
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
----------------------------
September 30, September 24,
1995 1994
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $ 389,000 $ (421,000)
Depreciation, depletion and amortization ........ 1,499,000 1,513,000
Other ........................................... (5,595,000) (3,700,000)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES ............. (3,707,000) (2,608,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property ........................... (1,309,000) (1,214,000)
Purchases of available-for-sale securities ...... -- (627,000)
Proceeds from the sale of property and
available-for-sale securities ................ 1,884,000 68,000
----------- -----------
NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES 575,000 (1,773,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term debt ...................... (1,225,000) --
Proceeds from long-term borrowings .............. 5,179,000 8,404,000
Payment of long-term debt and capital lease
obligations .................................. (1,258,000) (6,785,000)
Dividends paid .................................. (88,000) (88,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......... 2,608,000 1,531,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS ......... (524,000) (2,850,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .. 1,828,000 4,209,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........ $ 1,304,000 $ 1,359,000
=========== ===========
CASH PAID DURING THE PERIOD FOR THE FOLLOWING:
Interest ........................................ $615,000 $650,000
======== ========
Income taxes paid (refunded) .................... $(568,000) $374,000
========= ========
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:
September 30, December 31,
1995 1994
------------- ------------
Finished products $5,314,000 $5,404,000
Work-in-process 557,000 100,000
Raw materials and supplies 2,302,000 2,902,000
---------- ----------
Total inventories $8,173,000 $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 September 30, 1995 was 9.00%. The Revolver is
collateralized by essentially all of the
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company's accounts receivable, inventories, 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 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 $439,000 through the third 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 nine months ended September 30, 1995, cash and cash equivalents
decreased $524,000. The primary sources of cash during the period were
$5,179,000 from long-term borrowings and $1,884,000 from the sale of property
and available-for-sale securities. Significant uses of cash were $3,707,000 for
operating activities, $1,258,000 for debt and capital lease obligations
repayments, $1,225,000 for short-term debt payments and $1,309,000 for purchases
of property primarily for The Quikset Organization.
For the nine months ended September 24, 1994, cash and cash equivalents
decreased $2,850,000. The primary source of cash during the period was
$8,404,000 from long-term borrowings. Significant uses of cash during this
fiscal period included $6,785,000 for debt and capital lease obligations
repayments, $2,608,000 for operating activities, $1,214,000 for purchases of
property primarily for The Quikset Organization and $627,000 for purchases of
available-for-sale securities.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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
September 30, 1995, 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 September 30, 1995, net revenues increased
$3,452,000 from the comparable period of the prior year. This primarily resulted
from increases in revenues of $2,097,000 at The Quikset Organization and
$1,245,000 at the Communications Group. The increase at The Quikset Organization
was primarily due to increases in sales throughout the Quikset Organization. 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.
During the three months ended September 30, 1995, the Company recognized
income before taxes of $111,000, or an increase in pre-tax income of $93,000
from the comparable period of the prior year. This increase in pre-tax income
resulted primarily from an increase in operating profit of $98,000 at the
Communications Group and an increase in other operating profit of $80,000,
partially offset by a decrease in operating profit of $41,000 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
dividend income from available-for-sale securities. The decrease in operating
profit at The Quikset Organization was primarily due to a decline in gross
margins and increases in selling expenses.
During the nine months ended September 30, 1995, net revenues increased
$6,903,000 from the comparable period of the prior year. This primarily resulted
from an increase in revenues of $3,074,000 at the Communications Group, an
increase in revenues of $2,441,000 at The Quikset Organization, and an increase
in other revenues of $1,388,000. 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 at The Quikset Organization was primarily due to an
increase in revenues from its plastics operation and California and Texas
concrete operations. 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.
During the nine months ended September 30, 1995, the Company recognized
income before taxes of $731,000, or an increase in pre-tax income of $1,369,000
from the comparable period of the prior year. This increase in pre-tax income
resulted primarily from an increase in other operating profit of $1,400,000 and
an increase in operating profit of $731,000 at the Communications Group,
partially offset by a decrease in operating profit of $694,000 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 and Revolver during the
current period.
Net gains recognized on the disposition of available-for-sale investments
for the nine months ended September 30, 1995 and September 24, 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
September 30, 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: November 14, 1995 BY: Karl M. Stockbridge
-------------------------- -------------------
Karl M. Stockbridge
Executive Vice President
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