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 27, 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 November 7, 1997:
Common Stock, $.05 par value - 877,616 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 27, 1997, and 3
December 28, 1996
Condensed Consolidated Statements of Operations for the Three 4
Months Ended September 27, 1997 and September 28, 1996 and for
the Nine Months Ended
September 27, 1997 and September 28, 1996
Condensed Consolidated Statements of Cash Flows for the Nine 5
Months Ended September 27, 1997 and September 28, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 7
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
September 27, December 28,
1997 1996
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,742,000 $ 1,518,000
Accounts receivable - trade (less allowance for doubtful accounts of $1,102,000
and $847,000 at September 27, 1997 and December 28, 1996 , respectfully) 18,173,000 17,259,000
Inventories 11,810,000 9,978,000
Deferred income taxes 1,480,000 1,873,000
Other 3,353,000 2,483,000
------------ ------------
Total current assets 38,558,000 33,111,000
------------ ------------
PROPERTY:
Property at cost 46,198,000 40,379,000
Less accumulated depreciation and amortization (29,289,000) (29,271,000)
------------ ------------
Property - net 16,909,000 11,108,000
------------ ------------
AVAILABLE-FOR-SALE SECURITIES -- 164,000
------------ ------------
OTHER ASSETS 3,017,000 2,633,000
------------ ------------
TOTAL $ 58,484,000 $ 47,016,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 1,876,000 $ 1,624,000
Accounts payable - trade 5,033,000 4,647,000
Accrued salaries and wages 2,188,000 2,976,000
Deferred income 2,251,000 2,009,000
Other 3,045,000 2,273,000
------------ ------------
Total current liabilities 14,393,000 13,529,000
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 26,756,000 15,565,000
------------ ------------
OTHER LIABILITIES (primarily deferred compensation) 786,000 893,000
------------ ------------
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, 877,616 shares) 44,000 44,000
Additional paid-in capital 1,083,000 1,083,000
Treasury stock, at cost, 200 shares (3,000) --
Unrealized net gains and losses on available-for-sale securities -- 33,000
Retained earnings 15,425,000 15,869,000
------------ ------------
Total stockholders' equity 16,549,000 17,029,000
------------ ------------
TOTAL $ 58,484,000 $ 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
Three Months Ended Nine Months Ended
-------------------------- ----------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
------------ ------------ ------------ ------------
NET REVENUES $ 28,316,000 $ 24,126,000 $ 75,959,000 $ 71,437,000
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of sales 18,801,000 15,646,000 50,052,000 46,627,000
Selling, general and administrative expenses 9,244,000 7,927,000 26,674,000 22,859,000
Interest expense 589,000 396,000 1,472,000 1,161,000
------------ ------------ ------------ ------------
Total cost and expenses 28,634,000 23,969,000 78,198,000 70,647,000
------------ ------------ ------------ ------------
OTHER INCOME 1,643,000 -- 1,643,000 --
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR TAXES 1,325,000 157,000 (596,000) 790,000
PROVISION (BENEFIT) FOR TAXES 534,000 63,000 (239,000) 317,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 791,000 $ 94,000 $ (357,000) $ 473,000
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE: $ 0.90 $ 0.11 $ (0.41) $ 0.54
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 877,749 877,816 877,794 877,816
============ ============ ============ ============
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 27, September 28,
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (357,000) 473,000
Depreciation, depletion and amortization 1,406,000 1,223,000
Other (3,197,000) (5,110,000)
NET CASH USED IN OPERATING ACTIVITIES $ (2,148,000) $ (3,414,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (7,108,000) (1,917,000)
Purchases of available-for-sale securities -- (373,000)
Proceeds from the sale of property and available-for-sale securities 175,000 3,714,000
------------ ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (6,933,000) 1,424,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 12,086,000 3,071,000
Proceeds from short-term borrowings 250,000 --
Payment of long-term debt and capital lease obligations (940,000) (1,219,000)
Dividends paid (88,000) (88,000)
Purchase of treasury shares (3,000) --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES
11,305,000 1,764,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,224,000 (226,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,518,000 1,528,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 3,742,000 1,302,000
============ ============
CASH PAID (REFUNDED) DURING THE PERIOD FOR THE FOLLOWING:
Interest $ 1,378,000 $ 1,028,000
============ ============
Income taxes ($ 326,000) $ 46,000
============ ============
<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:
September 27, December 28,
1997 1996
---------------- ----------------
Finished Products $ 6,585,000 $ 6,550,000
Work-in-process 346,000 398,000
Raw Materials and supplies 4,914,000 2,995,000
---------------- ----------------
Total Inventories $ 9,978,000 $ 11,810,000
================ ================
3. 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 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 received a $2,036,000 return of tax and
interest in September 1997, recognizing $1,643,000 as other income and the
remainder as an adjustment to its tax provision.
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 $599,000 through the third 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. In August 1997 the Company amended its loan and security agreement with
its lender to provide for: (i) a seven-year term loan in the principal
amount of $6,000,000 used to finance equipment and repay existing debt,
(ii) a five-year revolving credit facility in an amount up to $30,000,000
used to refinance the Company's previously existing credit facility and to
provide working capital, (iii) an eight-year real property term facility in
an amount up to $4,500,000, and (iv) a five-year capital expenditure
facility not to exceed $3,000,000 (collectively, the "Quikset Loans").
The Quikset Loans provide $30,000,000 maximum credit availability, bear
interest at rates equal to the prime rate plus .25% to prime plus 1.00% and
are secured entirely by assets of The Quikset Organization.
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FOR BETTER LIVING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. In September 1997 the Company purchased the approximately 43 acre site
of the Quikset Associated Concrete Products Santa Ana plant for $3.8
million plus costs. The Company financed 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 nine months of 1997 $2,148,000 of cash was used by
operations. Cash generated from financing and investment activities included
$7,586,000 proceeds from the Quikset Loans, $4,500,000 mortgage proceeds,
$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 cash used by
operations, $7,108,000 of capital expenditures, $940,000 of debt payments, and
$88,000 of dividend payments.
The Company's management believes that its liquidity position at September
27, 1997, together with funds anticipated to be generated from its operations
and available under its revolving credit, real estate term and equipment
financing facilities will provide sufficient cash resources to finance its
operating activities.
Results of Operations
For Better Living's net revenues for the nine months ended September 27,
1997 increased $4,522,000, or 6.3%, compared to the same period last year. Third
quarter revenues increased $4,190,000, or 17.4%. The increase in year to date
and third quarter revenues 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 nine months ended September 27, 1997, For Better Living's
income before taxes decreased $1,386,000, or 175.4%, compared to the same period
last year. Third quarter earnings before taxes increased $1,168,000 or 743.9%,
compared to the same period last year. The decrease in year to date earnings
before taxes was due primarily 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
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. Settlement of the dispute with the
California Franchise Tax Board in September 1997 resulted in other income of
$1,643,000 and was the primary contributor to the earnings growth of the third
quarter.
The Communications Group decided, in October 1997, to suspend
publication of its new magazine, Inside Golf.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 nine months ended September 27, 1997 and September 28,
1996 were $52,000 and $318,000, respectively.
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.
10 Amended and Restated Loan and Security Agreement with the CIT
Group/Credit Finance, dated August 14, 1997.
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months ended
September 27, 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: November 7, 1997 BY: Karl M. Stockbridge
----------------------- -------------------
Karl M. Stockbridge
Executive Vice President
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