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Scott’s Liquid Gold-Inc. Reports Third Quarter Results

DENVER--(BUSINESS WIRE)--

Third Quarter Update:

  • Net sales of $7.2 million for the third quarter of 2019, up from $6.4 million in the second quarter
  • Net income of $0.4 million for the quarter ($0.03 per share), as compared to a $0.7 million net loss in the second quarter

Scott’s Liquid Gold-Inc. (SLGD) today announced operating results for the three months ended September 30, 2019.

“I am pleased with the progress we made during the third quarter,” stated President and Chief Executive Officer Mark Goldstein. “We were able to resume Alpha shipments to China right at the end of September, which drove a profit during the third quarter. While China is still a difficult business climate to navigate, we are optimistic we have turned a corner.

"Our integration of the high-quality, high-value Kids ‘N’ Pets brands we acquired on October 1st has also gone well. I am proud of the team’s efforts to drive shareholder value following the transaction.”

Net sales

Net sales for the three months ended September 30, 2019 decreased 25.9% compared to the same period in 2018. This was primarily due to decreased Personal Care segment sales as a result of regulatory changes to OTC products in China. As a result of these regulatory changes, we were unable to ship Alpha Skin Care products to China for the majority of 2019. We have since obtained regulatory approval and resumed our Alpha export shipments to China in late September. Our distributed product sales also decreased as a result of slower overall facemask category sales impacting our 7th Heaven Brands, as well as a slight decrease in our Scott’s Liquid Gold® Wood Care products.

Net Income

Net income for the three months ended September 30, 2019 was $0.4 million, compared to net income of $1.1 million for the three months ended September 30, 2018. The $0.7 million decrease was primarily attributable to lower net sales and gross profits from our Alpha sales reduction, partially offset by our focus on more efficient advertising platforms, reduced brokerage commissions and internal labor costs, as well as lower income tax expense.

Our Household Products segment showed income from operations of $10,000 in the three months ended September 30, 2019, up from a net loss from operations of $127,000 in the same period in 2018. The improved results were primarily related to a focus on more efficient forms of advertising.

Cash Flow

Cash flow from operating activities was $1.1 million for the nine months ended September 30, 2019, as compared to $2.5 million for the same 2018 period. While cash provided by operating activities decreased between the periods under comparison, which was primarily a result of lower net sales, net cash increased $1.7 million during the nine months ended September 30, 2019 due to our operational team’s efforts to reduce inventory.

About Scott’s Liquid Gold-Inc.

Scott’s Liquid Gold-Inc. is an American manufacturing and distribution company with a strong belief that Made in America is something to be proud of. Over the last 65+ years we have developed a reputation for delivering high-quality, innovative products that consumers know and trust.

Our flagship product, Scott’s Liquid Gold® Wood Care, is a leader in its category and is known for bringing life back to and protecting all types of natural wood surfaces.

Scott’s Liquid Gold-Inc. also owns Neoteric Cosmetics, a skin and hair care company with a rich history of offering products that deliver high-quality, proven results that customers expect. Neoteric’s skin and hair care products are embraced and respected by both medical professionals and consumers alike and include brands such as Alpha® Skin Care, Prell®, and Denorex®. Neoteric Cosmetics is also the proud American distributor of 7th Heaven skin care products and the specialty channel distributor for Batiste Dry Shampoo.

 

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

$

7,178

 

 

$

9,686

 

 

$

20,365

 

 

$

27,921

 

Cost of sales

 

4,235

 

 

 

4,808

 

 

 

12,877

 

 

 

14,644

 

Gross Profit

 

2,943

 

 

 

4,878

 

 

 

7,488

 

 

 

13,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising

 

105

 

 

 

324

 

 

 

491

 

 

 

1,206

 

Selling

 

1,369

 

 

 

2,063

 

 

 

4,381

 

 

 

5,536

 

General and administrative

 

1,223

 

 

 

1,079

 

 

 

3,604

 

 

 

3,604

 

Total operating expenses

 

2,697

 

 

 

3,466

 

 

 

8,476

 

 

 

10,346

 

Income (loss) from operations

 

246

 

 

 

1,412

 

 

 

(988

)

 

 

2,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

28

 

 

 

-

 

 

 

89

 

 

 

-

 

Interest expense

 

(5

)

 

 

(5

)

 

 

(14

)

 

 

(77

)

Gain on sale of equipment

 

-

 

 

 

-

 

 

 

110

 

 

 

-

 

Income (loss) before income taxes

 

269

 

 

 

1,407

 

 

 

(803

)

 

 

2,854

 

Income tax benefit (expense)

 

118

 

 

 

(340

)

 

 

144

 

 

 

(699

)

Net income (loss)

$

387

 

 

$

1,067

 

 

$

(659

)

 

$

2,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.03

 

 

$

0.09

 

 

$

(0.05

)

 

$

0.18

 

Diluted

$

0.03

 

 

$

0.09

 

 

$

(0.05

)

 

$

0.17

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

12,462

 

 

 

12,162

 

 

 

12,435

 

 

 

12,039

 

Diluted

 

12,462

 

 

 

12,540

 

 

 

12,582

 

 

 

12,581

 

 

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

7,110

 

 

$

6,232

 

Accounts receivable, net

 

2,711

 

 

 

3,047

 

Inventories, net

 

7,030

 

 

 

7,817

 

Income taxes receivable

 

507

 

 

 

508

 

Prepaid expenses

 

350

 

 

 

546

 

Total current assets

 

17,708

 

 

 

18,150

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

986

 

 

 

971

 

Deferred tax asset

 

384

 

 

 

234

 

Goodwill

 

1,521

 

 

 

1,521

 

Intangible assets, net

 

5,348

 

 

 

5,528

 

Operating lease right-of-use assets

 

2,299

 

 

 

-

 

Other assets

 

71

 

 

 

71

 

Total assets

$

28,317

 

 

$

26,475

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

1,943

 

 

$

1,800

 

Accrued expenses

 

470

 

 

 

593

 

Operating lease liabilities, current portion

 

946

 

 

 

-

 

Total current liabilities

 

3,359

 

 

 

2,393

 

 

 

 

 

 

 

 

 

Operating lease liabilities, net of current

 

1,373

 

 

 

-

 

Total liabilities

 

4,732

 

 

 

2,393

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Preferred stock, no par value, authorized 20,000 shares; no shares issued and outstanding

 

-

 

 

 

-

 

Common stock; $0.10 par value, authorized 50,000 shares; issued and outstanding 12,462 shares (2019) and 12,408 shares (2018)

 

1,246

 

 

 

1,241

 

Capital in excess of par

 

7,220

 

 

 

7,063

 

Retained earnings

 

15,119

 

 

 

15,778

 

Total shareholders’ equity

 

23,585

 

 

 

24,082

 

Total liabilities and shareholders’ equity

$

28,317

$

26,475

 

 

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Nine Months Ended

 

 

September 30,

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net (loss) income

$

(659

)

 

$

2,155

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

552

 

 

 

626

 

Stock-based compensation

 

119

 

 

 

184

 

Deferred income taxes

 

(150

)

 

 

(99

)

Gain on sale of equipment

 

(110

)

 

 

-

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

336

 

 

 

(242

)

Inventories

 

787

 

 

 

400

 

Prepaid expenses and other assets

 

196

 

 

 

(27

)

Income taxes receivable

 

1

 

 

 

(543

)

Accounts payable and accrued expenses

 

40

 

 

 

33

 

Total adjustments to net (loss) income

 

1,771

 

 

 

332

 

Net cash provided by operating activities

 

1,112

 

 

 

2,487

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of internal-use software

 

(286

)

 

 

-

 

Purchase of property and equipment

 

(101

)

 

 

(202

)

Proceeds from sale of equipment

 

110

 

 

 

-

 

Net cash used by investing activities

 

(277

)

 

 

(202

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Repayments of long-term debt

 

-

 

 

 

(1,200

)

Proceeds from exercise of stock options

 

43

 

 

 

447

 

Net cash provided (used) by financing activities

 

43

 

 

 

(753

)

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

878

 

 

 

1,532

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

6,232

 

 

 

4,114

 

Cash and cash equivalents, end of period

$

7,110

 

 

$

5,646

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Cash paid during the period for interest

$

14

 

 

$

39

 

Cash paid during the period for income taxes

$

-

 

 

$

1,342

 

Note Regarding Forward-Looking Statements

This news release may contain "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "assumptions," "target," "guidance," “strategy,” "outlook," "plans," "projection," "may," "will," "would," "expect," "intend," "estimate," "anticipate," "believe”, "potential," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology.

Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, or results. All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events or circumstances to differ from those in forward-looking statements are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and other periodic reports filed with the Securities and Exchange Commission. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent filings with the Securities and Exchange Commission.

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