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

Third Quarter 2020 Highlights:

  • Net sales of $7.2 million, negatively impacted by COVID-related supply chain issues, partially offset by Biz and Dryel acquisition
  • Net loss of $0.5 million (($0.04) per share)
    • Includes $0.3 million of expenses related to supply chain transition and Biz and Dryel acquisition
  • Gross margin of 44.8%, an increase of 3.8% from Q3 2019

DENVER--()--Scott’s Liquid Gold-Inc. (OTC: SLGD) today announced operating results for the three months ended September 30, 2020.

President and Chief Executive Officer Mark Goldstein stated, “As we previously announced, pandemic driven raw material and container shortages impacted our third quarter revenue. We have seen limited improvements throughout our supply chain and expect better results in the fourth quarter, though challenges remain.”

Net Sales

Net sales remained level for three months ended September 30, 2020 compared to last year because a decrease in sales due to COVID-driven supply chain shortages was offset by an increase in net sales due to our Kids N Pets, Biz and Dryel acquisitions.

Net sales for the nine months ended September 30, 2020 increased $0.8 million compared to last year due to our Kids N Pets, Biz and Dryel acquisitions, partially offset by decreased sales for multiple product lines due to COVID-related shortages.

Net Loss

Our net loss of $0.5 million for the three months ended September 30, 2020 was primarily driven by COVID-related supply chain issues, increased SG&A expenses attributable to supply chain transition, acquisition-related expenses and interest expense associated with our new debt. These were partially offset by an increase in gross profit driven by the introduction of our Kids N Pets and SLG One products during the fourth quarter of 2019, the introduction of our Biz and Dryel products during the third quarter of 2020, and margin increases associated with outsourcing.

We reported a $0.4 million decrease in net loss for the nine months ended 2020 compared to last year due to our Kids N Pets, Biz and Dryel acquisitions, improved margins due to outsourcing our manufacturing, and a $0.4 million transition payment received related to the termination of our MJ distribution agreement. These decreases in net loss were partially offset by decreased sales caused by COVID-related reduced store traffic and raw material supply chain issues, increased SG&A due to supply chain transition and acquisition-related expenses, gain on sale of equipment during 2019, and interest expense associated with our new debt.

Cash Flow

Cash flow provided by operating activities was $4.3 million for the nine months ended September 30, 2020, as compared to cash flow provided from operating activities of $1.1 million for the same 2019 period. The $3.2 million increase in operating cash flow was primarily the result of our Kids N Pets, Biz, and Dryel acquisitions, as well as our improved margins driven by cost savings from outsourcing.

About Scott’s Liquid Gold-Inc.

Scott’s Liquid Gold-Inc. develops, markets, and sells high-quality, high-value household and personal care products nationally and internationally to mass merchandisers, drugstores, supermarkets, hardware stores, e-commerce retailers, other retail outlets, and to wholesale distributors. Over the last 65+ years we have developed a reputation for delivering 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. Our Kids N Pets® brands are award winning, safe, nontoxic, stain and odor removing products targeted toward households with children and pets. Our newly acquired Biz and Dryel are top performing laundry care products, with Biz being a top stain removing laundry additive, and Dryel being the market leader in at-home dry cleaning.

Scott’s Liquid Gold-Inc. also owns Neoteric Cosmetics, a personal care company with a rich history of offering products that deliver high-quality, proven results that customers expect. Neoteric’s personal 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 specialty channel distributor for Batiste Dry Shampoo.

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

$

7,197

 

 

$

7,178

 

 

$

21,134

 

 

$

20,365

 

Cost of sales

 

3,973

 

 

 

4,235

 

 

 

11,578

 

 

 

12,877

 

Gross Profit

 

3,224

 

 

 

2,943

 

 

 

9,556

 

 

 

7,488

 

Gross Margin

 

44.8

%

 

 

41.0

%

 

 

45.2

%

 

 

36.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising

 

169

 

 

 

105

 

 

 

531

 

 

 

491

 

Selling

 

2,168

 

 

 

1,369

 

 

 

5,371

 

 

 

4,381

 

General and administrative

 

1,377

 

 

 

1,223

 

 

 

4,284

 

 

 

3,604

 

Total operating expenses

 

3,714

 

 

 

2,697

 

 

 

10,186

 

 

 

8,476

 

(Loss) income from operations

 

(490

)

 

 

246

 

 

 

(630

)

 

 

(988

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

-

 

 

 

28

 

 

 

3

 

 

 

89

 

Interest expense

 

(137

)

 

 

(5

)

 

 

(215

)

 

 

(14

)

Gain on sale of equipment

 

-

 

 

 

 

 

 

 

-

 

 

 

110

 

Other income

 

-

 

 

 

-

 

 

 

350

 

 

 

-

 

(Loss) income before income taxes

 

(627

)

 

 

269

 

 

 

(492

)

 

 

(803

)

Income tax benefit

 

110

 

 

 

118

 

 

 

174

 

 

 

144

 

Net (loss) income

$

(517

)

 

$

387

 

 

$

(318

)

 

$

(659

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.04

)

 

$

0.03

 

 

$

(0.03

)

 

$

(0.05

)

Diluted

$

(0.04

)

 

$

0.03

 

 

$

(0.03

)

 

$

(0.05

)

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

12,480

 

 

 

12,462

 

 

 

12,468

 

 

 

12,435

 

Diluted

 

12,480

 

 

 

12,462

 

 

 

12,468

 

 

 

12,435

 

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amounts)

 

September 30,

 

 

December 31,

 

 

2020

 

 

2019

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

174

 

 

$

1,094

 

Accounts receivable, net

 

4,451

 

 

 

2,695

 

Inventories, net

 

5,747

 

 

 

7,841

 

Income taxes receivable

 

107

 

 

 

705

 

Property and equipment held for sale

 

-

 

 

 

500

 

Prepaid expenses

 

701

 

 

 

368

 

Other current assets

 

-

 

 

 

71

 

Total current assets

 

11,180

 

 

 

13,274

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

129

 

 

 

124

 

Deferred tax asset

 

692

 

 

 

556

 

Goodwill

 

5,280

 

 

 

3,230

 

Intangible assets, net

 

15,105

 

 

 

8,719

 

Operating lease right-of-use assets

 

3,048

 

 

 

188

 

Other assets

 

38

 

 

 

-

 

Total assets

$

35,472

 

 

$

26,091

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

2,959

 

 

$

1,809

 

Accrued expenses

 

589

 

 

 

422

 

Current portion of long-term debt

 

1,000

 

 

 

-

 

Operating lease liabilities, current portion

 

301

 

 

 

197

 

Total current liabilities

 

4,849

 

 

 

2,428

 

 

 

 

 

 

 

 

 

Long-term debt, net of current portion and debt issuance costs

 

4,031

 

 

 

-

 

Operating lease liabilities, net of current

 

2,977

 

 

 

19

 

Other liabilities

 

143

 

 

 

27

 

Total liabilities

 

12,000

 

 

 

2,474

 

 

 

 

 

 

 

 

 

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 12,513 shares (2020) and 12,462 shares (2019)

 

1,251

 

 

 

1,246

 

Capital in excess of par

 

7,418

 

 

 

7,250

 

Retained earnings

 

14,803

 

 

 

15,121

 

Total shareholders’ equity

 

23,472

 

 

 

23,617

 

Total liabilities and shareholders’ equity

$

35,472

 

 

$

26,091

 

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

Nine Months Ended

 

 

September 30,

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$

(318

)

 

$

(659

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

976

 

 

 

552

 

Stock-based compensation

 

106

 

 

 

119

 

Deferred income taxes

 

(136

)

 

 

(150

)

Gain on sale of equipment

 

-

 

 

 

(110

)

Change in operating assets and liabilities, net of effects of acquisition:

 

 

 

 

 

 

 

Accounts receivable

 

(1,756

)

 

 

336

 

Inventories

 

3,373

 

 

 

787

 

Prepaid expenses and other assets

 

(200

)

 

 

196

 

Income taxes receivable

 

598

 

 

 

1

 

Accounts payable, accrued expenses, and other liabilities

 

1,659

 

 

 

40

 

Total adjustments to net loss

 

4,620

 

 

 

1,771

 

Net cash provided by operating activities

 

4,302

 

 

 

1,112

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Acquisition

 

(10,529

)

 

 

-

 

Proceeds from sale of property and equipment

 

500

 

 

 

110

 

Purchase of internal-use software

 

-

 

 

 

(286

)

Purchase of property and equipment

 

(17

)

 

 

(101

)

Cash paid for leasehold improvements

 

(484

)

 

 

-

 

Reimbursement for leasehold improvements

 

247

 

 

 

-

 

Net cash used in investing activities

 

(10,283

)

 

 

(277

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

6,525

 

 

 

-

 

Repayments of revolving credit facility

 

(3,795

)

 

 

-

 

Proceeds from term loan

 

3,000

 

 

 

-

 

Repayments of term loan

 

(167

)

 

 

-

 

Proceeds from PPP loan

 

600

 

 

 

-

 

Repayment of PPP loan

 

(600

)

 

 

-

 

Payments for debt issuance costs

 

(569

)

 

 

-

 

Proceeds from exercise of stock options

 

67

 

 

 

43

 

Net cash provided by financing activities

 

5,061

 

 

 

43

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(920

)

 

 

878

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

1,094

 

 

 

6,232

 

Cash and cash equivalents, end of period

$

174

 

 

$

7,110

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Cash paid during the period for interest

$

23

 

 

$

14

 

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, 2019 and the Company's subsequent Quarterly Reports on Form 10-Q 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.

Contacts

Investor Relations Contact:

Kevin Paprzycki, CFO
303.576.6032

Contacts

Investor Relations Contact:

Kevin Paprzycki, CFO
303.576.6032