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


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

“With several of our key retail customers shutdown during Q2 by the pandemic, this quarter was challenging for Scott’s. Combined with lower store traffic and several key COVID-driven raw material shortages, our Q2 revenues declined,” said Mark E Goldstein, CEO and Chairman.

“However, our team responded well to the difficult circumstances. We reduced costs and demonstrated great flexibility to overcome raw material difficulties, which have continued into the third quarter. We began to see the benefit of our new operating model in our margins, reducing the impact of our lower revenues.”

Kevin Paprzycki, Scott’s CFO & Director, added, “We’ve taken several key steps to drive shareholder value in the past nine months. We’ve acquired three strong brands in Kids N Pets, Biz, and Dryel to both grow and diversify our portfolio. We’ve entered into new financing agreements and relationships to facilitate those deals and position us for future growth. Our execution in outsourcing both production and distribution has been solid, and we are excited about our long-term cost structure.

Our focus for the second half of 2020 is on execution – bringing Biz and Dryel fully onto the Scott’s platform and optimizing our new manufacturing and distribution processes. Successful execution will drive increased cash flow and debt reduction.”

Net Sales

Net sales for the three months ended June 30, 2020 decreased $0.3 million compared to the same period in 2019. This decrease was primarily attributable to decreased Batiste Dry Shampoo sales as a result of COVID-driven customer closures, a decrease in 7th Heaven skin care sachet sales due to the termination of our distribution agreement with Montagne Jeunesse (“MJ”), and a decrease in Denorex and other product sales resulting from supply chain issues spawned by COVID. This was partially offset our Kids N Pets acquisition during the fourth quarter of 2019 and the introduction of our new SLG One product.

Net sales for the six months ended June 30, 2020 increased $0.8 million compared to the same period in 2019. This was primarily attributable to our Kids N Pets acquisition and our new SLG One product, partially offset by a decrease in Batiste Dry Shampoo sales, MJ sales, and Alpha Skin Care sales to China.

Net Loss

Net loss for the three months ended June 30, 2020 of $0.1 million decreased $0.6 million from the same period in 2019, which was primarily driven by the addition of our Kids N Pets and SLG One products, a $0.4 million transition payment related to the termination of our MJ distribution agreement, and overall margin increases for all our brands as manufacturing was outsourced during the second quarter of 2020. Drivers of the increase were partially offset by decreased sales of Batiste Dry Shampoo and MJ, as well as $0.3 million of expenses associated with our supply chain transition and Biz and Dryel acquisition.

Net income for the six months ended June 30, 2020 was $0.2 million, up from a net loss of $1.0 million for the six months ended June 30, 2019. This positive movement was primarily driven by the addition of our Kids N Pets and SLG One products, a $0.4 million transition payment related to the termination of our MJ distribution agreement, a margin increase for all our brands due to lower costs across our brands as manufacturing was outsourced during the second quarter of 2020. Drivers of the increase were partially offset by decreased sales of Batiste Dry Shampoo and MJ, as well as $0.5 million of expenses associated with our supply chain transition and Biz and Dryel acquisition.

Cash Flow

Cash flow provided by operating activities was $4.6 million for the six months ended June 30, 2020, as compared to cash flow provided from operating activities of $1.7 million for the same 2019 period. The $2.9 million increase in operating cash flow was primarily the result of reducing a large finished goods inventory balance we built heading into our manufacturing and distribution transition, the termination of the MJ distribution agreement, and improved profit margins associated with new and outsourced products.

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

 

Six Months Ended

June 30,

 

June 30,

 

2020

 

2019

 

2020

 

2019

Net sales

$

6,083

 

 

$

6,382

 

 

$

13,937

 

$

13,187

 

Cost of sales

 

3,215

 

 

 

4,442

 

 

 

7,605

 

 

8,642

 

Gross Profit

 

2,868

 

 

1,940

 

 

6,332

 

 

4,545

 

Gross Margin

 

47.1

%

 

30.4

%

 

45.4

%

 

34.5

%

 

 

 

 

Operating expenses:

Advertising

 

141

 

 

 

202

 

 

 

362

 

 

386

 

Selling

 

1,614

 

 

 

1,354

 

 

 

3,203

 

 

3,012

 

General and administrative

 

1,503

 

 

 

1,158

 

 

 

2,907

 

 

2,381

 

Total operating expenses

 

3,258

 

 

 

2,714

 

 

 

6,472

 

 

5,779

 

Loss from operations

 

(390

)

 

 

(774

)

 

 

(140

)

 

(1,234

)

 

Interest income

 

2

 

 

30

 

 

3

 

 

61

 

Interest expense

 

(74

)

 

 

(4

)

 

 

(78

)

 

(9

)

Gain on sale of equipment

 

 

 

110

 

 

 

 

110

 

Income from distribution agreement termination

 

350

 

 

 

 

350

 

 

 

Loss before income taxes

 

(112

)

 

 

(638

)

 

 

135

 

 

(1,072

)

Income tax benefit (expense)

 

34

 

 

 

(78

)

 

 

64

 

 

26

 

Net (loss) income

$

(78

)

 

$

(716

)

 

$

199

 

$

(1,046

)

 

Net (loss) income per common share

 

 

 

 

 

 

Basic

$

(0.01

)

$

(0.06

)

 

$

0.02

 

$

(0.08

)

Diluted

$

(0.01

)

$

(0.06

)

 

$

0.02

 

$

(0.08

)

Weighted average shares outstanding

 

 

 

Basic

 

12,462

 

 

12,436

 

 

12,462

 

 

12,422

 

Diluted

 

12,462

 

 

12,436

 

 

12,571

 

 

12,422

 

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amounts)

 

June 30,

 

 

December 31,

 

 

2020

 

 

2019

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

5,877

 

 

$

1,094

 

Accounts receivable, net

 

2,539

 

 

 

2,695

 

Inventories, net

 

4,936

 

 

 

7,841

 

Income taxes receivable

 

383

 

 

 

705

 

Property and equipment held for sale

 

 

 

 

500

 

Prepaid expenses

 

429

 

 

 

368

 

Other current assets

 

 

 

 

71

 

Total current assets

 

14,164

 

 

 

13,274

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

133

 

 

 

124

 

Deferred tax asset

 

491

 

 

 

556

 

Goodwill

 

3,230

 

 

 

3,230

 

Intangible assets, net

 

8,271

 

 

 

8,719

 

Operating lease right-of-use assets

 

3,112

 

 

 

188

 

Other assets

 

180

 

 

 

 

Total assets

$

29,581

 

 

$

26,091

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

1,636

 

 

$

1,809

 

Accrued expenses

 

745

 

 

 

422

 

Operating lease liabilities, current portion

 

116

 

 

 

197

 

Total current liabilities

 

2,497

 

 

 

2,428

 

 

 

 

 

 

 

 

 

Operating lease liabilities, net of current

 

3,127

 

 

 

19

 

Other liabilities

 

70

 

 

 

27

 

Total liabilities

 

5,694

 

 

 

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

 

1,246

 

 

 

1,246

 

Capital in excess of par

 

7,321

 

 

 

7,250

 

Retained earnings

 

15,320

 

 

 

15,121

 

Total shareholders’ equity

 

23,887

 

 

 

23,617

 

Total liabilities and shareholders’ equity

$

29,581

 

 

$

26,091

 

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

Six Months Ended

 

 

June 30,

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

199

 

 

$

(1,046

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

522

 

 

 

369

 

Stock-based compensation

 

71

 

 

 

84

 

Deferred income taxes

 

65

 

 

 

(30

)

Gain on sale of equipment

 

 

 

 

(110

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

156

 

 

 

1,135

 

Inventories

 

2,905

 

 

 

1,366

 

Prepaid expenses and other assets

 

42

 

 

 

196

 

Income taxes receivable

 

322

 

 

 

 

Accounts payable, accrued expenses, and other liabilities

 

296

 

 

 

(289

)

Total adjustments to net income (loss)

 

4,379

 

 

 

2,721

 

Net cash provided by operating activities

 

4,578

 

 

 

1,675

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(17

)

 

 

(101

)

Proceeds from sale of property and equipment

 

500

 

 

 

110

 

Cash paid for leasehold improvements

 

(247

)

 

 

 

Reimbursement for leasehold improvements

 

110

 

 

 

 

Net cash provided by investing activities

 

346

 

 

 

9

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Payments for debt issuance costs

 

(141

)

 

 

 

Proceeds from exercise of stock options

 

 

 

 

41

 

Proceeds from PPP loan

 

600

 

 

 

 

Repayment of PPP loan

 

(600

)

 

 

 

Net cash (used in) provided by financing activities

 

(141

)

 

 

41

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

4,783

 

 

 

1,725

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

1,094

 

 

 

6,232

 

Cash and cash equivalents, end of period

$

5,877

 

 

$

7,957

 

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.



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