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Scott's Liquid Gold-inc. Reports First Quarter Results

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First Quarter 2020 Highlights:

  • Net sales of $7.9 million
  • Net income of $0.3 million ($0.02 per share)
    • Includes $0.2 million of expenses related to our supply chain transition further detailed below
  • Gross margins of 44.1% increased from 38.3% for the same period in 2019

Scott's Liquid Gold-Inc. (OTC:SLGD) today announced operating results for the three months ended March 31, 2020.

President and Chief Executive Officer Mark Goldstein stated, "In one of the most unprecedented and unstable periods in the 69 year history of Scott's Liquid Gold, our business demonstrated its resilience. The strength of our brands allowed us to provide virtually all of Scott's essential consumer products to both customers and end consumers throughout the COVID-19 pandemic without interruption. A return to consistent Alpha Skin Care sales, both online and to China, helped drive profitability during the first quarter, even with expenditures for our supply chain transition. We are again optimistic about Alpha's future growth potential.

"Our team turned in a fantastic performance during the first quarter of 2020. Despite the turmoil, they fully shifted to remote work and new, safer practices. They accomplished this while successfully maintaining our operations, continuing to make solid progress on our supply chain transition, and executing a solid introduction of our new SLG One product.

"We do expect a reduction in sales for the coming second quarter due the forced retail closures of some of our large distributed product customers. However, we are optimistic about our overall 2020 results and cash generation, as well as our longer-term ability to grow Scott's business and generate shareholder value."

Net Sales

Net sales for the three months ended March 31, 2020 increased $1.0 million compared to the same period in 2019. This was primarily attributable to our Kids N Pets acquisition during the fourth quarter of 2019 and the addition of our new SLG One product.

Net Income

Net income for the three months ended March 31, 2020 was $0.3 million, up from a net loss of $0.3 million for the three months ended March 31, 2019. This positive movement was largely driven by our Kids N Pets acquisition and SLG One product addition, partially offset by $0.2 million of expenses associated with our supply chain transition further described below.

Cash Flow

Cash flow used in operating activities was $0.6 million for the three months ended March 31, 2020, as compared to cash flow provided from operating activities of $0.5 million for the same 2019 period. The decrease in operating cash flow was the primarily due to slower payment terms by a few of our large distributed product customers as a result of the COVID-19 pandemic.

Recent Transaction Recap

On October 2, 2020, we announced the acquisition of the Kids N Pets product line.

Our December 5, 2020 announcement of the Elevation Labs deal was the culmination of our strategic plan to outsource our manufacturing operations. This transition enables us to comprehensively evaluate, select, and benefit from the manufacturing, R&D, and infrastructure expertise of new partners, and focus our on the growth and marketing our high-quality, high-value brands.

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, biodegradable, safe, nontoxic, stain and odor removing products targeted toward households with children and pets.

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

March 31,

 

 

2020

 

 

 

2019

 

Net sales

$

7,854

 

 

$

6,805

 

Cost of sales

 

4,390

 

 

 

4,200

 

Gross Profit

 

3,464

 

 

2,605

 

Gross Margin

 

44.1

%

 

38.3

%

 

 

Operating expenses:

Advertising

 

221

 

 

 

184

 

Selling

 

1,589

 

 

 

1,658

 

General and administrative

 

1,404

 

 

 

1,223

 

Total operating expenses

 

3,214

 

 

 

3,065

 

Income (loss) from operations

 

250

 

 

 

(460

)

 

Interest income

 

1

 

 

31

 

Interest expense

 

(4

)

 

 

(5

)

Income (loss) before income taxes

 

247

 

 

 

(434

)

Income tax benefit

 

30

 

 

 

104

 

Net income (loss)

$

277

 

 

$

(330

)

 

Net income (loss) per common share

 

 

 

Basic

$

0.02

 

$

(0.03

)

Diluted

$

0.02

 

$

(0.03

)

Weighted average shares outstanding

Basic

 

12,462

 

 

12,408

 

Diluted

 

12,608

 

 

12,408

 

SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amounts)

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

926

 

 

$

1,094

 

Accounts receivable, net

 

3,646

 

 

 

2,695

 

Inventories, net

 

7,412

 

 

 

7,841

 

Income taxes receivable

 

744

 

 

 

705

 

Property and equipment held for sale

 

-

 

 

 

500

 

Prepaid expenses

 

308

 

 

 

368

 

Other current assets

 

-

 

 

 

71

 

Total current assets

 

13,036

 

 

 

13,274

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

137

 

 

 

124

 

Deferred tax asset

 

449

 

 

 

556

 

Goodwill

 

3,230

 

 

 

3,230

 

Intangible assets, net

 

8,495

 

 

 

8,719

 

Operating lease right-of-use assets

 

3,176

 

 

 

188

 

Other assets

 

102

 

 

 

-

 

Total assets

$

28,625

 

 

$

26,091

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

907

 

 

$

1,809

 

Accrued expenses

 

553

 

 

 

422

 

Operating lease liabilities, current portion

 

26

 

 

 

197

 

Total current liabilities

 

1,486

 

 

 

2,428

 

 

 

 

 

 

 

 

 

Operating lease liabilities, net of current

 

3,182

 

 

 

19

 

Other liabilities

 

27

 

 

 

27

 

Total liabilities

 

4,695

 

 

 

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

 

7,286

 

 

 

7,250

 

Retained earnings

 

15,398

 

 

 

15,121

 

Total shareholders' equity

 

23,930

 

 

 

23,617

 

Total liabilities and shareholders' equity

$

28,625

 

 

$

26,091

 

SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

Three Months Ended

 

 

March 31,

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

277

 

 

$

(330

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

229

 

 

 

186

 

Stock-based compensation

 

36

 

 

 

42

 

Deferred income taxes

 

107

 

 

 

(104

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(951

)

 

 

78

 

Inventories

 

429

 

 

 

537

 

Prepaid expenses and other assets

 

93

 

 

 

121

 

Income taxes receivable

 

(39

)

 

 

-

 

Accounts payable and accrued expenses

 

(768

)

 

 

(53

)

Total adjustments to net income (loss)

 

(864

)

 

 

807

 

Net cash (used) provided by operating activities

 

(587

)

 

 

477

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(17

)

 

 

(101

)

Proceeds from sale of property and equipment

 

500

 

 

 

-

 

Net cash provided by (used in) investing activities

 

483

 

 

 

(101

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Payments for debt issuance costs

 

(64

)

 

 

-

 

Net cash used in financing activities

 

(64

)

 

 

-

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(168

)

 

 

376

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

1,094

 

 

 

6,232

 

Cash and cash equivalents, end of period

$

926

 

 

$

6,608

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Cash paid during the period for interest

$

4

 

 

$

5

 

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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 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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