SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1995
Commission File No. 0-5128
SCOTT'S LIQUID GOLD-INC.
4880 Havana Street
Denver, CO 80239
Phone: 303-373-4860
State of Incorporation Colorado
I.R.S. Employer Identification No.84-0920811
Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (ii) has been subject to such
filing requirements for the past 90 days.
YES [ X ] NO [ ]
The Registrant had 10,012,858 common shares, $0.10 par value, its only
class of common stock, issued and outstanding on July 28, 1995.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
Scott's Liquid Gold-Inc. & Subsidiaries
Consolidated Statements of Income (Unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Net sales $14,615,600 $15,512,900 $29,063,900 $28,587,300
Other income 122,800 12,800 298,300 28,900
- -------------------------------------------------------------------------------------------------
14,738,400 15,525,700 29,362,200 28,616,200
Costs and Expenses:
Cost of sales 4,213,200 3,862,300 8,261,800 7,477,300
Advertising 6,498,700 4,092,900 13,062,500 8,697,700
Selling 1,920,200 2,302,300 4,184,800 4,350,200
General and administrative 1,417,100 1,794,500 2,939,700 3,188,200
Interest 99,700 83,100 275,000 166,100
- -------------------------------------------------------------------------------------------------
14,148,900 12,135,100 28,723,800 23,879,500
- -------------------------------------------------------------------------------------------------
Income from operations 589,500 3,390,600 638,400 4,736,700
Provision for income taxes 227,200 1,365,000 246,000 1,897,000
- -------------------------------------------------------------------------------------------------
Net income $ 362,300 $ 2,025,600 $ 392,400 $ 2,839,700
=================================================================================================
Net income per common share (Note 2) $ .04 $ .20 $ .04 $ .28
=================================================================================================
Weighted number of common
shares outstanding 10,276,400 10,276,500 10,282,700 10,220,300
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
<S> <C> <C>
Six Months Ended
June 30,
Increase (Decrease) in Cash and Cash Equivalents 1995 1994
---- ----
Cash flows from operating activities:
Net income $ 392,400 $ 2,839,700
- ---------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 428,300 389,400
Provision for doubtful accounts receivable 129,000 87,300
Compensation expense of employee stock plans 255,700 208,800
Change in assets and liabilities:
Receivables (1,458,900) (3,309,400)
Inventories 343,900 11,500
Prepaid expenses (8,100) (60,200)
Other assets 4,572,200 -
Accounts payable and accrued expenses 2,566,400 2,261,700
- ---------------------------------------------------------------------------------------------------
Total adjustments to net income 6,828,500 (410,900)
- ----------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 7,220,900 2,428,800
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (6,613,800) (423,200)
- ---------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (6,613,800) (423,200)
- ----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 172,300 249,200
Proceeds from short-term borrowings 154,700 103,300
Principal payments on short-term borrowings (84,400) (68,800)
Proceeds from long-term borrowings - 10,000
Principal payments on long-term borrowings (17,400) (539,800)
Dividends paid (989,000) (954,600)
- ----------------------------------------------------------------------------------------------------
Net Cash Used by Financing Activities (763,800) (1,200,700)
- ----------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (156,700) 804,900
Cash and Cash Equivalents, beginning of period 3,754,900 2,828,800
- ---------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, end of period 3,598,200 $ 3,633,700
===================================================================================================
Supplemental disclosures:
Cash paid during the period for:
Interest (net of $351,300 capitalized in 1995) $ 240,200 $ 167,300
Income taxes $ 577,500 $ 1,761,100
Noncash investing and financing activities:
Construction commitments $ 2,196,000 $ -
See Notes to Consolidated Financial Statements
<CAPTION>
</TABLE>
Scott's Liquid Gold-Inc. & Subsidiaries
Consolidated Balance Sheet
[CAPTION]
<TABLE>
<S> <C> <C>
ASSETS
1995 1994
Current Assets:
Cash $ 3,598,200 $ 3,754,900
Trade receivables (Note 3): 6,076,500 4,746,600
Inventories:
Finished goods 2,572,300 2,714,000
Raw materials 1,877,300 2,079,500
Prepaid expenses 662,100 654,000
Deferred tax assets 367,800 367,800
- ------------------------------------------------------------------------------
Total current assets 15,154,200 14,316,800
- ------------------------------------------------------------------------------
Property, plant and equipment
at cost 25,153,900 18,540,100
Less accumulated
depreciation 8,064,300 7,678,800
- ------------------------------------------------------------------------------
17,089,600 10,861,300
Restricted cash 1,244,900 6,162,700
Other assets 3,288,700 789,900
- ------------------------------------------------------------------------------
$36,777,400 $32,130,700
==============================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
1995 1994
---- -----
Current liabilities:
Notes payable $ 70,300 $ -
Accounts payable 5,416,600 2,008,600
Accrued expenses 4,126,000 2,771,600
Current maturities of
long-term debt 1,035,700 1,035,700
Total current liabilities 10,648,600 5,815,900
Long-term debt 11,449,200 11,466,600
Deferred income taxes 512,000 512,000
22,609,800 17,794,500
Shareholders' equity (Note 2):
Common stock 1,001,300 976,400
Capital in excess of par 4,710,400 4,307,300
Retained Earnings 8,455,900 9,052,500
Shareholders' equity 14,167,600 14,336,200
$36,777,400 $32,130,700
See Notes to Consolidated Financial Statements
</TABLE>
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1
In the opinion of management, the financial information in this report
reflects all adjustments necessary for a fair presentation of the results for
the interim periods.
NOTE 2
Per share data for the three and six months ended June 30, 1995 and 1994 were
determined by using the weighted average number of common and common equivalent
shares outstanding, using the treasury stock method.
Average shares outstanding used in the above computations were 10,276,400 and
10,282,700 respectively for the three and six months ended June 30, 1995, and
10,276,500 and 10,220,300 respectively for the three and six months ended June
30, 1994.
At June 30, 1995 there were 20,000,000 shares of the Company's $.10 par value
common stock authorized.
NOTE 3
Allowance for doubtful accounts at June 30, 1995 and December 31, 1994 were
$464,700 and $345,900 respectively.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company manufactures and markets household chemical products, skin care
products and cigarette filters. In early 1992, the Company entered into the
cosmetics business, introducing a new line of skin care products, `Alpha
Hydrox', which is sold throughout the United States and which is currently
being introduced in Canada. Sales of the cosmetics line were $5.9 million in
1992, $15.8 million in 1993, $ 30.6 million in 1994, and $18.3 million for the
first six months of 1995. As a result, the Company experienced record revenues
and profits in both 1993 and 1994. In November of 1994, the Company introduced
a line of men's after shave lotion, and, in early 1995, began to market a line
of body wash products. Heavy advertising during the most recent six months, as
is explained below, was responsible for reduced earnings during the first half
of 1995 compared to the same period of the previous year.
RESULTS OF OPERATIONS
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SUMMARY OF RESULTS AS A PERCENTAGE OF NET SALES
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(AUDITED)
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1994 1995 1994
Net sales
Scott's Liquid Gold household products 40.7% 35.2% 40.2%
Neoteric Cosmetics 57.3% 62.9% 57.7%
Aquafilters 2.0% 1.9% 2.1%
------------------------------
Total net sales 100.0% 100.0% 100.0%
Cost of sales 25.6% 28.4% 26.2%
-------------------------------
Gross profit 74.4% 71.6% 73.8%
Other revenue 0.4% 1.0% 0.1%
------------------------------
74.8% 72.6% 73.9%
-------------------------------
Operating expenses 55.5% 69.5% 56.8%
Interest 1.2% 0.9% 0.5%
------------------------------
56.7% 70.4% 57.3%
-------------------------------
Income before income taxes 18.1% 2.2% 16.6%
===============================
</TABLE>
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SIX MONTHS ENDED JUNE 30, 1995
COMPARED TO SIX MONTHS ENDED JUNE 30, 1994
Consolidated net sales for the first half of 1995 were $29,063,900 compared
to $28,587,300 for the first six months of 1994, an increase of $476,600 or
about 1.7%. Included in the aggregate sales increase is $166,000 attributable
to higher average selling prices, prices of household chemical products being
up by $260,000 (all of which related to Scott's Liquid Gold wood care products),
offset by a decrease in average selling prices of cosmetics products which were
down by $94,000.
During the first half of 1995, net sales of cosmetics products accounted
for 62.9% of consolidated net sales compared to 57.7% for the first half of
1994. Net sales of these products for those periods were $18,285,400 in 1995
compared to $16,509,000 in 1994, an increase of $1,776,400 or 10.8%. The
Company attributes such increase to several factors: maintaining effective and
extensive advertising of the Company's cosmetics line, competitive pricing, the
addition of several new products subsequent to the end of the first half of 1994
, and the efficacy of the Company's products. During 1994 and the first six
months of 1995, the number of competitive skin care products containing alpha
hydroxy acids, including private label products, increased significantly and
may continue to do so in the future. In the Company's 1994 Annual Report,
management stated that `... it may be unduly optimistic to expect 1995 sales of
the Company's skin care products to increase at the rate experienced in 1994.''
That was certainly the case during the first half of this year. With respect to
private label, `Alpha Hydrox'' look-alike products, the Company filed suit in
July of 1995 against a major contract packager and its parent company which
produce such products for trade dress infringement, unfair competition and other
similar matters.
Sales of household chemical products for the first six months of 1995
accounted for 35.2% of consolidated net sales compared to 40.2% for the same
period of 1994. These products are comprised of `Scott's Liquid Gold,'' a wood
cleaner which preserves as it cleans, and `Touch of Scent'', a room air
freshener. During the six months ended June 30, 1995, sales of household
chemical products were $10,239,900 compared to $11,485,600 for the first six
months of 1994, a decrease of $1,245,700 or 10.9%. Sales of `Scott s Liquid
Gold''for the first six months of 1995 compared to the same period of last year
were down by $147,800, a decrease of 2.6%, and sales of `Touch of Scent'' were
down by $1,097,900 or 18.7%. Advertising expenditures for household chemical
products during the first half of 1995 were 50% of those of the first half of
1994.
Net sales of `Aquafilters'', a disposable cigarette filter, represented
1.9% of consolidated net sales during the first half of 1995 compared to 2.1%
for the comparable six months of 1994. Such sales were lower in 1995 than in
1994 by $54,100, a decrease of 9.1%. Over the last several years, sales of
`Aquafilters'' have declined. For this reason, the Company is actively
attempting to sell Aquafilter's land and building. The Company expends no
moneys in advertising this product.
Cost of goods sold on a consolidated basis were $8,261,800 during the first
half of 1995 compared to $7,477,300 for the same period of 1994, an increase of
10.5%. For the most part, this increase is the result of unfavorable
manufacturing variances, primarily in the areas of labor and overhead, and
primarily in the second quarter of 1995 compared to 1994. Such variances are
the result of production levels which were lower than those anticipated by the
Company for the period. As a percentage of consolidated net sales, cost of
goods sold was 28.4% for the first half of 1995 compared to 26.2% for the
comparable period of 1994. An addition of plant facilities and equipment, as is
described below under `Liquidity and Capital Resources'' will increase
depreciation expense from the time of completion by approximately $125,000 per
year, which is expected to have little effect on gross margins.
Advertising expenses for the first six months of 1995 were $13,062,500
compared to $8,697,700 for the comparable six months of 1994, an increase of
$4,364,800 or 50.2%. (But for this increase, earnings per share for the first
six months of 1995 would have approximated those of the first half of 1994.)
Such increase was due, in large measure, to an increase in advertising rates
during the first half of this year. Of this increase, $6,386,700 pertained to
cosmetics products, offset by a decrease of $2,021,900 which pertained to
household chemical products. During the remainder of 1995, the Company intends
to spend significantly less for product advertising than was spent during the
first half of 1995. The Company believes that it must continue to advertise
during the balance of 1995 for the following reasons: (i) without advertising to
educate the consuming public as to the merits of `Alpha Hydrox'', future
growth, although not assured by advertising, will be severely restricted; (ii)
with respect to the Company's product lines, a correlation usually exists
between dollars expended on advertising and sales dollars; and (iii)
competitive products continue to enter the marketplace and, accordingly, the
`Alpha Hydrox'' name needs to be kept in front of current consumers.
Additionally, the Company believes that advertising is essential to maintain or
increase sales levels of the Company's household chemical products.
Irrespective of the foregoing, the Company recognizes the need to rein in
advertising expenditures during the next six months. It does not know to what
extent a lower advertising level will affect sales of the Company's products
during the second half of this year, and, therefore, the Company is relying
substantially upon its current customer base and, to a lesser extent, upon new
product introductions to produce significantly higher profits than those of the
first half of 1995.
Selling expenses for the first six months of 1995 were $4,184,800 compared
to $4,350,200 for the comparable period of 1994, a decrease of $165,400 or
3.8%. Administrative expenses for the same comparable periods were $2,939,700
and $3,188,200, respectively, a decrease of $248,500 or 7.8%. Of that decrease,
$376,300 is attributable to a decrease in salaries, profit sharing and
bonuses, and fringe benefits, offset by an increase in expenses of $75,800 for
shareholder relations and net increases in various other expenses, none of
which, by itself, was significant, of $52,000. It is noted that, while legal
expenses did not increase during the first six months of 1995, such expenses may
be expected to increase during the balance of the year and, perhaps, thereafter
as a result of a lawsuit (described below) which was filed against the Company
in September of 1994.
Interest expense for the first half of 1995 was greater than that of the
comparable half of 1994 by $108,900, an increase of 65.6%, which was due to
higher borrowings and interest rates. Interest expense will continue to
increase during 1995 and thereafter due to the issuance by the Company in July
of 1994 of 10% First Mortgage Bonds, the proceeds of which are being used to
finance the Company's physical expansion as is described below under Liquidity
and Capital Resources. During the construction phase of this expansion, a
portion of the amount of interest to be paid is being capitalized ($351,300 in
the first six months of 1995). Partially offsetting the increase in interest
expense of 1995 over 1994 was $294,200 of interest earned, an increase over 1994
of $269,300, the major portion of which resulted from investing the proceeds of
the bond issue in short-term Treasury Bills and similar paper.
During the first half of 1995, expenditures for research and development
were not material (under 1% of revenues).
THREE MONTHS ENDED JUNE 30, 1995
COMPARED TO THREE MONTHS ENDED JUNE 30, 1994
Consolidated net sales for the second quarter of 1995 were $14,615,600
compared to $15,512,900 for the second quarter of 1994, a decrease of $897,300
or about 5.8%. Included in the aggregate sales decrease is $12,000
attributable to lower average selling prices, prices of household chemical
products being up by $35,300 (all of which related to Scott's Liquid Gold wood
care products), offset by a decrease in average selling prices of cosmetics
products which were down by $47,300.
During the second quarter of 1995, net sales of cosmetics products
accounted for 64.1% of consolidated net sales compared to 60.0% for the second
quarter of 1994. Net sales of these products for those periods were
$9,369,600 in 1995 compared to $9,312,200 in 1994, an increase of $57,400 (less
than 1.0%) and lower than the increase of the first quarter of 1995, probably
due, for the most part, to increase competition.
Sales of household chemical products for the second quarter of 1995
accounted for 34.1% of consolidated net sales compared to 38.2% for the same
quarter of 1994. These products are comprised of `Scott's Liquid Gold,'' a
wood cleaner which preserves as it cleans, and `Touch of Scent,'' a room air
freshener. During the three months ended June 30, 1995, sales of household
chemical products were $4,988,700 compared to $5,918,900 for the second quarter
of 1994, a decrease of $930,200 or 15.7%. Sales of `Scott s Liquid Gold''
were down by $199,600, a decrease of 6.5%, and sales of `Touch of Scent'' were
down by $730,600 or 25.5%. Advertising expenditures to support these products
during the second quarter of 1995 were lower than those of the second quarter of
1994 by 66.4%.
Net sales of `Aquafilters'', a disposable cigarette filter, represented
1.8% of consolidated net sales during the second quarter of both 1995 and 1994.
Such sales were lower in the second quarter of 1995 than those of 1994 by
$24,500, a decrease of 8.7%. See discussion of Aquafilter for the six months
ended June 30, 1995.
Cost of goods sold on a consolidated basis were $4,213,200 during the
second quarter of 1995 compared to $3,862,300 for the same quarter of 1994, an
increase of $350,900 or 9.1%. For the most part, this increase is the result of
unfavorable manufacturing variances, primarily in the areas of labor and
overhead. As a percentage of consolidated net sales, cost of goods sold was
28.8% for the second quarter of 1995 compared to 24.9% for the second quarter of
1994. An addition of plant facilities and equipment, as is described below
under `Liquidity and Capital Resources'' will increase depreciation expense
from the time of completion by approximately $125,000 per year, which is
expected to have little effect on gross margins.
Advertising expenses for the quarter ended June 30, 1995 were $6,498,700
compared to $4,092,900 for the comparable three months of 1994, an increase of
$2,405,800 or 58.8%. Such increase was due, in large measure, to an increase in
advertising rates during 1995. Of this increase, $3,670,200 pertained to
cosmetics products, offset by a decrease of $1,264,400 which pertained to
household chemical products. As to short-term and long-term advertising plans,
see discussion of advertising expenses for the six months ended June 30, 1995.
Selling expenses for the second quarter of 1995 were $1,920,200 compared to
$2,302,300 for the comparable quarter of 1994, a decrease of $382,100 or 16.6%.
Of that decrease, $191,500 is attributable to a decrease in shipping expenses
and sales commissions (which vary with sales volume) and $287,100 relates to
decreases in couponing and slotting expenses, an aggregate of $478,600 which is
offset by a net increase of $96,500 in a variety of other selling expenses, none
of which, by itself, is material.
Administrative expenses for the three months ended June 30, 1995 were
$1,417,100 compared to $1,794,500 for the same months of 1994, a decrease of
$377,400 or 21.0%. Such expenses decreased for the same reasons set forth in
the discussion above for the six months ended June 30, 1995.
Interest expense for the second quarter of 1995 was greater than that of
the comparable quarter of 1994 by $16,600, an increase of 20.0%, which was due
to higher borrowings and interest rates. Interest expense will continue to
increase during 1995 and thereafter due to the issuance by the Company in July
of 1994 of 10% First Mortgage Bonds, the proceeds of which are being used to
finance the Company's physical expansion as is described below under Liquidity
and Capital Resources. During the construction phase of this expansion, a
portion of the amount of interest to be paid is being capitalized ($216,800 in
the second quarter of 1995). Partially offsetting the 1995 increase in
interest expense over 1994 was $120,800 of interest earned during the second
quarter of 1995, an increase over the comparable quarter of 1994 of $110,000,
the result of investing the proceeds of the bond issue and the Company's excess
cash in short-term Treasury Bills and similar paper.
During the second quarter of 1995, expenditures for research and
development were not material (less than 1% of revenues).
LIQUIDITY AND CAPITAL RESOURCES
On July 29, 1994, the Company consummated a $12 million bond issuance to
finance the expansion of the Company's Denver facilities. This expansion,
necessitated by the growth of the Company's wholly-owned subsidiary, Neoteric
Cosmetics, Inc., manufacturer of `Alpha Hydrox'' skin care products, includes
construction of a 77,000 square foot office building, replacing a smaller,
existing office structure; and an additional 52,000 square feet of
manufacturing and warehouse space at an aggregate cost of approximately $13.4
million (revised from a previously reported amount of $12.9 million), including
the cost of fixtures and equipment. Construction of the project began in August
of 1994. The Company occupied the office building in June of 1995.
Construction of the manufacturing and warehouse facility is slated to begin in
late July or early August, with completion scheduled for November of this year.
The net proceeds of the bond issue, after expenses (including an
Underwriter's commission of $360,000) and repayments of certain indebtedness,
was $8,861,300, which was deposited with Norwest Bank Colorado which serves as
the Trustee under the Bond Indenture. Approximately $2,754,600 of the net
proceeds was used to repay certain of the Company's then indebtedness, and about
$24,100 was used for other expenses related to the bond issue. In addition to
the foregoing, the Company paid out, from its own cash reserves, approximately
$240,000 for other expenses, primarily professional fees, in connection with the
bond issue. The moneys on deposit with the Trustee are being disbursed over the
construction period to cover building costs as such costs are incurred and
certified by the project's architect. At March 31, 1995, there remained
approximately $2.7 million to be paid from Company funds to complete the
aforementioned construction project, including the cost of machinery, equipment,
furniture, fixtures, and a portion of construction costs. Because, for the
most part, the Company had contractually obligated itself for the payment of
such amount, the Company recorded $2.7 million as an accrued expense (a current
liability) during the first quarter of 1995, offset by $2.7 million which
appeared as a non-current asset in its balance sheet under Other Assets at March
31, 1995. As a result of paying a portion of the amount accrued, such amount
had been reduced to $2.2 million at June 30, 1995.
Interest on the $12 million bond issue is payable semi-annually beginning
on January 1, 1995 at the rate of 10% per annum. (The July 1, 1995 interest
payment was made in a timely manner.) A sinking fund payment of $1 million is
required annually, with a first payment in 1995. Currently, the Company is
voluntarily paying $183,333 each month to the Trustee to cover future interest
and sinking fund payments. The Trustee, at the Company's request, holds such
moneys in accounts to which the Company has no access. At June 30, 1995, the
Trustee was holding $600,000 towards the interest payment due on July 1, and
$679,800 against the $1 million sinking fund payment due by the end of 1995.
Among other covenants, the Bond Indenture requires that the Company
maintain a current ratio of at least 1.0:1 while the bonds are outstanding, and
further requires that the Company maintain a ratio of consolidated funded debt
to consolidated net worth of not more than 1.5:1. Both of the foregoing
requirements were met at June 30, 1995. The Bond Indenture also prohibits the
declaration or payment by the Company of a dividend or distribution on its
equity securities, purchase or other acquisition of any of its equity
securities, or the incurrence of additional funded debt if, after giving effect
to the action, the ratio of consolidated funded debt to consolidated net worth
would exceed 1.30 to 1 during 1995 or 1.25 to 1 on January 1, 1996 and
thereafter. (For purposes of these calculations, the amount of consolidated
funded debt is reduced by amounts required to be paid within one year into the
bond sinking fund.) The bonds are secured by a first deed of trust on the
Company's land and buildings, including new structures financed by the bond
issuance. An independent appraisal conducted just prior to the issuance of the
bonds placed an aggregate market value of $16 million on this property, assuming
completion of the construction project.
During the first half of 1995, the Company's working capital decreased by
$3,995,300, and concomitantly, its current ratio (current assets divided by
current liabilities) decreased from 2.46:1 at December 31, 1994 to 1.42:1 at
June 30, 1995. This decrease in working capital is attributable to net income
of $392,400, contributions to the Company's ESOP and exercise of stock options
of $428,000, and a decrease in restricted cash of $4,917,800; all offset by an
increase in other assets of $2,498,800 (including the accrual of $2.2 million
for contractual obligations incurred for the construction project), capital
expenditures in excess of depreciation of $6,228,300, the declaration in March
of 1995 of a dividend of $989,000, and a decrease in long-term debt of $17,400.
At June 30, 1995, the ratio of consolidated funded debt to consolidated net
worth was .81:1.
Restricted cash at June 30, 1995 was $4,917,800 less than at December 31,
1994 due to progress payments made by the Trustee of the Company's Bond
Indenture to the general contractor for the construction project. Other assets
were $2,498,800 greater than those at December 31, 1994 primarily due to the
balance of the accrual of $2.2 million for construction obligations. The
increase of $1,354,400 in accrued expenses at June 30, 1995 compared to
December 31, 1994, includes the aforesaid $2.2 million, but is offset by
decreases in accruals for profit sharing and bonuses ($469,900) income taxes
($323,300), and net decreases in other accrued items ($52,400). Accounts
payable increased by $3.4 million since December 31, 1994, primarily due to an
increase in advertising payables.
On March 7, 1995, the Company's Board of Directors declared a dividend of
$0.10 to shareholders of record of March 24, 1995. This dividend was paid on
April 7, 1995 and reduced cash and retained earnings at that time by
approximately $989,000.
Other
Certain regulations adopted by the California Air Resources Board
(`CARB'') limit the amount of volatile organic compounds (``VOCs'') that can be
contained in single phase air fresheners, including `Touch of Scent'', and in
non-aerosol forms of furniture maintenance products. As reported previously,
the Company has made excellent progress in reformulating `Touch of Scent''
without changing the product's characteristics. The cost to produce the
reformulated product is expected to be higher than that of the `Touch of
Scent''product currently produced. Such increased cost currently is estimated
to be about 10%. The CARB regulations which affect `Touch of Scent'' are not
effective until January 1, 1996. The regulations which affect `Scott `s Liquid
Gold''for wood became effective on January 1, 1994. These regulations do not
affect the sale of `Scott's Liquid Gold'' in aerosol form. Various other
states have adopted VOC regulations or are considering the adoption of such
regulations. On April 11, 1995, the United States Environmental Protection
Agency (`EPA''), pursuant to the Clean Air Act Amendments of 1990, issued a
final report to the Congress of the United States regarding VOC emissions from
consumer and commercial products. EPA regulations which pertain to the types of
products manufactured by the Company are therein scheduled to be issued by 1997.
As was set forth in detail in the Company's 1994 Annual Report, on
September 8, 1994, the United States Justice Department, at the request of the
United States Army, filed an environmental lawsuit against the Company, alleging
that the Company was a contributor to contamination in a groundwater aquifer
underlying a portion of the Rocky Mountain Arsenal, a Superfund Site
contaminated by the United States Army and a major chemical Company over many
years; and, therefore, that the Company should contribute to the existing and
future costs incurred by the Army in connection with remediation of that
groundwater. The Army recently provided additional groundwater data concerning
a claimed migration pathway from the Company's property to the Arsenal. The
Company views this data as inconclusive as to whether any contamination from the
Company has migrated as far as the Arsenal. The Company does believe, however,
that the data demonstrate that any contaminants which could have traveled to the
relevant geographic area from the Company would not have been in quantities
large enough to cause the Army (or anyone else) to incur CERCLA response costs
or other damages. The Company strongly believes that the lawsuit is unjustified
and is mounting a vigorous defense.
In 1988, when the Company itself discovered small amounts of certain
chemicals in its soil and groundwater, it began to work closely with the
Colorado Department of Health (`CDH''), which kept the EPA informed, to
implement a remedial action plan, including the removal of all underground
tanks, the construction, above ground, of a new, self-contained tank farm, and
the treatment of groundwater at the Company's site. In April of 1995, the CDH
informed the Company that the CDH considered the Company's remedial action with
respect to the Company's site to be complete and that no further monitoring of
groundwater at such site is required.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Please see "Other" under "Management Discussion and Analysis of
Financial Condition and Results of Operations," which
information is incorporated in Part I, Item 2, herein by this
reference. Such information describes developments in certain
legal proceedings.
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Not Applicable
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Summary Financial Information.
(b) No reports were filed by the Company on Form 8-K for the
second quarter of 1995.
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.
SCOTT'S LIQUID GOLD-INC.
Registrant
August 2, 1995 /s/ Mark E. Goldstein
Date Mark. E. Goldstein
President
August 2, 1995 /s/ Barry Shepard
Date Barry Shepard, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted form Scott's
Liquid Gold-Inc. 1995 Second Quarter 10-Q report and is qualified in its
entirety by reference to such 10-Q filing.
</LEGEND>
<S> <C>
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