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
SEPTEMBER 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 forsuch
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 10,020,858 common shares, $0.10 par value, its
only class of common stock, issued and outstanding on October 20,
1995.
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
Scott's Liquid Gold-Inc. & Subsidiaries
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Net sales $12,585,200 $12,171,900 $41,649,100 $40,759,200
Other income 79,100 75,000 377,400 103,900
_____________________________________________________________
12,664,300 12,246,900 42,026,500 40,863,100
Costs and Expenses:
Cost of sales 3,957,500 2,822,900 12,219,300 10,300,200
Advertising 3,521,700 3,423,700 16,584,300 12,121,400
Selling 1,882,000 1,870,100 6,066,800 6,220,300
General and administrative 1,638,400 1,542,300 4,578,100 4,730,500
Interest 293,900 226,500 568,900 392,600
____________________________________________________________
11,293,500 9,885,500 40,017,400 33,765,000
Income from operations 1,370,800 2,361,400 2,009,100 7,098,100
Provision for income taxes 527,000 942,000 773,000 2,839,000
____________________________________________________________
Net income $ 843,800 $ 1,419,40 $ 1,236,100 $ 4,259,100
Net income per
common share (Note 2) $ .08 $ .14 $ .12 $ .42
Weighted number of common
shares outstanding 10,250,400 10,247,000 10,272,000 10,228,600
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Nine Months Ended
September 30,
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents 1995 1994
Cash flows from operating activities:
Net income $ 1,236,100 $ 4,259,100
___________________________________
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 691,300 597,000
Provision for doubtful accounts receivable 193,500 130,900
Compensation expense of employee stock plans 255,700 208,800
Change in assets and liabilities:
Accounts receivable (566,300) (2,509,400)
Inventory 559,500 (1,599,300)
Prepaid expenses 254,600 (273,300)
Other assets 4,899,100 (9,266,700)
Accounts payable and accrued expenses 2,784,100 2,299,300
____________________________________
Total adjustments to net income 9,071,500 (10,412,700)
Net Cash Provided (Used) by Operating Activities 10,307,600 (6,153,600)
Cash flows from investing activities:
Purchase of property, plant and equipment (8,098,500) (1,210,000)
Net Cash Used by Investing Activities (8,098,500) (1,210,000)
_____________________________________
Cash flows from financing activities:
Proceeds from exercise of stock options 175,100 250,300
Proceeds from short-term borrowings 154,700 103,300
Principal payments on short-term borrowings (126,600) (203,300)
Proceeds from long-term borrowings - 12,010,000
Principal payments on long-term borrowings (26,400) (3,209,200)
Dividends paid (989,000) (954,600)
____________________________________
Net Cash Provided (Used) by Financing Activities (812,200) 7,996,500
Net Increase in Cash and Cash Equivalents 1,396,900 632,900
Cash and Cash Equivalents, beginning of period 3,754,900 2,828,800
Cash and Cash Equivalents, end of period $ 5,151,800 $ 3,461,700
____________________________________
Supplemental disclosures:
Cash paid during the period for:
Interest (net of $374,800 and $18,200 capitalized
in 1995 and 1994 respectively) $ 558,200 $ 299,500
Income taxes $ 645,500 $ 3,494,300
Noncash investing and financing activities:
Construction commitments $ 2,496,000 $ -
<FN>See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
Consolidated Balance Sheets
September 30, 1995 (Unaudited) and December 31, 1994
<CAPTION>
ASSETS
1995 1994
<S> <C> <C>
Current Assets:
Cash $ 5,151,800 $ 3,754,900
Trade receivables (Note 3): 5,119,400 4,746,600
Inventories:
Finished goods 2,323,300 2,714,000
Raw materials 1,910,700 2,079,500
Prepaid expenses 399,400 654,000
Deferred tax assets 367,800 367,800
___________________________________
Total current assets 15,272,400 14,316,800
Property, plant and equipment
at cost 26,638,600 18,540,100
Less accumulated depreciation 8,306,000 7,678,800
____________________________________
18,332,600 10,861,300
Restricted cash 574,300 6,162,700
Other assets 3,911,100 789,900
____________________________________
$38,090,400 $32,130,700
LIABILITIES & SHAREHOLDERS' EQUITY
1995 1994
Current liabilities:
Notes payable $ 28,100 $ -
Accounts payable 5,177,600 2,008,600
Accrued expenses 4,882,700 2,771,600
Current maturities of
long-term debt 1,035,700 1,035,700
____________________________________
Total current liabilities 11,124,100 5,815,900
Long-term debt 11,440,200 11,466,600
Deferred income taxes 512,000 512,000
____________________________________
23,076,300 17,794,500
Shareholders' equity (Note 2):
Common stock 1,001,800 976,400
Capital in excess of par 4,712,800 4,307,300
Retained Earnings 9,299,500 9,052,500
____________________________________
Shareholders' equity 15,014,100 14,336,200
$38,090,400 $32,130,700
<FN>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 nine months ended September 30, 1995 and the
three and nine months ended September 30, 1994 were determined by using the
weighted average number of common and common equivalent shares outstanding,
using the treasury stock method.
NOTE 3
Allowance for doubtful accounts at September 30, 1995 and December 31, 1994 were
$529,300 and $345,900 respectively.
At September 30, 1995 there were 20,000,000 shares of the Company's $.10 par
value common stock authorized.
Market Information
The high and low prices or bid quotations of Scott's Liquid Gold-Inc. common
stock as traded on the New York Stock Exchange commencing November 23, 1994, and
prior to that date on Nasdaq or Nasdaq National Market, were as follows:
<TABLE>
High Low
Three Months Ended Bid Bid
<S> <C> <C>
December 31, 1993 4-3/16 2-3/4
March 31, 1994 9 3-5/8
June 30, 1994 7-3/4 3-3/8
September 30, 1994 7-3/8 3-3/4
December 31, 1994 6-11/16 3-7/8
March 31, 1995 6 5-1/8
June 30, 1995 5-5/8 3-3/4
September 30, 1995 4-3/4 3-1/4
<FN>The above quotations prior to November 23, 1994 represent prices between
dealers, and do not include retail mark-up or commissions; nor do they represent
actual transactions.
</TABLE>
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 cigarett 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 Canada. Sales of the cosmetics
line were $5.9 million in 1992, $15.8 million in 1993, $30.6 million in 1994,
and $25.9 million for the first nine months of 1995. As a result, the Company
experienced record revenues in 1993, 1994 and the first nine months of 1995, and
record profits in 1993 and 1994. However, due to heavy advertising of cosmetic
products during the most recent nine months, as is explained below, and a 12.1%
decline in sales of the Company's household chemical products, the Company
experienced a decline in earnings during the first three quarters of 1995
compared to the same period of the previous year.
Results of Operations
<TABLE>
Summary of Results as a Percentage of Net Sales
<CAPTION>
(Audited) Nine Months Ended
Year Ended September 30,
December 31, 1994 1995 1994
<S> <C> <C> <C>
Net sales
Scott's Liquid Gold household products 40.7% 35.7% 41.6%
Neoteric Cosmetics 57.3% 62.3% 56.3%
Aquafilters 2.0% 2.0% 2.1%
___________________________________________
Total net sales 100.0% 100.0% 100.0%
Cost of sales 25.6% 29.3% 25.3%
___________________________________________
Gross profit 74.4% 70.7% 74.7%
Other revenue 0.4% 0.9% 0.3%
__________________________________________
74.8% 71.6% 75.0%
Operating expenses 55.5% 65.4% 56.6%
Interest 1.2% 1.4% 1.0%
___________________________________________
56.7% 66.8% 57.6%
Income before income taxes 18.1% 4.8% 17.4%
</TABLE>
Nine Months Ended September 30, 1995
Compared to Nine Months Ended September 30, 1994
Consolidated net sales for the first three quarters of 1995 were $41,649,100
compared to $40,759,200 for the first nine months of 1994, an increase of
$889,900 or about 2.2%. The aggregate sales increase is net of a decrease of
$50,000 attributable to lower average selling prices, prices of household
chemical products being up by $193,800 (average selling prices of Scott's Liquid
Gold wood care products being up by $357,500 while average selling prices of
Touch of Scent were down by $163,700), offset by a decrease in average selling
prices of cosmetics products which were down by $243,800.
During the first three quarters of 1995, net sales of cosmetics products
accounted for 62.3% of consolidated net sales compared to 56.3% for the first
nine months of 1994. Net sales of these products for those periods were
$25,933,200 in 1995 compared to $22,967,400 in 1994, an increase of $2,965,800
or 12.9%. The Company attributes such increase to several factors: 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 nine months
of 1994, and the efficacy of the Company's products. During 1994 and the first
nine 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 Comp#any's skin care products to increase at the rate experienced in 1994."
That was certainly the case during the first three quarters 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. A suit against another contract packager is
currently being considered.
Sales of household chemical products for the first nine months of 1995 accounted
for 35.7% of consolidated net sales compared to 41.6% 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 nine months ended September 30, 1995, sales of household chemical products
were $14,895,300 compared to $16,951,400 for the first nine months of 1994, a
decrease of $2,056,100 or 12.1%. Sales of "Scott's Liquid Gold" for the first
nine months of 1995 compared to the same period of last year were down by
$641,000, a decrease of 7.9%, and sales of "Touch of Scent" were down by
$1,415,100 or 16.1%. Advertising expenditures for household chemical products
during the first nine months of 1995 were only 48% of those of the first nine
months of 1994.
Net sales of "Aquafilters", a disposable cigarette filter, represented 2.0% of
consolidated net sales during the first three quarters of 1995 compared to 2.1%
for the comparable nine months of 1994. Such sales were lower in 1995 than in
1994 by $19,800, a decrease of 2.4%. Over the last several years, sales of
Aquafilters have declined. For this reason, from time to time, the Company has
attempted to sell Aquafilter's land and building. The Company expends very
little money to advertise this product.
Cost of goods sold on a consolidated basis was $12,219,300 during the first nine
months of 1995 compared to $10,300,200 for the same period of 1994, an increase
of 18.6%. As a percentage of consolidated net sales, cost of goods sold was
29.3% for the first three quarters of 1995 compared to 25.3% for the comparable
period of 1994.
The decrease in gross profit for the first nine months of 1995 compared to 1994
is explained as follows: (a) manufacturing overhead for the 1995 period was
about $400,000 more than for the comparable period of 1994 due primarily to an
increase in indirect labor (up $320,000, mostly in the areas of technical
support/laboratory and quality control) and in laboratory expenses (up
$254,000), offset by a net decrease in various other overhead expenses, none of
which, by itself, was material, of about $174,000; (b) plant utilization was
greater in the 1994 period, particularly in the third quarter of that year, than
in 1995 due to the Company's operating on a two-shift basis in the third quarter
of 1994 to produce certain Alpha Hydrox products to be introduced late in the
fourth quarter of that year; and (c) certain products introduced during the
first nine months of 1995, particularly Alpha Hydrox Body Wash which accounted
for approximately 10.5% of Alpha Hydrox sales during the 1995 period, are list-
priced to yield a gross profit which is substantially lower than that of most
other Alpha Hydrox products. There were no sales of these products in 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 nine months of 1995 were $16,584,300 compared
to $12,121,400 for the comparable nine months of 1994, an increase of $4,462,900
or 36.8%. Such increase was due, in part, to an increase in advertising rates
during 1995, and, in part, to extensive advertising of cosmetic products. Of
this increase, $7,021,800 pertained to cosmetics products, offset by a decrease
of $2,558,900, most of which pertained to household chemical products. During
the last quarter of 1995, the Company intends to spend significantly less for
product advertising, probably $2 million less than the amount expended during
the third quarter. The Company believes that advertising of its products is
important for the following reasons: (i) it assesses its penetration of the skin
care market, thus far, to have been modest and believes that future growth is,
therefore, possible; (ii) 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; (iii) with respect to the Company's
proprietary product lines, a correlation usually exists between dollars expended
on advertising and sales dollars; and (iv) 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 last quarter
so that, relying substantially upon its current consumer base, profits will be
sufficient during the last half of 1995 to permit the Company to institute a
moderately aggressive advertising policy in 1996.
Selling expenses for the first nine months of 1995 were $6,066,800 compared to
$6,220,300 for the comparable period of 1994, a decrease of $153,500 or 2.5%.
Administrative expenses for the same comparable periods were $4,578,100 and
$4,730,500, respectively, a decrease of $152,400 or 3.2%. It is noted that,
while legal expenses did not increase during the first nine 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. Some of these expenses may be
recovered from various insurance companies.
Interest expense for the first nine months of 1995 was greater than that of the
comparable period of 1994 by $176,300, an increase of 44.9%, 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 being paid is being capitalized ($374,800 in the first nine
months of 1995). Partially offsetting the increase in interest expense of 1995
over 1994 was $371,600 of interest earned, an increase over 1994 of $273,700,
the major portion of which resulted from investing the proceeds of the bond
issue and some of the Company's excess cash in short-term Treasury Bills and
similar paper, and in money market accounts.
During the first nine months of 1995, expenditures for research and development
were not material (under 1% of revenues).
Three Months Ended September 30, 1995
Compared to Three Months Ended September 30, 1994
Consolidated net sales for the third quarter of 1995 were $12,585,200 compared
to $12,171,900 for the third quarter of 1994, an increase of $413,300 or about
3.4 %. The aggregate sales increase includes an offset of $216,200 attributable
to lower average selling prices. Prices of household chemical products were down
by $66,400 ($103,200 related to a decrease in average selling prices of Touch of
Scent, offset by a $36,800 increase in average selling prices of Scott's Liquid
Gold wood care products), and average selling prices of cosmetics products were
down by $149,800.
During the third quarter of 1995, net sales of cosmetics products accounted for
60.8% of consolidated net sales compared to 53.1% for the third quarter of 1994.
Net sales of these products for those periods were $7,647,800 in 1995 compared
to $6,458,400 in 1994, an increase of $1,189,400 (about 18.4%).
Sales of household chemical products for the third quarter of 1995 accounted for
37.0 % of consolidated net sales compared to 44.9% 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 September 30, 1995, sales of household chemical products were
$4,655,400 compared to $5,465,800 for the third quarter of 1994, a decrease of
$810,400 or 14.8%. Sales of "Scott's Liquid Gold" for wood were down by
$493,200, a decrease of 19.5%, and sales of "Touch of Scent" were down by
$317,200 or 10.8 %.
Net sales of "Aquafilters", a disposable cigarette filter, represented 2.2% of
consolidated net sales during the third quarter of 1995 and 2% during the same
quarter of 1994. Such sales were higher in the third quarter of 1995 than those
of 1994 by $34,300, an increase of 13.8%. Over the last several years, sales of
Aquafilters have declined. For this reason, the Company,from time to time, has
attempted to sell Aquafilter's land and building. The Company expends almost no
moneys in advertising this product.
Cost of goods sold on a consolidated basis were $3,957,500 during the third
quarter of 1995 compared to $2,822,900 for the same quarter of 1994, an increase
of $1,134,600 or 40.2%. As a percentage of consolidated net sales, cost of goods
sold was 31.4% for the third quarter of 1995 compared to 23.2% for the second
quarter of 1994. In this regard, see discussion for the nine months ended
September 30, 1995 and 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 September 30, 1995 were $3,521,700
compared to $3,423,700 for the comparable three months of 1994, an increase of
$98,000 or 2.9%. Of this increase, $635,200 pertained to cosmetics products
which was offset by a decrease in advertising of other products of $537,200,
primarily household chemical products. As to short-term and long-term
advertising plans, see discussion of advertising expenses for the nine months
ended September 30, 1995.
Selling expenses for the third quarter of 1995 were $1,882,000 compared to
$1,870,100 for the comparable quarter of 1994, an increase $11,900 or under
1.0%. Administrative expenses for the three months ended September 30, 1995 were
$1,638,400 compared to $1,542,300 for the same months of 1994, an increase of
$96,100 or 6.2%. Such increase was attributable to a variety of increases and
decreases in expenses, none of which, by itself, was significant.
Interest expense for the third quarter of 1995 was greater than that of the
comparable quarter of 1994 by $67,400, an increase of 29.8%, 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 being paid is being capitalized ($23,500 in the third quarter
of 1995). Offsetting the 1995 increase in interest expense over 1994 was $77,200
of interest earned during the third quarter of 1995, comparable to the third
quarter of 1994, 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 third quarter of 1995, expenditures for research and development were
not material (under 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 began in late July, with completion now scheduled for
December 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 proceeds of the sale of
bonds 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 to be disbursed over the
construction period to cover building costs as such costs are incurred and
certified by the project's architect. At September 30, 1995, there remained
approximately $2.5 million to be paid from Company funds to complete the
construction project, including some of the costs of machinery, equipment,
furniture, fixtures, and a portion of construction costs. Because, for the most
part, the Company has contractually obligated itself for the payment of such
amount, the Company's records at September 30, 1995 reflect an accrued expense
(a current liability) of $2,496,000, offset by a like amount which appears as a
non-current asset in the Company's balance sheet.
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 September 30, 1995, the Trustee
was holding $309,500 towards the interest payment due on January 1, and slightly
over $1,000,000 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 September 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 nine months of 1995, the Company's working capital decreased by
$4,352,600, and concomitantly, its current ratio (current assets divided by
current liabilities) decreased from 2.46:1 at December 31, 1994 to 1.37:1 at
September 30, 1995. This decrease in working capital is attributable to net
income of $1,236,100, contributions to the Company's ESOP and exercise of
incentive stock options of $430,800, and a decrease in restricted cash of
$5,588,400; all offset by an increase in other assets of $3,121,200 (including
the accrual of $2.5 million for contractual obligations incurred for the
construction project), capital expenditures in excess of depreciation of
$7,471,300, the declaration in March of 1995 of a dividend of $989,000, and a
decrease in long-term debt of $26,400. At September 30, 1995, the ratio of
consolidated funded debt to consolidated net worth was .76:1.
Restricted cash at September 30, 1995 was $5,588,400 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 $3,121,200 greater than those at December 31, 1994 primarily due to the
balance of the accrual of $2.5 million for construction obligations. The
increase of $2,111,100 in accrued expenses at September 30, 1995 compared to
December 31, 1994, includes the aforesaid $2.5 million, but is offset by
decreases in accruals for profit sharing and bonuses ($277,200) and net
decreases in other accrued items ($111,700).
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. Regulations which pertain to the types of
products manufactured by the Company are scheduled to be issued in 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. In a recent
disclosure, the Army increased its alleged response costs to $27 million from
$22 million. The Army alleges that the Company is liable for a substantial,
though not yet defined, portion of those response costs. The Company views
currently available 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 is attempting to conduct its own
groundwater testing in relevant areas. The Company strongly believes that the
lawsuit is unjustified and is mounting a vigorous defense.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Please see "Other" under "Management Discussion and Analysis of
Financial Condition and Results of Operation in Registrant's Third Quarter
Report for thenine months ended September 30, 1995," which information is
incorporated 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) The following documents are filed as exhibits to this Report:
Summary Financial Information
(b) No reports were filed by the Company on Form 8-K for the Third
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.
October 30, 1995 /s/ Mark E. Goldstein
Date Mark. E. Goldstein, President
October 30, 1995 /s/ Barry Shepard
Barry Shepard
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Scott's
Liquid Gold-Inc. 1995 Third Quarter 10-Q Report and is qualified in its
entirety by reference to such 10-Q filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
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0
0
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