SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant
Filed by a Party other than the Registrant
Check the Appropriate box:
Preliminary Proxy Statement Confidential, for Use of the
Commission Only (as permitted
X Definitive Proxy Statement by Rule 14a-6(e)(2))
Definitive Additional Materials
Soliciting Material Pursuant to ? 240.14a-11(c) or ? 240.14a-12
Scott's Liquid Gold-Inc
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11. (Set forth the amount on
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determined):
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________________________________________________________________________
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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4) Date Filed:
SCOTT'S LIQUID GOLD-INC.
4880 Havana Street
Denver, Colorado 80239
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held May 3, 2000
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Scott's Liquid Gold-Inc., a Colorado
corporation (the "Company"), will be held at 10:00 a.m., Mountain Time, on
Wednesday, May 3, 2000 at the Company's offices, 4880 Havana Street, Denver,
Colorado for the purpose of considering and acting upon the following:
(1) The election of five directors;
(2) Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on March 8, 2000 are
entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
CAROLYN J. ANDERSON
Corporate Secretary
Denver, Colorado
March 24, 2000
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE
MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED, POSTAGE PREPAID, ADDRESSED ENVELOPE. NO ADDITIONAL POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
SCOTT'S LIQUID GOLD-INC.
4880 Havana Street
Denver, Colorado 80239
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 3, 2000
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of Scott's Liquid Gold-Inc., a Colorado corporation (the "Company"), for use at
the Company's Annual Meeting of Shareholders to be held at 10:00 a.m., Mountain
Time, on Wednesday, May 3, 2000 at the Company's offices, 4880 Havana Street,
Denver, Colorado, or any adjournment thereof. This Proxy Statement and the
accompanying form of Proxy are first being mailed or given to the shareholders
of the Company on or about March 24, 2000.
Any shareholder signing and mailing the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of the revocation to the
Company's Corporate Secretary, by voting in person at the meeting or by filing
at the meeting a later executed proxy.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
All voting rights are vested exclusively in the holders of the Company's
$0.10 par value common stock. Each share of the Company's common stock is
entitled to one vote. Cumulative voting in the election of directors is not
permitted. Holders of a majority of shares entitled to vote at the meeting,
when present in person or by proxy, constitute a quorum. On March 8, 2000, the
record date for shareholders entitled to vote at the meeting, the Company had
10,103,058 shares of its $0.10 par value common stock issued and outstanding.
When a quorum is present, in the election of directors, those five nominees
having the highest number of votes cast in favor of their election will be
elected to the Company's Board of Directors. Consequently, any shares not voted
(whether by abstention, broker non-vote or otherwise) have no impact in the
election of directors except to the extent the failure to vote for an individual
results in another individual receiving a larger number of votes. With respect
to any other matter which may properly come before the Meeting, unless a greater
number of votes is required by law, a matter is approved by the shareholders if
the votes cast in favor of the matter exceed the votes cast in opposition. Any
shares not voted (whether by abstention, broker non-vote or otherwise) have no
impact on the vote for these other matters, if any, so long as a quorum is
present.
The following persons are the only persons known to the Company who on
March 8, 2000, owned beneficially more than 5% of the Company's common stock,
its only class of outstanding voting securities:
<TABLE>
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Owner Ownership Class
<S> <C> <C> <C>
Mark E. 2,681,355 (1)(2) 26.4%
Goldstein
4880 Havana
Street
Denver,
Colorado 80239
Scott's Liquid 1,099,558 (3) 10.9%
Gold-Inc.
Employee Stock
Ownership Plan
4880 Havana
Street
Denver,
Colorado 80239
</TABLE>
(1) Includes 2,126,473 shares held by the Goldstein Family Partnership, Ltd., a
limited partnership of which the general partner is the Goldstein Family
Corporation and whose limited partners include Mark E. Goldstein, his
children, a sister, and certain other relatives. Mr. Goldstein is the sole
director and sole executive officer of the Goldstein Family Corporation,
and he owns 80% of the outstanding stock of the Goldstein Family
Corporation in his individual name and owns as a trustee 20% of the
outstanding stock of the Goldstein Family Corporation. Mr. Goldstein has
the sole voting and disposition powers with respect to these shares of
the Company owned by the Goldstein Family Partnership, Ltd.
Also includes 70,500 shares underlying incentive stock options granted
under the Company's 1998 Stock Option Plan and 92,892 shares
held by Mr. Goldstein's minor children. Includes 70,500 shares underlying
stock options in the estate of Jerome J. Goldstein. Does not include
25,890 shares of the Company's common stock owned by Mr. Goldstein's
spouse, as to which Mr. Goldstein disclaims any beneficial ownership.
(2) Does not include 85,013 shares held by the Company's Employee Stock
Ownership Plan attributable to Mr. Goldstein's vested interest in the Plan
as of December 31, 1999.
(3) The six person committee administering the Employee Stock Ownership Plan
directs the voting of shares held under such Plan. The Company's four
executive officers are members of this six-person committee.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of March 8, 2000, the shares of the Company's
common stock beneficially owned by each director and executive officer of the
Company and the shares beneficially owned by all of the directors and executive
officers as a group:
<TABLE>
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
(1)
<S> <C> <C> <C>
Mark E. Goldstein 2,681,355 (2)(3)(5) 26.4%
Carolyn J. Anderson 288,460 (3)(5) 2.8%
Barry Shepard 264,500 (3)(5)(6) 2.6%
Jeffrey R. Hinkle 161,178 (3)(5)(7) 1.6%
Dennis H. Field 151,833 (4) 1.5%
James F. Keane 105,833 (4) 1.0%
All Directors and 3,653,159 (3)(4) 34.3%
executive officers as a
Group (six persons)
</TABLE>
(1) Beneficial owners listed have sole voting and disposition power with
respect to the shares shown unless otherwise indicated.
(2) For information regarding Mr. Goldstein's beneficial ownership of shares,
see footnote 1 under the table in "Voting Securities and Principal
Shareholders."
(3) For each named executive, other than Mr. Hinkle, also includes70,500 the
following number of shares underlying stock options granted under the
Company's 1998 Stock Option Plan which was approved by the Company's
shareholders at the 1999 Annual Meeting: 70,500 for each of Mr. Goldstein,
Ms. Anderson and Mr. Shepard; and 79,000 for Mr. Hinkle. For Mr. Hinkle,
who was elected as an executive officer of the Company on February 22,
2000, includes 79,000 shares underlying stock options granted under the
Company's 1997 and 1998 Stock Option Plans.
(4) Includes for Mr. Field 148,333 shares and for Mr. Keane 103,333 shares
underlying presently exercisable stock options granted by the Company's
Board of Directors under the Company's 1993 Stock Option Plan for Outside
Directors.
(5) Does not include shares owned by the Company's Employee Stock Ownership
Plan under which, at December 31, 1999, Mark E. Goldstein had a vested
interest in 85,013 shares, Carolyn J. Anderson had a vested interest in
125,588 shares, Barry Shepard had a vested interest in 76,660 shares, and
Jeffrey R. Hinkle had a vested interest in 44,627 shares.
(6) Of Mr. Shepard's shares, 20,000 are held jointly by Mr. Shepard and his
wife.
(7) Mr. Hinkle was elected Vice President-Marketing of Scott's Liquid Gold-Inc.
on February 22, 2000. Of Mr. Hinkle's shares, 46,400 are held jointly by
Mr. Hinkle and his wife.
There has been no change in control of the Company since the beginning of
the last fiscal year, and there are no arrangements known to the Company,
including any pledge of securities of the Company, the operation of which may at
a subsequent date result in a change in control of the Company.
Jerome J. Goldstein was the Company's founder, a director, and Chairman of
the Company's Board of Directors from the time of the Company's founding through
the entire year of 1999. As a result of the death of Jerome J. Goldstein in
January, 2000, Mark E. Goldstein became the beneficial owner of 2,126,473 shares
of the Company's common stock held by the Goldstein Family Partnership, Ltd.,
representing approximately 21.0% of the outstanding common stock of the Company.
On January 21, 2000, Mark E. Goldstein acquired 800 shares of the common stock
of the Goldstein Family Corporation, representing 80% of the outstanding common
stock of the Goldstein Family Corporation. He also became the sole director,
the President and the sole executive officer of the Goldstein Family Corporation
on that date. As a result, Mark E. Goldstein controls the Goldstein Family
Corporation. The Goldstein Family Corporation controls the voting and
disposition of common stock of the Company owned by the Goldstein Family
Partnership, Ltd. Mr. Goldstein paid no consideration for the shares of the
Goldstein Family Corporation. The shares were transferred to him by a Trust
created by Jerome J. Goldstein; the Trust provided for this transfer of the
shares upon the death of Jerome J. Goldstein. As indicated above, Mark E.
Goldstein may now be considered the beneficial owner of approximately 26.4% of
the Company's common stock.
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
Nominees
The Company's Board of Directors consists currently of five directors.
Unless authority to vote is withheld, the persons named in the enclosed form of
proxy will vote the shares represented by such proxy for the election of the
five nominees for director named below. If, at the time of the Meeting, any of
these nominees shall have become unavailable for any reason to serve as a
director, the persons entitled to vote the proxy will vote for such substitute
nominee or nominees, if any, as they determine in their discretion. If elected,
the nominees for director will hold office until the next annual meeting of
shareholders or until their successors are elected and qualified. The nominees
for director, each of whom has consented to serve if elected, are as follows:
<TABLE>
Name of Nominee and Principal Occupation for
Position Director Last Five Years
in the Company Age Since
<S> <C> <C> <S>
Mark E. Goldstein 43 1983 Chairman of the Board of the Company
(Chairman of the since February 22, 2000, President and
Board, President and Chief Executive Officer since August,
Chief Executive 1990. From 1982 to 1990, Vice President-
Officer) Marketing of Company. Employed by the
Company since 1978.
Carolyn J. Anderson 61 1974 Executive Vice President since 1974,
(Executive Vice Chief Operating Officer of the Company
President, Chief since 1982 and Corporate Secretary since
Operating Officer and 1973. Employed by the Company since
Corporate Secretary) 1970.
Barry Shepard 69 1982 Treasurer and Chief Financial Officer of
(Treasurer and Chief the Company since 1981 when first
Financial Officer) employed by the Company.
Dennis H. Field 67 1991 Management Consultant since 1990. From
1984 to 1990, Executive Vice
President/General Manager, Faberge USA,
Inc. (mass market health and beauty
aids).
James F. Keane 66 1993 Independent businessman since 1987.
Founder of firms in auto parts and home
furnishings. From 1990 to 1992,
Marketing Professor at Bentley College.
From 1974 to 1987, Vice President, S.C.
Johnson & Son, Inc. (household and
personal care products).
</TABLE>
All of the foregoing persons are currently directors of the Company. Their
positions on standing committees of the Board of Directors are shown below under
"Directors' Meetings and Committees".
The Company's only executive officers are those who are described in the
foregoing table. The officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each annual meeting of
shareholders and serve at the pleasure of the Board of Directors.
There are no family relationships among the executive officers or directors
of the Company. There are no arrangements or understandings pursuant to which
any of these persons were elected as an executive officer or director.
Directors' Meetings and Committees
During the year ended December 31, 1999, the Company had four directors
meetings, plus four actions by unanimous written consent. The Company's Board
of Directors has both a Compensation Committee and an Audit Committee.
The primary responsibilities of the Compensation Committee include
development of an executive compensation philosophy for the Company; origination
of all executive compensation proposals; review of the appropriate mix of
variable versus fixed compensation; and review of all transactions between the
Company and any executive officer or director, whether or not involving compensa
tion. The Committee consists of two outside directors of the Company and, in
addition, the President of the Company. Current members of the Compensation
Committee are Dennis H. Field (Chairperson), James F. Keane, and Mark E.
Goldstein (with Mr. Goldstein having no vote). The Compensation Committee met
two times during 1999.
The Audit Committee has as its primary responsibilities the recommendation
of an independent public accountant to audit the annual financial statements of
the Company, the review of internal and external audit functions, the review of
internal accounting controls, the review of annual financial statements, and a
review at its discretion of compliance with corporate policies and codes of
conduct. The Audit Committee consists of two outside directors. The current
members of the Audit Committee are James F. Keane (Chairperson), and Dennis H.
Field. The Audit Committee met four times during 1999.
Compensation Committee Interlocks and Insider Participation
Mr. Dennis Field serves on both the Compensation Committee and the Audit
Committee. From 1978 to 1982, Mr. Field was President and Chief Operating
Officer of Aquafilter Corporation, a wholly owned subsidiary of the Company
which manufactured cigarette filters. After leaving Aquafilter Corporation,
Mr. Field had virtually no contact with the Company from the date of his
resignation to 1991 when he was asked to join the Company's Board. Prior to
1991, he was Executive Vice President/General Manager, U.S. Division, of
Faberge. Mr. Field has a distinguished career with significant consumer product
companies.
Michael J. Sheets was a director and a member of the Compensation Committee
of the Board of Directors until he resigned from the Board of Directors on
October 31, 1999. Mr. Sheets was also a consultant to the Company, providing
advice primarily in the areas of marketing and advertising. Mr. Sheets became a
consultant at the time of joining the Company's Board of Directors in 1990. He
was paid $1,667 per month for his services as a consultant. Mr. Sheets was,
prior to October, 1990, President and Chief Executive Officer of Airwick
Industries (Reckitt & Colman Household Products), a large competitor of the
Company, and had a distinguished career in consumer products, manufacturing,
advertising and sales.
Executive Compensation
Summary Compensation Table
The following Summary Compensation Table shows the annual and other
compensation of the chief executive officer and all other executive officers of
the Company at December 31, 1999 for services in all capacities provided to the
Company and its subsidiaries for the past three years.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual
Compensation Long Term Compensation
<S> <C> <C> <C> <C> <S> <C>
Other
Name and Annual Securities Underlying All Other
Principal Salary Bonus Compensation Options Compensation
Position Year $ $(2) $ (#) ($)(3)
Mark E. 1999 $350,000 - $ 25,023 20,500 $1,767
Goldstein 1998 $350,000 - $ 23,293 50,000 $2,850
President and 1997 $350,000 $140,373 $ 23,142 - $2,289
Chief Executive
Officer
Jerome J. 1999 $350,000 - $164,151 20,500 -
Goldstein (1) 1998 $350,000 - $115,222 50,000 $2,850
Chairman of The 1997 $350,000 $140,373 $ 88,442 - $2,289
Board
Carolyn J. 1999 $350,000 - $ 28,138 20,500 $1,767
Anderson 1998 $350,000 - $ 77,296 50,000 $2,850
Executive Vice 1997 $350,000 $140,373 $ 29,504 - $2,289
President,
Chief Operating
Officer,
Corporate
Secretary
Barry Shepard 1999 $350,000 - $ 45,103 20,500 $1,767
Treasurer and 1998 $350,000 - $ 45,585 50,000 $2,850
Assistant 1997 $350,000 $140,373 $106,062 - $2,289
Secretary
</TABLE>
Note: There were no restricted stock awards or long term incentive payouts
during the last three fiscal years; nor were there any long term compensation
awards, such as an award of stock options, during 1997. During 1998, options to
purchase 50,000 shares of the Company's common stock were awarded to each of the
Company's then executive officers at an average price of $1.77 a share. With
regard to 1999, see Option Grants in Last Fiscal Year.
(1) Deceased.
(2) The Company has adopted a bonus plan for its executive officers for the
year 2000. The Plan provides that an amount will be distributed to the
Company's executive officers equal to 10% of the annual before tax profit
exceeding $1 million, excluding items that are infrequent, unusual, or
extraordinary. Such amount, if any, for 2000 will be divided among the
Company's executive officers as follows: President, 35%, Executive Vice
President and Treasurer, 25% each, Vice President-Marketing, 15%. In no
event is a bonus paid unless pre-tax profits, excluding the above-mentioned
items, exceed $1,000,000 for the fiscal year, nor is any bonus paid on
the first $1,000,000 of pre-tax earnings, excluding the above mentioned
items. The Company had substantially the same a similar plan in 1999, 1998,
and 1997.
(3) All Other Compensation for each of the executive officers consists of
Company contributions under an Employee Stock Ownership Plan and Trust
Agreement ("ESOP") which provides that the Company may contribute annually
to the ESOP cash or common stock in an amount not to exceed 15% of all
participants' total compensation. The Board of Directors determines
whether any contributions will be made for the year. Benefits are allocated
to all eligible employees according to a formula based on compensation,
except that any income earned on assets of the Trust is allocated to ESOP
participants based upon the value that each participant's account bears to
the total value of Trust assets.
There were no changes in the base salaries of the Company's executive
officers from January 1, 1995 through December 31, 1999.
The dollar amount of Other Annual Compensation changes from year to year
because of fluctuations in the costs of benefits and their timing. Other Annual
Compensation in the table above for 1997 through 1999 is comprised of the
following:
<TABLE>
Mark E. Goldstein Jerome J. Goldstein
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1998 1999 1997 1998 1999
Automobile purchase (1) $ - $ - $ - $ - $ - $ 40,668
Income taxes on
automobile purchase (1) - - - - - 38,762
Other automobile expenses 919 1,318 1,785 364 1,549 1,229
Memberships 12,311 12,429 13,017 9,321 9,893 10,223
Life insurance 2,446 2,446 2,387 34,835 33,887 33,714
Income taxes on life insurance 2,273 2,285 2,286 32,797 32,544 31,660
Medical plan (2) 2,831 2,494 3,227 8,759 35,028 5,574
Other 2,362 2,321 2,321 2,366 2,321 2,321
Total other compensation $23,142 $23,293 $25,023 $88,442 $115,222 $164,151
Carolyn J. Anderson Barry Shepard
1997 1998 1999 1997 1998 1999
Automobile purchase (1) $ - $ 25,000 $ - $ 25,000 $ - $ -
Income taxes on
automobile purchase (1) - 24,068 - 24,068 - -
Other automobile expenses 2,706 806 537 1,929 2,809 2,473
Memberships 5,328 5,404 5,417 7,110 5,655 5,849
Life insurance 8,220 8,926 8,497 15,733 15,733 16,683
Income taxes on life insurance 7,648 7,680 8,338 13,812 14,699 14,699
Medical plan (2) 3,239 3,091 3,028 16,045 4,368 3,078
Other 2,363 2,321 2,321 2,365 2,321 2,321
Total other compensation $29,504 $77,296 $28,138 $106,062 $45,585 $45,103
</TABLE>
(1) Every three years, the Company provides $25,000, plus an amount to pay
resulting income taxes, to each executive officer for the purchase of an
automobile. Mr. Jerome J. Goldstein had not used this amount in the three
years prior to 1999 and therefore received a higher amount in 1999 when he
purchased an automobile.
(2) In addition to group life, health, hospitalization and medical
reimbursement plans which generally are available to all employees, the
Company has adopted a plan which provides for additional medical coverage of
not more than $50,000 per year to each of the Company's executive officers.
The plan further provides that, for a period of five years following an
executive officer's voluntary retirement, or involuntary retirement in the
event of a change in control of the Company, the Company will, at no cost
to the executive or his or her surviving dependents, cover the executive
and/or such dependents under the Company Health Plan and shall also
provide, at no cost to the executive, for the payment of additional
medical coverage of up to $50,000 a year.
The Company maintains a Key Executive Disability Plan, which is not
reflected in the table above. The purpose of this Plan is to provide the
executive with his or her regular salary during periods of long-term disability
in excess of 90 days to age 70, or to date of death, whichever first occurs.
Jerome J. Goldstein, who was Chairman of the Board until his death in January,
2000, had this benefit available for his lifetime. The benefits available under
this Plan will cease upon termination of employment as an executive officer of
the Company other than during a period of disability. The Plan is partially
funded by disability insurance maintained by the Company under which the Company
is the beneficiary.
Grant of Options
At March 8, 2000, 301,800 options had been granted under the Company's 1998
Stock Option Plan by the Company's Board of Directors to replace expired options
and one set of options that would have expired in February, 1999, all of which
were previously granted under other option plans. Of the 301,800 options
granted, 200,000 were granted, on November 24, 1998, to the Company's executive
officers, 50,000 to each of Carolyn J. Anderson and Barry Shepard at a price of
$1.69 per share and 50,000 to each of Jerome J. Goldstein and Mark E. Goldstein
at a price of $1.86 per share; and 101,800 were granted on January 11, 1999, of
which 82,000 were granted to the Company's executive officers, 20,500 to each of
Ms. Anderson and Mr. Shepard at a price of $1.56 per share and 20,500 to each of
Jerome J. Goldstein and Mark E. Goldstein at a price of $1.72 per share. The
aggregate of 70,500 in options granted to Mr. Jerome J. Goldstein are, pursuant
to the terms of the 1998 Plan, exercisable for one year following his death,
meaning, to January 4, 2001. One employee also received, on January 11, 1999, an
option for 19,800 shares at an exercise price of $1.56 per share. The grant of
these options did not increase the number of shares under option to each officer
from the number of shares previously awarded to each officer. The 1998 Plan was
approved by the Company's shareholders at the Annual Meeting of May 5, 1999.
The options granted under the 1998 Plan are not subject to any vesting
requirements and expire as follows: 70,500 on January 4, 2001, 150,000 on
November 23, 2003, and 81,300 on January 10, 2004. No option granted was
granted at a price lower than the closing price for the Company's common stock
on the New York Stock Exchange on the day before the grant.
Option Grants in Last Fiscal Year
The following table concerns the grant of options during the year ended
December 31, 1999 to executive officers of the Company:
<TABLE>
Individual Grants Annual Rates of Stock Price Appreciation
Number of
Securities % of Total
Underlying Options Granted Exercise or
Options Granted to Employees in Base Price
Name (#) (2) Fiscal Year ($/Share) Expiration Date 5%($)(1) 10%($)(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark E. Goldstein 20,500 20.1% 1.72 January 10, 2004 $5,600 $16,200
Jerome J. Goldstein 20,500 20.1% 1.72 January 4, 2001 (3) $5,600 $16,200
Carolyn J. Anderson 20,500 20.1% 1.56 January 10, 2004 $8,800 $19,500
Barry Shepard 20,500 20.1% 1.56 January 10, 2004 $8,800 $19,500
</TABLE>
(1) Assumes 5% and 10% growth per year based upon January 11, 1999 price of
$1.56/share.
(2) The options shown in the table above were issued under the Company's 1998
Stock Option Plan. Under that Plan, no option may be exercised more than ten
years after it is granted. If the option grant is for an incentive stock
option, the exercise price must be at least 100% of the fair market value of
the Company's stock on the date of grant. The exercise price for a
nonqualified stock option must be no less than 85% of the fair market value
of the Company's stock on the date of grant. If the grantee owns more than
10% of the Company's outstanding stock, then these limitations for an
incentive stock option are five years from the date of grant and 110% of the
fair market value. No incentive option may be granted to any person in any
year to purchase shares having an aggregate fair market value greater than
$100,000 at the date of the option grant. Payment for shares purchased upon
the exercise of any option must be made in cash.
(3) Exercisable only until January 4, 2001 due to the death of Jerome J.
Goldstein.
Outstanding Options
No options were exercised by any of the Company's executive officers during
1999. The following table summarizes information with respect to the value of
each officer's unexercised stock options at December 31, 1999.
<TABLE>
Fiscal Year End Option Values
Number of
Securities
Underlying In-the-Money
Unexercised Value of Unexercised
Options at Options at Year End (1)
Year End
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Mark E. Goldstein 70,500 0 0 0
Jerome J. Goldstein 70,500 0 0 0
Carolyn J. Anderson 70,500 0 0 0
Barry Shepard 70,500 0 0 0
</TABLE>
(1) The in-the-money value of unexercised options is equal to the excess of the
per share market price of the Company's stock at December 31, 1999 over the
per share exercise price multiplied by the number of unexercised options.
However, the per share exercise price was higher than the market price of the
Company's stock at year end.
COMPENSATION COMMITTEE REPORT
Background
The Compensation Committee of the Board of Directors is now comprised of
the Company's two outside directors and the Company's President (who serves as a
non-voting member of the Committee). During 1999, until October 31, 1999, when
Mr. Michael Sheets resigned from the Company's Board, the Compensation Committee
included three outside directors; and, until his death in January 2000, included
Jerome J. Goldstein, the Company's Chairman of the Board (as a non-voting member
of the Committee.) The responsibilities of the Compensation Committee include
the origination of all executive compensation proposals.
In making decisions regarding executive compensation, the Compensation
Committee considers a number of factors. The Compensation Committee has also
determined that an outside consultant on compensation matters should be used
once every three years.
Organization Philosophy
The Committee believes that the Company's organization and the specific
responsibilities of its executive officers are an essential part of analyzing
compensation levels. The first important point concerning the management of the
Company is that each executive subscribes to a team concept of executive
management, and operates in accordance with this concept. Although each of the
executive officers has his or her specific areas of responsibility and each is
able to and often does make independent decisions, the executive officers
operate as a collaborative team, and very few significant decisions are made
without input from the group as a whole.
Second, each executive officer is responsible for a number of distinct
areas and tasks. Each performs many tasks traditionally associated with "middle
management" in other companies in addition to their respective duties of top
level or executive management. As a result, the Company has very little "middle
management" and operates as a fairly lean organization compared to many of its
competitors.
From the time of the Company's formation until 1990, Jerome Goldstein
served as its President, Chief Executive Officer and Chairman of the Board. In
August 1990, he relinquished the titles of President and Chief Executive Officer
to Mark E. Goldstein, his son. At that time, Mr. Goldstein's relinquishment of
those positions in no sense constituted a retirement, nor a diminishment of his
contribution to the Company. Jerome Goldstein continued to be an important
driving force behind the Company's policies. Over the years, the Company relied
greatly on Jerome Goldstein's entrepreneurial skills and his talent with respect
to product development, design, advertising and marketing. In 1999, he
continued to be involved in a variety of decisions, helped in the development of
commercials and was a guide to management. Jerome Goldstein died in January,
2000.
Mark E. Goldstein has the basic responsibilities associated with being a
CEO of a public company. He is also actively involved in the sales and
marketing efforts of the Company and its development of new products. For
example Mark Goldstein is the primary contact with the Company's largest
account, Wal-Mart Stores, Inc., and he directs the Company's advertising and
promotional efforts. He ultimately is responsible for the day-to-day operations
of the Company, although he relies on the Company's other executive officers for
advice and counsel.
Carolyn J. Anderson has been employed by the Company for thirty years. She
became Corporate Secretary in 1973; she was promoted to Executive Vice President
in 1974; and Ms. Anderson was given the additional title and responsibilities of
Chief Operating Officer in 1982. As Chief Operating Officer, Ms. Anderson has a
direct responsibility for decision-making with respect to the day-to-day
operations of the Company's plant and facilities. Additionally, Ms. Anderson
directs the Company's research and development activities. Ms. Anderson also
plays a major role, in cooperation with Barry Shepard, with respect to the
Company's "human resources" decisions. Further, Ms. Anderson is, together with
Mr. Shepard, the primary contact for the Company's legal matters.
Barry Shepard performs all of the traditional functions of Treasurer and
Chief Financial Officer, including negotiations and maintenance of relationships
with creditors and the trustee for the Company's bonds. He has been with the
Company since 1981, and his role on the executive team has increased during his
tenure with the Company. Mr. Shepard supervises all of the back office
functions of the Company, including accounting, data processing, computer
operations and personnel.
Factors
In determining its recommendations on executive compensation, the Committee
considered the management organization as described above and the following
factors, among others:
(a) Services performed and time devoted to the Company by the executive;
(b) Amounts paid to executives in comparable companies;
(c) The size and complexities of the business;
(d) Successes achieved by the executive;
(e) The executive's abilities;
(f) Increase in volume of business during the executive's tenure;
(g) Corporate earnings and profits;
(h) Comparison of salary to distributions to stockholders;
(i) Prevailing economic conditions;
(j) Compensation paid to other employees of the corporation; and
(k) The amount previously paid to the executive.
Utilizing these factors, the Compensation Committee recommended that the
base salaries of the Company's executive officers remain the same in 1999 as in
1998 and that the components of other compensation provided to the Company's
executive officers also remain the same in 1999 as in 1998. These
recommendations were adopted by the Company's Board of Directors.
In making its recommendations for the compensation of executives in 1999,
the Compensation Committee noted, among other things, that: (1) The executive
officers devote considerable time to the Company, often more than full-time; (2)
the Company's philosophy as to its employees in general is that good employees,
who are paid well and stay with the Company, contribute significantly to the
successes of the Company's businesses; (3) with respect to base salaries, the
base salaries of the Company's executive officers prior to 1995 had not changed
since October 30, 1988, and then, increased in the aggregate by only 13.5%; (4)
the bonus plan has been in effect for a number of years, with a result of
decreasing compensation in 1996, 1998, and 1999 because of the Company's
performance; (5) the Company's emphasis is on the bonus plan and performance and
successes achieved by executives; (6) the levels of the bonus plan and other
components of compensation have been in effect for a number of years; (7) the
Company's officers were awarded only modest stock options in 1998 and 1999,
having received none since 1994 and those options replaced options that either
had expired or were about to expire; and (8) the anticipated amounts paid for
the base salary and bonus in 1999 were and are expected to be tax deductible,
without being subject to a limitation on the deductibility of certain
compensation in excess of $1 million under the Internal Revenue Code. The
Committee believed that the roles of the Company's officers were more difficult
because of decreasing sales of the Company's products and competitive and market
factors, including the consolidation of manufacturers, the consolidation of
retailers and the state of art in business practices.
In terms of performance by the executives in 1998, the Committee noted a
number of factors, including, among others, the following:
> The Company experienced a net loss in 1998, as the market for alpha hydroxy
acid products matured, and the management has been seeking to turn-around
the operating results;
> A retinol product was introduced, with wide distribution;
> The Company maintained distribution of its basic Alpha Hydrox items;
> The Company formed an alliance for skin care products designed for
diabetics;
> The Company expanded international markets, although the total sales of
products outside of North America were low;
> The Company maintained the core sales of its household product, Scott's
Liquid Gold for wood;
> Scott's Liquid Gold for wood sales increased in 1998, although it required
a heavy investment in advertising;
> Touch of Scent distribution was maintained;
> Touch of Scent pricing structure was changed;
> Touch of Scent packaging was changed;
> Advertising for Alpha Hydrox products and Touch of Scent was revised;
> The Company maintained customer relationships in the face of changing
circumstances;
> Cost savings were implemented;
> The Company defended vigorously and won the Brooks lawsuit in the midst of
a difficult year in terms of sales;
> Employee relations remained good;
> The financial management was significant in maintaining the Company's good
financial condition, including to continuing to satisfy convenants for the
Company's bonds and setting aside funds to repay those bonds; and
> The cash-flow of the Company was managed well.
In 1992, the Compensation Committee decided to engage a consultant on
compensation matters every three years. A consultant was engaged in 1992 and
also in 1994 and 1997. The consultant selected by the Committee was the Hay
Group. In 1997, the Hay Group was asked to assess the competitiveness of the
executive compensation levels of the Company. Their report, issued in July,
1997, concluded that overall the total direct compensation practices of the
Company fall within a peer group competitive range, with competitiveness of the
pay packages varying by executive. Base salaries were viewed as in line with
competitive practices; annual incentive awards were below competition, with the
size of the annual incentive being a direct result of Company performance; and
long-term incentive awards, such as stock options, were below competitive
practices.
The Company's 1999 executive bonus plan provided for a bonus pool based on
10% of pre-tax profits (excluding items that are infrequent, unusual or
extraordinary) for a year in excess of $1 million. The Company's key executive
officers would have shared equally any bonus awarded under the plan. The
Company had substantially the same plan in prior years. The Compensation
Committee believes that this bonus plan was an important part of the incentives
for the Company's executive officers and recognized directly many of the factors
considered important by the Compensation Committee as stated above.
The Company provides certain other benefits and perquisites to the
executive officers. The Committee believes that the types of benefits offered to
Company executives and the value of these benefits are similar to benefit
packages provided by competitors. While the Hay Group report in 1992 found that
the Company had a comprehensive executive benefits package, there are several
other common benefit programs that the Company does not provide to its
executives. A number of the benefits are provided by the Company not only to
the executive officers but also to other Company employees. These benefits are
appropriate for their positions, to compensate them consistent with market
levels and to facilitate performance of their jobs in a more efficient and
effective manner.
In conclusion, the factors described above remain applicable for 1999, and
the Compensation Committee believes that the levels of compensation for the
Company's executive officers have been fair and appropriate.
COMPENSATION COMMITTEE
Dennis H. Field
James F. Keane
Mark E. Goldstein
Stock Performance Graph
There follows a graph, constructed for the Company, comparing the
cumulative total shareholder return of Scott's Liquid Gold-Inc. common stock to
the Media General Composite Index (see below), and to a selected peer group.
<TABLE>
1994 1995 1996 1997 1998 1999
<C> <C> <C> <C> <C> <C> <C>
Scott's Liquid Gold 100 49.81 25.99 55.22 25.51 12.75
Old Peer Group 100 135.03 181.58 267.17 321.87 369.35
Media General
Composite Index 100 129.66 156.58 203.33 248.56 303.21
New Peer Group 100 135.44 182.52 269.12 324.85 372.42
</TABLE>
Fiscal year ended December 31
Assumes $100 invested on December 31, 1994
in the Company, the Peer Group,
The NYSE CompositeMedia General Composite Index
and assumes the reinvestment of any dividends
Note: The foregoing graph was prepared for the Company by Media General
Financial Services of Richmond, Virginia. The peer group selected by the
Company consists of companies which use the standard industrial classification
of specialty cleaning and sanitation and which are publicly held, and other
publicly held companies which are partially or entirely engaged in the cosmetics
business. The Company believes that, within its industry classes, the assembly
of a peer group is difficult because the Company competes with other companies
that are significantly larger than Scott's Liquid Gold-Inc., including two major
companies which are not publicly traded.
The peer group selected by the Company was changed from that used in the
preceding year because the Company considered the new peer group more
representative of its industry, and because of the change late in 1999 form the
New York Stock Exchange to the NASD Over-The-Counter Bulletin Board. The
following companies comprise the peer group: Avon Products, Inc., CCA
Industries, Inc., Chattem, Inc., Clorox Co. (includes Armor All Products,
acquired by Clorox Co. in 1997), Del Laboratories, Inc., and Procter & Gamble.
The Media General Composite Index is based on the market value of all common
stocks listed on the NYSE, AMEX and Nasdaq National Market. The index is
adjusted for all stock splits and dividends.
Compensation of Directors
Three directors are full-time executive officers of the Company and receive
no additional compensation for service as a director. Dennis H. Field, and James
F. Keane are non-employee directors. The Company pays $2,500 per month to each
non-employee director for his services as director. Michael J. Sheets, who is no
longer a director, was paid $1,667 per month through October, 1999 as a
consultant to the Company, primarily in the area of marketing and advertising.
On January 15, 1993, the Company's Board of Directors adopted the Company's
1993 Stock Option Plan for Outside Directors (the "Plan"), which was approved by
the Company's shareholders on May 5, 1993. The Plan provides for the granting
of options to directors who are not employees of the Company. The purpose of the
Plan is to further the growth and development of the Company by providing an
incentive to outside directors of the Company, by increasing their involvement
in the business and affairs of the Company, by helping the Company to attract
and retain well qualified directors and/or by rewarding directors for their past
dedication to the Company. The Plan became effective on January 15, 1993.
A maximum of 400,000 shares of the Company's common stock are available for
issuance upon the exercise of options granted under the Plan. The number of
shares available under the Plan, the number of shares subject to outstanding
options, and the exercise price per share of such options are subject to
adjustment on account of stock dividends, stock splits, mergers, consolidations,
recapitalizations, combinations or exchanges of stock, or other similar
circumstances. If any option under the Plan terminates or expires, the shares
allocable to the unexercised portion of the option will again be available for
purposes of the Plan.
The Plan is administered by the Board of Directors or a committee appointed
by and serving at the pleasure of the Board of Directors, consisting of no fewer
than two directors. The Plan is currently administered by the Board of
Directors. At March 8, 2000, options to purchase 399,999 shares of the
Company's common stock had been granted under the Plan, of which 48,333 were
surrendered during 1999. Except for the exercise of options for 100,000 shares
by Mr. Sheets, who resigned from the Board during 1999, no options had been
exercised at or prior to March 8, 2000. The outstanding options are held as
follows by the non-employee directors:
<TABLE>
Year End Option Values
Number of Securities In-the-Money
Underlying Unexercised Value of Unexercised
Options at Year End Options at Year End
(1)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Dennis H. Field 148,333 0 0 0
James F. Keane 103,333 0 0 0
</TABLE>
(1) The in-the-money value of unexercised options is equal to the excess of the
per share market price of the Company's stock at December 31, 1999 over the
per share exercise price multiplied by the number of unexercised options.
TRANSACTIONS WITH MANAGEMENT
The Company has indemnification agreements with each of its directors and
executive officers. These agreements provide for indemnification and
advancement of expenses to the full extent permitted by law in connection with
any proceeding in which the person is made a party because the person is a
director or officer of the Company. They also state certain procedures,
presumptions and terms relevant to indemnification and advancement of expenses.
Until January, 1999, the Company, Neoteric Cosmetics, Inc. (a wholly-owned
subsidiary), and the Company's then Chairman, Jerome J. Goldstein, were
defendants in a lawsuit in the federal District Court for the District of
Colorado brought by Leslee Brooks (a daughter of Mr. Jerome J. Goldstein), her
husband, Dr. Norman Brooks (a California dermatologist), and a related
corporation. The lawsuit involved a claim for compensation by the Brooks
relating to Alpha Hydrox products. On July 24, 1998, a jury unanimously found
in favor of the Company, its subsidiary, and Jerome J. Goldstein. The jury
found that there was no liability as to each claim of the plaintiffs.
Subsequently, the plaintiffs in the Brooks case filed an appeal of the judgment
to the United States Tenth Circuit Court of Appeals. On January 21, 1999, the
Company entered into a settlement agreement with the plaintiffs in the Brooks
case, under which the Company paid $225,000 to the plaintiffs. The settlement
results in a dismissal of the appeal of that case and a release regarding the
Company and the other defendants in the case. The Company continues to believe
that the claims of the plaintiffs in the Brooks case were groundless. The
settlement allowed the Company to avoid the cost, time, and any uncertainty
involved in an appeal of the case. The Company and Jerome J. Goldstein engaged
the same counsel for the defense of the Brooks case, and all legal fees and
costs of the Brooks case, including the settlement amount, were paid by the
Company, amounting to a total of approximately $970,000. In February, 1999, the
Board of Directors approved and authorized the indemnification of Jerome
Goldstein for attorneys' fees, costs and the settlement amount in the Brooks
case to the extent they may be considered expenses or costs of Mr. Goldstein.
Also in February, 1999, the Company settled its claim against the insurer under
the Company's directors and officers liability insurance for reimbursement of
$550,000 of the legal expenses and settlement amount paid by the Company with
respect to the Brooks case.
SECTION 16 REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and beneficial owners of more than 10% of the outstanding
shares of the Company to file with the Securities and Exchange Commission
reports regarding changes in their beneficial ownership of shares in the
Company. To the Company's knowledge, there was full compliance with all Section
16(a) filing requirements applicable to those persons for 1999.
COMPANY ACCOUNTANTS
Arthur Andersen LLP were selected by the Board of Directors as the
Company's independent auditors for the fiscal year ended December 31, 1999. The
Company selected the same firm as the Company's independent auditors for the
fiscal year ending December 31, 2000. A representative of Arthur Andersen LLP is
expected to be present at the Annual Meeting of Shareholders and to have the
opportunity to make a statement if he so desires. Such representative also is
expected to be available to respond to appropriate questions at that time.
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Company's proxy materials
relating to the next annual meeting of shareholders must be received by the
Company on or before November 24, 2000. Also, persons named in the proxy
solicited by the Board of Directors of the Company for its year 2000 annual
meeting of shareholders may exercise discretionary authority on any proposal
presented by a shareholder of the Company at that meeting if the Company has not
received notice of the proposal by February 8, 2001.
1999 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S FORM 10-K REPORT FOR 1999 CONSISTS PRIMARILY OF CROSS
REFERENCES TO INFORMATION IN THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS AND
THIS PROXY STATEMENT AND IS FILED ELECTRONICALLY WITH THE SECURITIES AND
EXCHANGE COMMISSION. SHAREHOLDERS WHO WISH TO OBTAIN, WITHOUT CHARGE, A COPY OF
THE COMPANY'S FORM 10-K REPORT FOR THE YEAR ENDED DECEMBER 31, 1999 IN THE FORM
FILED WITH THE SEC SHOULD ADDRESS A WRITTEN REQUEST TO CAROLYN J. ANDERSON,
CORPORATE SECRETARY, SCOTT'S LIQUID GOLD-INC., 4880 HAVANA STREET, DENVER,
COLORADO 80239.
SOLICITATION OF PROXIES
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by mail, proxies may be solicited by officers
and other regular employees of the Company by telephone, telegraph or by
personal interview for which employees will not receive additional compensation.
Arrangements also may be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to beneficial owners
of the shares held of record by such persons, and the Company may reimburse such
persons for reasonable out-of pocket expenses incurred by them in so doing.
OTHER BUSINESS
As of the date of this Proxy Statement, Management was not aware that any
business not described above would be presented for consideration at the
meeting. If any other business properly comes before the meeting, it is
intended that the shares represented by proxies will be voted in respect thereto
in accordance with the judgment of the persons voting them.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
CAROLYN J. ANDERSON
Corporate Secretary
Denver, Colorado
March 24, 2000
