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

Rhea-AI Summary

Scott’s Liquid Gold reported a net sales decline to $4.3 million in Q3 2022 from $8.0 million in 2021, largely attributed to the sale of the Dryel brand and an ended distribution agreement for Batiste products. However, net loss improved to $0.7 million from $2.5 million year-over-year, aided by reduced operating expenses and improved margins. The company is facing challenges in adjusting to customer purchasing behaviors and supply chain hurdles but is focused on cost reductions and operational efficiencies amid a challenging environment.

Positive

• Net loss decreased significantly to $0.7 million from $2.5 million year-over-year.
• Reduction in operating expenses contributed to improved margins.

Negative

• Net sales dropped by 46% year-over-year due to the sale of Dryel and the end of the Batiste distribution agreement.
• Sales of Alpha Skin Care products in China declined after terminating the exclusive distributor.
• Ongoing challenges with customer purchasing strategies and supply chain issues.

Third Quarter 2022 Highlights:

• Third quarter 2022 net sales of $4.3 million vs. $8.0 million of net sales in 2021
• Net loss of $0.7 million in Q3 2022 vs. $2.5 million in 2021

GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)-- Scott’s Liquid Gold-Inc. (OTC: SLGD) today announced results for the three months ended September 30, 2022.

Third Quarter Financial Results

In the third quarter of 2022, net sales decreased primarily due to the sale of the Dryel brand and the conclusion of our agreement to distribute Batiste products. Sales of our Alpha Skin Care products destined for the China market decreased, as we terminated our relationship with our exclusive distributor in China in the second quarter of 2022. Net sales from other product lines decreased primarily due to changes in our customers’ purchasing strategies related to inventory control measures as well as supply chain challenges with certain BIZ products.

Our net loss decreased versus the prior year due to reductions in various operating expenses and improved margins on the products we sold to our customers. Income tax expense decreased in the third quarter of 2022 versus the same period in 2021 due to the realization of a valuation allowance on our deferred tax asset in 2021.

Management Commentary

“Our team is adapting to the changing environment with our customers’ order patterns and inventory management, and we remain focused on delivering for our retail customers and consumers,” said Tisha Pedrazzini, President of Scott’s. “We expect the operating environment to remain challenging. While our efforts to reduce overhead and operating expenses have been successful, we are committed to further cost reductions and efficiencies to optimize our business.”

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2022				2021				2022				2021
Net sales	$	4,277			$	7,970			$	15,449			$	24,583
Cost of sales		2,358				5,100				8,337				14,624
Gross profit		1,919				2,870				7,112				9,959
Operating expenses:
Advertising		166				144				492				506
Selling		1,691				2,542				5,752				7,388
General and administrative		578				836				2,020				3,782
Intangible asset amortization		87				278				313				834
Impairment of goodwill and intangible assets		-				-				3,589				-
Total operating expenses		2,522				3,800				12,166				12,510
Loss from operations		(603	)			(930	)			(5,054	)			(2,551	)
Interest expense		(139	)			(109	)			(419	)			(219	)
Loss before income taxes and discontinued operations		(742	)			(1,039	)			(5,473	)			(2,770	)
Income tax expense		(2	)			(1,224	)			(55	)			(798	)
Loss from continuing operations		(744	)			(2,263	)			(5,528	)			(3,568	)
Loss from discontinued operations, net of taxes		-				(205	)			-				(246	)
Net loss	$	(744	)		$	(2,468	)		$	(5,528	)		$	(3,814	)
Basic and diluted net loss per common shares:
Loss from continuing operations	$	(0.06	)		$	(0.18	)		$	(0.43	)		$	(0.28	)
Loss from discontinued operations	$	-			$	(0.02	)		$	-			$	(0.02	)
Net loss	$	(0.06	)		$	(0.20	)		$	(0.43	)		$	(0.30	)
Weighted average shares outstanding:
Basic and diluted		12,749				12,642				12,747				12,628

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except par value amounts)
	September 30,				December 31,
	2022				2021
Assets
Current assets:
Cash	$	14			$	770
Restricted cash		125				500
Accounts receivable, net		1,791				3,516
Inventories		6,289				5,677
Income taxes receivable		247				320
Prepaid expenses		214				436
Total current assets		8,680				11,219
Property and equipment, net		3				7
Goodwill		838				1,710
Intangible assets, net		2,272				5,160
Operating lease right-of-use assets		2,553				2,735
Other assets		38				38
Total assets	$	14,384			$	20,869
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,750			$	2,647
Accrued expenses		397				747
Current portion of long-term debt		2,684				1,000
Operating lease liabilities, current portion		264				251
Total current liabilities		5,095				4,645
Long-term debt, net of current portion and debt issuance costs		555				1,876
Operating lease liabilities, net of current		2,581				2,780
Other liabilities		27				27
Total liabilities		8,258				9,328
Shareholders’ equity:
Preferred Stock, no par value, authorized 20,000 shares; no shares issued and outstanding		-				-
Common Stock; $0.10 par value, authorized 50,000 shares; issued and outstanding 12,749 shares (2022) and 12,727 shares (2021)		1,275				1,273
Capital in excess of par		7,900				7,789
(Accumulated deficit) retained earnings		(3,049	)			2,479
Total shareholders’ equity		6,126				11,541
Total liabilities and shareholders’ equity	$	14,384			$	20,869

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
	Nine Months Ended
	September 30,
	2022				2021
Cash flows from operating activities:
Net loss	$	(5,528	)		$	(3,568	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		480				1,357
Stock-based compensation		113				99
Deferred income taxes		-				784
Impairment of goodwill and intangible assets		3,589				-
Change in operating assets and liabilities:
Accounts receivable		1,725				228
Inventories		(612	)			(2,651	)
Prepaid expenses and other assets		222				175
Income taxes receivable		73				192
Accounts payable, accrued expenses, and other liabilities		(1,251	)			1,990
Total adjustments to net loss		4,339				2,174
Net cash used in operating activities		(1,189	)			(1,394	)
Cash flows from investing activities:
Purchase of software		(142	)			(262	)
Net cash used in investing activities		(142	)			(262	)
Cash flows from financing activities:
Repayments on term loans		(2,000	)			(750	)
Proceeds from revolving credit facility		20,763				29,824
Repayments of revolving credit facility		(18,563	)			(27,222	)
Proceeds from exercise of stock options		-				57
Net cash provided by financing activities		200				1,909
Net (decrease) increase in cash and restricted cash		(1,131	)			253
Cash and restricted cash, beginning of period		1,270				5
Cash and restricted cash, end of period	$	139			$	258
Supplemental disclosures:
Cash paid during the period for interest	$	256			$	372

Note Regarding Forward-Looking Statements

This news release may contain "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "assumptions," "target," "guidance," “strategy,” "outlook," "plans," "projection," "may," "will," "would," "expect," "intend," "estimate," "anticipate," "believe”, "potential," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology.

Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, or results. All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events or circumstances to differ from those in forward-looking statements are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 and the Company's subsequent Quarterly Reports on Form 10-Q and other periodic reports filed with the Securities and Exchange Commission. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent filings with the Securities and Exchange Commission.

About Scott’s Liquid Gold-Inc.

Scott’s Liquid Gold-Inc. exists to positively impact consumers’ lives in the markets we serve while creating shareholder value. We develop, market, and sell high-quality, high-value household and health and beauty care products nationally and internationally to mass merchandisers, drugstores, supermarkets, hardware stores, e-commerce retailers, other retail outlets, and to wholesale distributors.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221114005202/en/

Investor Relations Contact:

David Arndt

Chief Financial Officer

303.576.6027

Source: Scott’s Liquid Gold-Inc.

FAQ

What were Scott's Liquid Gold's net sales for Q3 2022?

Scott's Liquid Gold reported net sales of $4.3 million for Q3 2022.

How much did Scott's Liquid Gold lose in Q3 2022?

The company recorded a net loss of $0.7 million in Q3 2022.

What factors contributed to the sales decline at Scott's Liquid Gold?

The sales decline was primarily due to the sale of the Dryel brand and the conclusion of the Batiste distribution agreement.

What is the outlook for Scott's Liquid Gold amid operational challenges?

Scott's Liquid Gold expects to face ongoing challenges related to customer purchasing patterns and supply chain issues, but is focused on cost reductions.