UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
September 30, 2007
Commission File No. 001-13458
SCOTT'S LIQUID GOLD-INC.
4880 Havana Street
Denver, CO 80239
Phone: 303-373-4860
Colorado 84-0920811
State of Incorporation I.R.S. Employer
Identification No.
Check whether the issuer: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X]
As of September 30, 2007, the Registrant had 10,560,000 of its
$0.10 par value common stock outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net sales $ 4,644,100 $ 3,842,400 $12,810,100 $12,131,500
Operating costs
and expenses:
Cost of sales 2,609,300 2,069,300 7,296,400 6,880,200
Advertising 66,700 360,900 267,800 1,062,200
Selling 1,406,900 1,353,400 4,041,300 4,189,100
General and
administrative 735,800 791,400 2,318,700 2,566,700
----------- ----------- ----------- -----------
4,818,700 4,575,000 13,924,200 14,698,200
----------- ----------- ----------- -----------
Loss from
operations (174,600) (732,600) (1,114,100) (2,566,700)
Gain on disposal
of assets - 67,100 - 67,100
Interest income 16,700 35,300 60,600 62,200
Interest expense (107,600) (110,800) (315,700) (211,200)
----------- ----------- ----------- -----------
Loss before
income taxes (265,500) (741,000) (1,369,300) (2,648,600)
Income tax expense
(benefit) - - - -
----------- ----------- ----------- -----------
Net loss $ (265,500) $ (741,000) $(1,369,300) $(2,648,600)
=========== =========== =========== ===========
Net loss per
common share
(Note 3):
Basic $ (0.03) $ (0.07) $ (0.13) $ (0.25)
=========== =========== =========== ===========
Diluted $ (0.03) $ (0.07) $ (0.13) $ (0.25)
=========== =========== =========== ===========
Weighted average
shares outstanding:
Basic 10,545,000 10,503,000 10,537,000 10,503,000
=========== =========== =========== ===========
Diluted 10,545,000 10,503,000 10,537,000 10,503,000
=========== =========== =========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Balance Sheets
September 30 December 31,
2007 2006
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,248,100 $ 2,804,100
Investment securities 50,400 51,100
Trade receivables, net of allowance
for doubtful accounts of $62,800
and $62,000, respectively 1,218,600 743,700
Other receivables 55,100 55,500
Inventories, net 3,523,500 3,291,400
Prepaid expenses 273,400 161,600
----------- -----------
Total current assets 6,369,100 7,107,400
Property, plant and equipment, net 12,739,300 13,159,700
Other assets 56,500 59,700
----------- -----------
TOTAL ASSETS $19,164,900 $20,326,800
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,343,900 $ 1,893,600
Accrued payroll and benefits 775,500 866,400
Other accrued expenses 353,500 417,100
Current maturities of long-term debt 200,700 191,600
----------- -----------
Total current liabilities 3,673,600 3,368,700
Long-term debt, net of current maturities 4,724,900 4,875,500
----------- -----------
8,398,500 8,244,200
Commitments and contingencies
Shareholders' equity:
Common stock; $.10 par value, authorized
50,000,000 shares; issued and
outstanding 10,560,000 shares 1,056,000 1,053,300
Capital in excess of par 5,066,900 5,015,800
Accumulated comprehensive income 400 1,100
Retained earnings 4,643,100 6,012,400
----------- -----------
Shareholders' equity 10,766,400 12,082,600
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $19,164,900 $20,326,800
=========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
--------------------------
2007 2006
----------- -----------
Cash flows from operating activities:
Net loss $(1,369,300) $(2,648,600)
----------- -----------
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation and amortization 484,700 533,000
Stock issued to ESOP 25,100 48,700
Stock options granted 28,700 -
Gain on disposal of assets (200) (67,100)
Changes in assets and liabilities:
Trade and other receivables, net (474,500) 872,400
Inventories, net (232,100) (656,600)
Prepaid expenses (111,800) (80,000)
Accounts payable and accrued expenses 295,800 541,800
----------- ----------
Total adjustments to net loss 15,700 1,192,200
----------- -----------
Net Cash Used by Operating Activities (1,353,600) (1,456,400)
----------- -----------
Cash flows from investing activities:
Proceeds from disposal of assets 200 93,800
Purchase of property, plant & equipment (61,100) (84,200)
----------- -----------
Net Cash Provided (Used) by
Investing Activities (60,900) 9,600
----------- -----------
Cash flows from financing activities:
Proceeds from long-term borrowings - 5,156,600
Short-term borrowings (payments), net - (570,000)
Purchase of stock for contribution to ESOP - (48,700)
Principal payments on long-term borrowings (141,500) (1,938,200)
Loan origination fees and other costs - (64,600)
----------- -----------
Net Cash Provided (Used) by
Financing Activities (141,500) 2,535,100
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (1,556,000) 1,088,300
Cash and Cash Equivalents,
beginning of period 2,804,100 2,260,700
----------- -----------
Cash and Cash Equivalents, end of period $ 1,248,100 $ 3,349,000
=========== ===========
Supplemental disclosures:
Cash paid during period for:
Interest $ 316,800 $ 215,900
=========== ===========
Income taxes $ 2,000 $ 1,100
=========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies
(a) Company Background
Scott's Liquid Gold-Inc. (a Colorado corporation) was incorporated
on February 15, 1954. Scott's Liquid Gold-Inc. and its wholly owned
subsidiaries (collectively, "we" or "our") manufacture and market
quality household and skin care products, and we fill, package and
market our Mold Control 500 product. Since the first quarter of 2001,
we have acted as a distributor in the United States of beauty care
products contained in individual sachets and manufactured by Montagne
Jeunesse. Our business is comprised of two segments, household products
and skin care products.
(b) Principles of Consolidation
Our consolidated financial statements include our accounts and
those of our subsidiaries. All intercompany accounts and transactions
have been eliminated.
(c) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates include, but are not limited to, realizability
of deferred tax assets, reserves for slow moving and obsolete inventory,
customer returns, coupon redemptions and allowances, and bad debts.
(d) Cash Equivalents
We consider all highly liquid investments with an original
maturity of three months or less at the date of acquisition to be cash
equivalents.
(e) Investments in Marketable Securities
We account for investments in marketable securities in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115
"Accounting for Certain Investments in Debt and Equity Securities",
which requires that we classify investments in marketable securities
according to management's intended use of such investments. We invest
our excess cash and have established guidelines relative to
diversification and maturities in an effort to maintain safety and
liquidity. These guidelines are periodically reviewed and modified to
take advantage of trends in yields and interest rates. We consider
all investments as available for use in our current operations and,
therefore, classify them as short-term, available-for-sale investments.
Available-for-sale investments are stated at fair value, with
unrealized gains and losses, if any, reported net of tax, as a separate
component of shareholders' equity and comprehensive income (loss).
The cost of the securities sold is based on the specific identification
method. Investments in corporate and government securities as of
September 30, 2007, are scheduled to mature within one year.
(f) Inventories
Inventories consist of raw materials and finished goods and are
stated at the lower of cost (first-in, first-out method) or market.
We record a reserve for slow moving and obsolete products and raw
materials. We estimate reserves for slow moving and obsolete products
and raw materials based upon historical and anticipated sales.
Inventories were comprised of the following at:
September 30, 2007 December 31, 2006
------------------ -----------------
Finished goods $ 2,562,500 $ 2,435,400
Raw materials 1,368,700 1,337,200
Inventory reserve
for obsolescence (407,700) (481,200)
----------- -----------
$ 3,523,500 $ 3,291,400
=========== ===========
(g) Property, Plant and Equipment
Property, plant and equipment are recorded at historical cost.
Depreciation is provided using the straight-line method over estimated
useful lives of the assets ranging from three to forty-five years.
Building structures and building improvements are estimated to have
useful lives of 35 to 45 years and 3 to 20 years, respectively.
Production equipment and production support equipment are estimated to
have useful lives of 15 to 20 years and 3 to 10 years, respectively.
Office furniture and office machines are estimated to have useful
lives of 10 to 20 and 3 to 5 years, respectively. Carpeting, drapes and
company vehicles are estimated to have useful lives of 5 to 10 years.
Maintenance and repairs are expensed as incurred. Improvements that
extend the useful lives of the assets or provide improved efficiency
are capitalized.
(h) Financial Instruments
Financial instruments which potentially subject us to
concentrations of credit risk include cash and cash equivalents,
investments in marketable securities, and trade receivables. We
maintain our cash balances in the form of bank demand deposits with
financial institutions that management believes are creditworthy. As
of the balance sheet date and periodically throughout the year, the
Company has maintained balances in various operating accounts in
excess of federally insured limits. We establish an allowance for
doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends and other information. We have
no significant financial instruments with off-balance sheet risk of
accounting loss, such as foreign exchange contracts, option contracts
or other foreign currency hedging arrangements.
The recorded amounts for cash and cash equivalents, receivables,
other current assets, and accounts payable and accrued expenses
approximate fair value due to the short-term nature of these financial
instruments. The fair value of investments in marketable securities
is based upon quoted market value. Our long-term debt bears interest
at a fixed rate that adjusts annually on the anniversary date to a
then prime rate. The carrying value of long-term debt approximates
fair value as of September 30, 2007 and December 31, 2006.
(i) Long-Lived Assets
We account for long-lived assets in accordance with the provisions
of SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." This Statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs
to sell.
(j) Income Taxes
We account for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes", which requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences attributable to differences between the
financial statement carrying amounts of assets and liabilities and
their respective income tax bases. A valuation allowance is provided
when it is more likely than not that some portion or all of a deferred
tax asset will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income
during the period in which related temporary differences become
deductible. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.
(k) Revenue Recognition
Revenue is recognized when an arrangement exists to sell our
product, we have delivered such product in accordance with that
arrangement, the sales price is determinable, and collectibility is
probable. Reserves for estimated market development support, pricing
allowances and returns are provided in the period of sale as a reduction
of revenue. Reserves for returns and allowances are recorded as a
reduction of revenue, and are maintained at a level that management
believes is appropriate to account for amounts applicable to existing
sales. Reserves for coupons and certain other promotional activities
are recorded as a reduction of revenue at the later of the date at
which the related revenue is recognized or the date at which the sales
incentive is offered. At September 30, 2007 and December 31, 2006
approximately $839,000 and $649,000, respectively, had been reserved
as a reduction of accounts receivable, and approximately $32,000 and
$50,000, respectively, had been reserved as current liabilities.
Co-op advertising, marketing funds, slotting fees and coupons are
deducted from gross sales and totaled $1,797,000, and $1,804,000 at
September 30, 2007 and 2006, respectively.
(l) Advertising Costs
We expense advertising costs as incurred.
(m) Stock-based Compensation
At September 30, 2007, we had four stock-based employee
compensation plans. During the first quarter of fiscal 2007, we adopted
the provisions of, and account for stock-based compensation in
accordance with, the Financial Accounting Standards Board's ("FASB")
Statement of Financial Accounting Standards No. 123-revised 2004
("SFAS 123R"), "Share-Based Payment" which replaced Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees." Under the fair value
recognition provisions of this statement, stock-based compensation cost
is measured at the grant date based on the fair value of the award and
is recognized as expense on a straight-line basis over the requisite
service period, which is the vesting period. We elected the
modified-prospective method, under which prior periods are not revised
for comparative purposes. The valuation provisions of SFAS 123R apply
to new grants and to grants that were outstanding as of the effective
date and are subsequently modified. No grants occurred in 2006
subsequent to the adoption of SFAS 123R and all outstanding options
granted prior to December 31, 2006 were fully vested as of
December 31, 2006.
Prior to January 1, 2006, we accounted for the plans described
above under the recognition and measurement principles of APB Opinion
No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is reflected
in net income prior to January 1, 2006, as all options granted under
those plans had an exercise price not less than the market value of the
underlying common stock on the date of grant.
During the third quarter of 2007 we granted options for 92,000
shares of our common stock at $0.82 per share and 2,000 shares of our
common stock at $0.85 per share to employees. During the first quarter
of 2007, we granted 448,550 options for shares of our common stock
(268,500 to employees and 180,000 to non-employee directors) at $0.82
per share. The options which vest ratably over forty-eight months, or
upon a change in control, and which expire after five years, were
granted at or above the market value as of the date of grant.
The weighted average fair market value of the options granted in
the first quarter of 2007 of $0.42 was estimated on the date of grant
using a Black-Scholes option pricing model with the following assumptions.
Expected life of options 4.5 years
Risk-free interest rate 4.46%
Expected volatility of stock 58%
Expected dividend rate None
The weighted average fair market value of the options granted in
the third quarter of 2007 of $0.47 was estimated on the date of each grant
using a Black-Scholes option pricing model with the following assumptions.
Expected life of options 4.5 years
Risk-free interest rate 4.2%
Expected volatility of stock 57%
Expected dividend rate None
Compensation cost related to stock options recognized in
operating results (included in general and administrative expenses)
under SFAS 123R was $28,700 in the nine months ended September 30, 2007.
Approximately $200,700 of total unrecognized compensation costs related
to non-vested stock options is expected to be recognized over the next
forty-one to forty-seven months. In accordance with SFAS 123R, there
was no tax benefit from recording the non-cash expense as relates to
the options granted to employees as these were qualified stock options
which are not normally tax deductible. With respect to the non-cash
expense associated with the options granted to the non-employee
directors, no tax benefit was recognized due to the existence of as yet
unutilized net operating losses. At such time as these operating losses
have been utilized and a tax benefit is realized from the issuance of
non-qualified stock options, a corresponding tax benefit may be
recognized.
(n) Comprehensive Income
We follow SFAS No. 130, "Reporting Comprehensive Income" which
establishes standards for reporting and displaying comprehensive income
and its components. Comprehensive income includes all changes in equity
during a period from non-owner sources.
The following table is a reconciliation of our net loss to our
total comprehensive loss:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2007 2006 2007 2006
---------- ---------- ----------- -----------
Net loss $ (265,500) $ (741,000) $(1,369,300) $(2,648,600)
Unrealized gain
(loss) on investment
securities (100) 400 (700) (800)
---------- ---------- ----------- -----------
Comprehensive loss $ (265,600) $ (740,600) $(1,370,000 $(2,649,400)
========== ========== =========== ===========
(o) Operating Costs and Expenses Classification
Cost of sales includes costs associated with manufacturing and
distribution including labor, materials, freight-in, purchasing and
receiving, quality control, internal transfer costs, repairs,
maintenance and other indirect costs, as well as warehousing and
distribution costs. We classify shipping and handling costs comprised
primarily of freight-out and nominal outside warehousing costs as a
component of selling expense on the accompanying Consolidated
Statement of Operations. Shipping and handling costs totaled
$1,148,800 and $1,106,800 for the nine months ended September 30, 2007
and 2006, respectively.
Selling expenses consist primarily of shipping and handling
costs, wages and benefits for sales and sales support personnel,
travel, brokerage commissions, promotional costs, as well as other
indirect costs.
General and administrative expenses consist primarily of wages
and benefits associated with management and administrative support
departments, business insurance costs, professional fees, office
facility related expenses and other general support costs.
(p) Recently Issued Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("SFAS No. 157").
This Statement defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value in
generally accepted accounting principles ("GAAP") and expands
disclosure related to the use of fair value measures in financial
statements. SFAS No. 157 does not expand the use of fair value measures
in financial statements, but standardizes its definition and guidance
in GAAP. The Standard emphasizes that fair value is a market-based
measurement and not an entity-specific measurement based on an exchange
transaction in which the entity sells an asset or transfers a liability
(exit price). SFAS No. 157 establishes a fair value hierarchy from
observable market data as the highest level to fair value based on an
entity's own fair value assumptions as the lowest level. SFAS No. 157
is effective in fiscal years beginning after November 15, 2007.
Adoption of this statement is not expected to materially impact our
results of operations or financial position.
In July 2006, the FASB issued FASB Interpretation No. 48
(FIN 48,) "Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109, Accounting for Income
Taxes". FIN 48 clarifies the accounting for income taxes by prescribing
the minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. FIN 48 also
provides guidance on derecognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure and
transition. The interpretation applies to all tax positions related
to income taxes subject to FASB Statement No. 109.
FIN 48 is effective for fiscal years beginning after
December 15, 2006. Differences between amounts recognized in the
statements of financial position prior to the adoption of FIN 48 and
the amounts reported after adoption should be accounted for as
cumulative-effect adjustment recorded to the beginning balance of
retained earnings. The adoption of FIN 48 did not have a material
impact on our financial position.
Note 2. Basis of Preparation of Financial Statements
We have prepared these unaudited interim consolidated financial
statements in accordance with the rules and regulations of the
Securities and Exchange Commission. Such rules and regulations allow
the omission of certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles as long as the statements are not
misleading. In the opinion of management, all adjustments necessary
for a fair presentation of these interim statements have been included
and are of a normal recurring nature. These interim financial
statements should be read in conjunction with our financial statements
included in our 2006 Annual Report on Form 10-KSB.
Note 3. Earnings Per Share
Per share data was determined by using the weighted average
number of common shares outstanding. Potentially dilutive securities,
including stock options, are considered only for diluted earnings per
share, unless considered anti-dilutive. The potentially dilutive
securities, which are comprised of outstanding stock options of
1,994,200 and 1,680,600 at September 30, 2007 and 2006, were excluded
from the computation of weighted average shares outstanding due to
their anti-dilutive effect.
A reconciliation of the weighted average number of common shares
outstanding for the three and nine months ended September 30, 2007
and 2006, respectively, follows:
2007 2006
------------------------------------ ----------
Total Three and
Three Months Nine Months Shares Nine Months
----------- ----------- ---------- -----------
Common shares
outstanding
beginning of period 10,533,000 10,533,000 10,533,000 10,503,000
Stock issued to ESOP 12,000 4,000 27,000 -
---------- ---------- ---------- ----------
Weighted average number
of common shares
outstanding 10,545,000 10,537,000 10,560,000 10,503,000
Dilutive effect of
common share
equivalents - - - -
---------- ---------- ---------- ----------
Diluted weighted
average number of
common shares
outstanding 10,545,000 10,537,000 10,560,000 10,503,000
========== ========== ========== ==========
At September 30, 2007, there were authorized 50,000,000 shares
of our $.10 par value common stock and 20,000,000 shares of preferred
stock issuable in one or more series. None of the preferred stock was
issued or outstanding at September 30, 2007.
Note 4. Segment Information
We operate in two different segments: household products and
skin care products. Our products are sold nationally and internationally
(primarily Canada), directly and through independent brokers, to mass
merchandisers, drug stores, supermarkets, wholesale distributors and
other retail outlets. Management has chosen to organize our business
around these segments based on differences in the products sold. The
household products segment includes "Scott's Liquid Gold" for wood, a
wood cleaner which preserves as it cleans, Mold Control 500, a mold
remediation product, and "Touch of Scent," a room air freshener. The
skin care segment includes "Alpha Hydrox," alpha hydroxy acid
cleansers and lotions; a retinol product; "Diabetic Skin Care", a
healing cream and moisturizer developed to address skin conditions of
diabetics; and beauty care sachets of Montagne Jeunesse distributed
by us.
The following provides information on our segments for the three
and nine months ended September 30:
Three Months Ended September 30,
-----------------------------------------------------
2007 2006
------------------------- -------------------------
Household Skin Care Household Skin Care
Products Products Products Products
----------- ----------- ----------- -----------
Net sales to
external customers $ 1,941,700 $ 2,702,400 $ 1,897,300 $ 1,945,100
=========== =========== =========== ===========
Income (loss) before
profit sharing,
bonuses, and
income taxes $ 85,400 $ (350,900) $ (136,600) $ (604,400)
=========== =========== =========== ===========
Identifiable Assets $ 3,333,300 $ 6,114,800 $ 3,763,100 $ 5,908,900
=========== =========== =========== ===========
Nine Months Ended September 30,
-----------------------------------------------------
2007 2006
------------------------- -------------------------
Household Skin Care Household Skin Care
Products Products Products Products
----------- ----------- ---------- -----------
Net sales to
external customers $ 6,183,400 $ 6,626,700 $ 6,523,300 $ 5,608,200
=========== =========== =========== ===========
Income (loss) before
profit sharing,
bonuses and
income taxes $ 173,900 $(1,543,200) $ (510,400) $(2,138,200)
=========== =========== =========== ===========
Identifiable Assets $ 3,333,300 $ 6,114,800 $ 3,763,100 $ 5,908,900
=========== =========== =========== ===========
The following is a reconciliation of segment information to
consolidated information for the three and nine months ended September 30:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net sales to
external customers $ 4,644,100 $ 3,842,400 $12,810,100 $12,131,500
=========== =========== =========== ===========
Loss before profit
sharing, bonuses
and income taxes $ (265,500) $ (741,000) $(1,369,300) $(2,648,600)
=========== =========== =========== ===========
Identifiable assets $ 9,448,100 $ 9,672,000 $ 9,448,100 $ 9,672,000
Corporate assets 9,716,800 12,118,400 9,716,800 12,118,400
----------- ----------- ----------- -----------
Consolidated total
assets $19,164,900 $21,790,400 $19,164,900 $21,790,400
=========== =========== =========== ===========
Corporate assets noted above are comprised primarily of our cash
and investments, and property and equipment not directly associated
with the manufacturing, warehousing, shipping and receiving activities.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
During the first nine months of 2007, we experienced a decrease
in sales of our Scott's Liquid Gold household chemical products, while
experiencing an increase in sales of our Montagne Jeunesse line of
skin care products and a decrease in sales of our Alpha Hydrox skin
care products. Our net loss for the first nine months of 2007 was
$1,369,300 versus a loss of $2,648,600 in the first nine months of 2006.
The decrease in our loss for the first nine months of 2007 compared to
the first nine months of 2006 results from a small increase in sales,
and a reduction in our operating costs and expenses, primarily the
reduction of advertising.
Summary of Results as a Percentage of Net Sales
Year Ended Nine Months Ended
December 31, September 30,
------------ -------------------
2006 2007 2006
------------ ------- --------
Net sales
Scott's Liquid Gold
household products 53.1% 48.3% 53.8%
Neoteric Cosmetics 46.9% 51.7% 46.2%
------ ------ ------
Total Net Sales 100.0% 100.0% 100.0%
Cost of Sales 57.4% 57.0% 56.7%
------ ------ ------
Gross profit 42.6% 43.0% 43.3%
Other revenue 1.0% 0.5% 1.1%
------ ------ ------
43.6% 43.5% 44.4%
------ ------ -----
Operating expenses 63.8% 51.7% 64.5%
Interest 2.0% 2.5% 1.7%
------ ------ ------
65.8% 54.2% 66.2%
------ ------ ------
Loss before income taxes (22.2%) (10.7%) (21.8%)
====== ======= ======
Our gross margins may not be comparable to those of other
entities, because some entities include all of the costs related to
their distribution network in cost of sales and others, like us, exclude
a portion of them (freight out to customers and nominal outside
warehouse costs) from gross margin, including them instead in the
selling expense line item. See Note 1(o), Operating Costs and Expenses
Classification, to the unaudited Consolidated Financial Statements
in this Report.
Comparative Net Sales
Nine Months Ended Percentage
September 30, Increase
2007 2006 (Decrease)
----------- ----------- ----------
Scott's Liquid Gold and
other household products $ 5,384,700 $ 5,476,400 (1.7%)
Touch of Scent 798,700 1,046,900 (23.7%)
----------- ----------- ------
Total household
chemical products 6,183,400 6,523,300 (5.2%)
----------- ----------- ------
Alpha Hydrox and
other skin care 2,310,900 2,836,400 (18.5%)
Montagne Jeunesse skin care 4,315,800 2,771,800 55.7%
----------- ----------- ------
Total skin care product 6,626,700 5,608,200 18.2%
----------- ----------- ------
Total net sales $12,810,100 $12,131,500 5.6%
=========== =========== ======
Nine Months Ended September 30, 2007
Compared to Nine Months Ended September 30, 2006
Consolidated net sales for the first nine months of the current
year were $12,810,100 versus $12,131,500 for the first nine months of
2006, an increase of $678,600. Average selling prices were down by
$86,700. Co-op advertising, marketing funds, slotting fees, and
coupons paid to retailers are deducted from gross sales, and totaled
$1,797,000 in the first nine months of 2007 versus $1,804,000 in the
same period in 2006, a decrease of $7,000 or 0.4%. This decrease
consisted of a decrease in coupon expense of $33,100, an increase
in co-op marketing funds of $105,700, and a decrease in slotting fee
expenses of $79,600.
From time to time, our customers return product to us. For our
household chemicals products, we permit returns only for a limited
time, and generally only if there is a manufacturing defect. With
regard to our skin care products, returns are more frequent under an
unwritten industry standard that permits returns for a variety of
reasons. In the event a skin care customer requests a return of
product, the Company will consider the request, and may grant such
request in order to maintain or enhance relationships with customers,
even in the absence of an enforceable right of the customer to do so.
Some retailers have not returned products to us. Return price credit
(used in exchanges typically, or rarely, refunded in cash) when
authorized is based on the original sale price plus a handling charge
of the retailer that ranges from 8-10%. The handling charge covers
costs associated with the return and shipping of the product.
Additions to our reserves for estimated returns are subtracted from
gross sales.
From January 1, 2004 through end of last quarter September 30,
2007, our product returns (as a percentage of gross revenue) have
averaged as follows: household products 0.5%, Montagne Jeunesse
products 3.1%, and our Alpha Hydrox and other skin care products 6.4%.
The level of returns as a percentage of gross revenue for the household
products and Montagne Jeunesse products have remained fairly constant
as a percentage of sales over that period while the Alpha Hydrox and
other skin care products return levels have fluctuated. More recently,
as our sales of the skin care products have declined we have seen a
decrease in returns as a percentage of gross revenues. The products
returned in the fiscal year to date (indicated as a percentage of gross
revenues) were: household products 0.2%, Montagne Jeunesse products
3.9%, and our Alpha Hydrox and other skin care products 8.9%. We are
not aware of any industry trends, competitive product introductions or
advertising campaigns at this time which would cause returns as a
percentage of gross sales to be materially different for the current
fiscal year than for the above averages. Furthermore, the Company's
management is not currently aware of any changes in customer
relationships that we believe would adversely impact anticipated
returns. However, we review our reserve for returns quarterly and
we regularly face the risk that the existing conditions related to
product returns will change.
During the first nine months of 2007, net sales of skin care
products accounted for 51.7% of consolidated net sales compared to
46.2% for the same period of 2006. Net sales of these products for
that period were $6,626,700 in 2007 compared to $5,608,200 in 2006,
an increase of $1,018,500 or 18.2%.
Our decrease in sales of Alpha Hydrox and other skin care
products was due to a decrease in distribution in 2007; however, this
decrease was offset somewhat by the sales of our line of Neoteric
Massage Oils, introduced earlier in 2007. With only the introduction
underway, it is too early to tell about consumer acceptance of
Neoteric Massage Oils. We have continued to experience a drop in unit
sales of our more recently introduced Alpha Hydrox products and our
earlier-established alpha hydroxy acid-based products due primarily
to maturing in the market for alpha hydroxy acid-based skin care
products, intense competition from producers of similar or alternative
products, many of which are considerably larger than Neoteric
Cosmetics, Inc. and reduced distribution of these products at retail
stores in current and prior periods. For the first nine months of 2007,
the sales of our Alpha Hydrox products accounted for 12.7% of net sales
of skin care products and 6.6% of total net sales, compared to 35.7% of
net sales of skin care products and 16.5% of total net sales in 2006.
During the third quarter we introduced four new items to the Alpha
Hydrox line of products, it is too early to tell about consumer
acceptance of these additions.
Net sales of Montagne Jeunesse products were $4,315,800 in the
first nine months of 2007 versus $2,771,800 for the comparable period
of 2006, an increase of $1,544,000 or 55.7%. The increase reflects
the product placement in additional Wal-Mart stores which began late
in the first quarter. This placement included significantly more stores
and more sachet variants in the stores. We have returned to two more
national retail chains with placement of Montagne Jeunesse in the
second half of 2007.
Sales of household products for the first nine months of this
year accounted for 48.3% of consolidated net sales compared to 53.8%
for the same period in 2006. These products are comprised of Scott's
Liquid Gold wood care products (Scott's Liquid Gold for wood, a wood
wash and wood wipes), mold remediation products and Touch of Scent.
During the nine months ended September 30, 2007 sales of household
products were $6,183,400 as compared to $6,523,300 for the same period
in 2006, a decrease of $339,900, or 5.2%. Sales of Scott's Liquid Gold
wood care products decreased by $274,700 in 2007 versus 2006. We
believe this reduction to be a result of a decrease in media
advertising of our wood care products in 2007 versus 2006. Mold
Control 500 sales, which are shown in the sales for Scott's Liquid Gold
and other household products, were $741,000 for the first nine months
of 2007 versus $558,000 in the same period of 2006. Sales of "Touch
of Scent" were down by $248,200 or 23.7%, primarily due to a decrease
in distribution in present and past quarters. We anticipate that
there will be further reductions in distribution of our older Touch
of Scent products in the fourth quarter of 2007. During the third
quarter of 2007, we introduced some additions to our Touch of Scent
air fragrance product line, it is too early to tell about consumer
acceptance of these additions. The additions are fragrances in a
formulation called Odor Extinguisher.
As sales of a consumer product decline, there is the risk that
retail stores will stop carrying the product. The loss of any
significant customer for any skin care products, "Scott's Liquid Gold"
wood care or mold remediation products, could have a significant
adverse impact on our revenues and operating results. We believe that
our future success is highly dependent on favorable acceptance and
sales in the marketplace of Montagne Jeunesse products, our Alpha
Hydrox products and our "Scott's Liquid Gold" wood care and mold
remediation products.
We also believe that the introduction of successful new products,
including line extensions of existing products, such as the wood wash
and our new mold remediation product, using the name "Scott's Liquid
Gold", are important in our efforts to maintain or grow our revenue.
Late in the fourth quarter of 2006, we introduced two new items within
our Alpha Hydrox cosmetic line of products. We have introduced, as
mentioned above, new products in 2007. We do not have any additional
products scheduled for introduction in 2007 or early 2008. However,
we review regularly possible additional products to sell through
distribution agreements or to manufacture ourselves. To the extent
that we manufacture a new product rather than purchase it from
external parties, we are also benefited by the use of existing
capacity in our facilities. We are using our facilities to fill and
package the mold control products. The actual introduction of
additional products, the timing of any additional introductions and
any revenues realized from new products is uncertain.
On a consolidated basis, cost of goods sold was $7,296,400
during the first nine months of 2007 compared to $6,880,200 for the
same period of 2006, an increase of $416,200 or 6.0%, on a sales
increase of 5.6%. As a percentage of consolidated net sales, cost
of goods sold was 57.0% in 2007 versus 56.7% in 2006, an increase of
about 0.5%.
Operating Expenses, Interest Expense and Other Income
Nine Months Ended Percentage
September 30, Increase
2007 2006 (Decrease)
----------- ----------- ----------
Operating Expenses
Advertising $ 267,800 $ 1,062,200 (74.8%)
Selling 4,041,300 4,189,100 (3.5%)
General & Administrative 2,318,700 2,566,700 (9.7%)
----------- ----------- ------
Total operating expenses $ 6,627,800 $ 7,818,000 (15.2%)
=========== =========== ======
Interest and Other Income $ 60,600 $ 129,300 (53.1%)
=========== =========== ======
Interest Expense $ 315,700 $ 211,200 49.5%
=========== =========== ======
Operating expenses, comprised primarily of advertising, selling
and general and administrative expenses, decreased $1,190,100 in the
first nine months of 2007, when compared to the first nine months of
2006. The various components of operating expenses are discussed below.
Advertising expenses for the first nine months of 2007 were
$267,800 compared to $1,062,200 for the comparable period of 2006,
a decrease of $794,400 or 74.8%. A majority of that decrease was due
to a decrease in television advertising expenses applicable to our
Alpha Hydrox skin care products, Mold Control 500 product and Scott's
Liquid Gold for wood.
Selling expenses for the first nine months of 2007 were $4,041,300
compared to $4,189,100 for the comparable nine months of 2006, a
decrease of $147,800 or 3.5%. That decrease was comprised of a
decrease in salaries, fringe benefits and related travel expense of
$130,100 primarily because of a decrease in personnel in 2007
versus 2006, a decrease in web sales expenses of $45,000, offset by
a net increase in other selling expense, none of which by itself is
significant, of $27,300.
General and administrative expenses for the first nine months of
2007 were $2,318,700 compared to $2,566,700 for the comparable period
of 2006, a decrease of $248,000 or 9.7%. That decrease was primarily
attributable to a decrease in salaries and fringe benefits and related
travel expense resulting from a reduction in salaries and personnel of
$223,000, and a net decrease in other general and administrative
expenses of $25,000.
Interest expense for the first nine months of 2007 was $315,700
versus $211,200 for the comparable period of 2006. Interest expense
increased because of higher interest rates and increased borrowing
levels. Interest income for the nine months ended September 30, 2007
was $60,600 compared to $62,200 for the same period of 2006, which
consists of interest earned on our cash reserves in 2007 and 2006.
During the first nine months of 2007 and of 2006, expenditures
for research and development were not material (under 2% of revenues).
Three Months Ended September 30, 2007
Compared to Three Months Ended September 30, 2006
Comparative Net Sales
Three Months Ended September 30,
-----------------------------------------
Percentage
Increase
2007 2006 (Decrease)
----------- ----------- ----------
Scott's Liquid Gold and
other household products $ 1,729,800 $ 1,545,600 11.9%
Touch of Scent 211,900 351,700 (39.7%)
----------- ----------- ------
Total household products 1,941,700 1,897,300 2.3%
----------- ----------- ------
Alpha Hydrox and
other skin care 764,900 1,155,300 (33.8%)
Montagne Jeunesse
skin care 1,937,500 789,800 145.3%
----------- ----------- ------
Total skin care
products 2,702,400 1,945,100 38.9%
----------- ----------- ------
Total net sales $ 4,644,100 $ 3,842,400 20.9%
=========== =========== ======
Consolidated net sales for the third quarter of the current year
were $4,644,100 versus $3,842,400 for the comparable quarter of 2006,
an increase of $801,700 or about 20.9%. Average selling prices for the
third quarter of 2007 were up by $141,100 over those of the comparable
period of 2006, prices of household products being up by $48,900,
while average selling prices of skin care products were up by
$92,200. Co-op advertising, marketing funds, slotting fees and coupon
expenses paid to retailers were subtracted from gross sales in
accordance with current accounting policies totaling $475,800 in the
third quarter of 2007 versus $651,200 in the same period in 2006, a
decrease of $175,400 or about 26.9%. This decrease consisted of a
decrease in coupon expenses of $114,100, a decrease in co-op
advertising of $33,000, and a decrease in slotting of $28,500.
During the third quarter of 2007, net sales of skin care products
accounted for 58.2% of consolidated net sales compared to 50.6% for the
third quarter of 2006. Net sales of these products for those periods
were $2,702,400 in 2007 compared to $1,945,100 in 2006, an increase of
$757,300 or about 38.9%. Net sales of Montagne Jeunesse were
approximately $1,937,500 in the third quarter of 2007 compared to
$789,800 in the third quarter of 2006. Please see the discussion above
for the first nine months of 2007 for additional information regarding
sales of skin care products, which is also applicable to sales of skin
care products in the third quarter of 2007.
Sales of household products for the third quarter of this year
accounted for 41.8% of consolidated net sales compared to 49.4% for
the same period of 2006. These products are comprised of Scott's Liquid
Gold wood care and mold remediation products, and "Touch of Scent",
a room air freshener. During the third quarter of 2007, sales of
household products were $1,941,700, as compared to sales of $1,897,300
for the same three months of 2006. Sales of Scott's Liquid Gold wood
care and other household products were up by $184,200, an increase of
11.9%. Sales of "Touch of Scent" were down by $139,800 or 39.7%.
During the second quarter of 2006 we began the introduction of our mold
remediation product "Mold Control 500". Sales of Mold Control 500 were
$269,000 during the third quarter of 2007, versus $125,000 in the third
quarter of 2006. Please see the discussion above for the first nine
months of 2007 for additional information regarding sales of household
products, which is also applicable to sales of household products in
the third quarter of 2007.
On a consolidated basis, cost of goods sold was $2,609,300 during
the third quarter of 2007 compared to $2,069,300 for the same period of
2006, an increase of $540,000 or 26.1%, on a sales increase of 20.9%.
As a percentage of consolidated net sales for the third quarter of
2007, cost of goods sold was 56.2% compared to 53.9% in 2006, an
increase of 4.3%, which reflects primarily the decrease in
manufacturing plant utilization.
Operating Expenses, Interest Expense and Other Income
Percentage
Increase
2007 2006 (Decrease)
----------- ----------- ----------
Operating Expenses
Advertising $ 66,700 $ 360,900 (81.5%)
Selling 1,406,900 1,353,400 4.0%
General & Administrative 735,800 791,400 (7.0%)
----------- ----------- ---------
Total operating expenses $ 2,209,400 $ 2,505,700 (11.8%)
=========== =========== =========
Interest and Other Income $ 16,700 $ 102,400 (83.7%)
Interest Expense $ 107,600 $ 110,800 (2.9%)
Operating expenses, comprised primarily of advertising, selling
and general and administrative expenses, decreased $296,300 in the third
quarter of 2007, when compared to the same period during 2006. The
various components of operating expenses are discussed below.
Advertising expenses for the third quarter of 2007 were $66,700
compared to $360,900 for the comparable quarter of 2006, a decrease of
$294,200 or 81.5%, primarily due to a decrease in Mold Control 500
advertising.
Selling expenses for the three months ended September 30, 2007
were $1,406,900 compared to $1,353,400 for the comparable three
months of 2006, an increase of $53,500 or 4.0%. That increase was
primarily because of an increase in freight and brokerage expenses of
$45,300 and a net increase in other selling expenses, none of which
by itself is significant, of $8,200.
General and administrative expenses for the third quarter of
2007 were $735,800 compared to $791,400 for the comparable period of
2006, a decrease of $55,600 or 7.0%. That decrease was primarily
attributable to a decrease in salaries and fringe benefits resulting
from a reduction in salaries and personnel of $51,900, and a net
decrease in other general and administrative expenses of $3,600.
Interest expense for the third quarter of 2007 was $107,600
versus $110,800 for the comparable period of 2006. Interest expense
decreased because of decreased borrowing levels. Interest income for
the three months ended September, 2007 was $16,700 compared to $35,300
for the same period of 2006.
During the third quarter of 2007 and of 2006, expenditures for
research and development were not material (under 2% of revenues).
Liquidity and Capital Resources
On June 28, 2006, we entered into a new loan with a fifteen year
amortization with Citywide Banks for $5,156,600 secured by the land,
building and fixtures at our Denver, Colorado facilities. This loan
replaced the bank loan with Citywide Banks, secured by the facilities,
in the principal amount of approximately $1,582,900. Interest on the
bank loan (8.0% at December 31, 2006) is at the prime rate as published
in The Wall Street Journal, adjusted annually each June (8.25% at
September 30, 2007). This loan requires 180 monthly payments of
approximately $49,500, which commenced on July 28, 2006. As did the
prior bank loan, the loan agreement contains a number of covenants,
including the requirement for maintaining a current ratio of at least
1:1 and a ratio of consolidated long-term debt to consolidated net
worth of not more than 1:1. We may not declare any dividends that
would result in a violation of either of these covenants. The foregoing
requirements were met at the end of the first nine months of 2007.
During the first nine months of 2007, our working capital
decreased by $1,043,200, and concomitantly, our current ratio (current
assets divided by current liabilities) decreased from 2.1:1 at
December 31, 2006 to 1.7:1 at September 30, 2007. This decrease in
working capital is attributable to a net loss in the first nine months
of 2007 of $1,369,300, reduction in long-term debt of $150,600, offset
by depreciation in excess of capital additions of $420,500.
At September 30, 2007, trade accounts receivable were $1,218,600
versus $743,700 at the end of 2006, largely because sales in the last
two months of the quarter ended September 30, 2007 were more than those
of the last two months of the quarter ended December 31, 2006.
Accounts payable increased from the end of 2006 through September of
2007 by $450,300 corresponding primarily with the increase and timing
of purchases of inventory over that period. At September 30, 2007
inventories were $232,100 more than at December 31, 2006, due to the
increase in cosmetic product inventory to support our new products,
and upcoming holiday sales. Prepaid expenses increased from the end
of 2006 by $111,800 primarily due to an increase in prepaid promotional
expenses. Accrued payroll and benefits decreased $90,900 from
December 31, 2006 to September 30, 2007 primarily because of a decrease
in accrued payroll. Other Accrued liabilities decreased by $63,600
primarily because of a decrease in accrued property taxes.
We have no significant capital expenditures planned for 2007 and
have no current plans for any external financing, other than our
existing bank loans. We expect that our available cash flows from
operating activities will fund the next twelve months' cash
requirements.
Our dependence on operating cash flow means that risks involved
in our business can significantly affect our liquidity. Any loss of a
significant customer, any further decreases in distribution of our
skin care or household products, any new competitive products
affecting sales levels of our products, or any significant expense not
included in our internal budget could result in the need to raise cash,
such as through a bank financing. We have no arrangements for any
additional external financing of debt or equity, and we are not certain
whether any such financing would be available on acceptable terms.
In order to improve our operating cash flow, we need to achieve
profitability.
As we have indicated in previous public reports, the Company
uses less than the capacity of its facilities and is also interested
in reducing its expenses. As part of this process, the Company has
engaged a commercial real estate broker to explore alternatives. These
alternatives include the sale of all or part of the facilities, a sale
of all or part of the facilities combined with a leaseback by the
Company of the facilities, or a lease of all or part of the facilities
by the Company to a third party. There is, however, no assurance that
acceptable transactions will be offered or completed.
Forward-Looking Statements
This report may contain "forward-looking statements" within the
meaning of U.S. federal securities laws. These statements are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements and our
performance inherently involve risks and uncertainties that could cause
actual results to differ materially from the forward-looking
statements. Factors that would cause or contribute to such differences
include, but are not limited to, continued acceptance of each of our
significant products in the marketplace; the degree of success of any
new product or product line introduction by us; the uncertainty of
consumer acceptance of the new Alpha Hydrox introduced in 2005, mold
control and wood wash products; competitive factors; any decrease in
distribution of (i.e., retail stores carrying) our significant products;
continuation of our distributorship agreement with Montagne Jeunesse;
the need for effective advertising of our products; limited resources
available for such advertising; new competitive products and/or
technological changes; dependence upon third party vendors and upon
sales to major customers; changes in the regulation of our products,
including applicable environmental regulations; continuing losses
which could affect our liquidity; the loss of any executive officer;
and other matters discussed in our 2006 Annual Report on Form 10-KSB.
We undertake no obligation to revise any forward-looking statements in
order to reflect events or circumstances that may arise after the date
of this report.
Item 3A(T). Controls and Procedures
As of September 30, 2007, we conducted an evaluation, under the
supervision and with the participation of the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective
to ensure that information required to be disclosed by us in reports
that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized, and reported within the time periods
specified in Securities and Exchange Commission rules and forms as of
September 30, 2007. In September 2007 we made changes in the
following areas of our disclosure controls and procedures in an
effort to remediate a material weakness:
.. The addition of a National Sales Director as an additional level
of review and approval over promotional budgets and program spending.
.. Enhanced budgeting procedures and additional periodic reviews
of our promotional programs by our National Sales Director and
executive management.
.. Enhanced follow up by our National Sales Director and corporate
headquarters to insure that the Company has received all pertinent
documentation for sales promotional proposals, commitments and contracts.
.. Required sales call reports, in written form, shortly after
sales appointments between Company personnel and our customer's buyer
and/or purchasing personnel. This report would, among other things,
summarize any commitments made on behalf of the Company or customer.
.. Quarterly, or more often if warranted, review by sales
management and executive management of promotional commitments to
insure accurate financial reporting.
PART II OTHER INFORMATION
Item 1. Not Applicable
Item 2. Not Applicable.
Item 3. Not Applicable.
Item 4. Not Applicable
Item 5. Not Applicable
Item 6. Exhibits
31.1 Rule 13a-14(a) Certification of the Chief Executive
Officer
31.2 Rule 13a-14(a) Certification of the Chief Financial
Officer
32.1 Section 1350 Certification
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
SCOTT'S LIQUID GOLD-INC.
November 13, 2007 BY: /s/ Mark E. Goldstein
Date --------------------------------------
Mark E. Goldstein
President and Chief Executive Officer
November 13, 2007 BY: /s/ Jeffry B. Johnson
Date --------------------------------------
Jeffry B. Johnson
Treasurer and Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Document
31.1 Rule 13a-14(a) Certification of the Chief Executive
Officer
31.2 Rule 13a-14(a) Certification of the Chief Financial
Officer
32.1 Section 1350 Certification