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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
September 30, 2002
Commission File No. 0-5128
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.
Indicate by check mark whether the registrant (i) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (ii) has been subject to such filing
requirements for the past 90 days.
YES X NO
The Registrant had 10,153,058 common shares, $0.10 par value,
its only class of common stock, issued and outstanding on
November 15, 2002.
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,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues:
Net sales $ 6,175,000 $ 4,844,900 $17,159,800 $19,201,900
Other income 600,800 88,500 637,400 237,100
------------ ------------ ----------- -------------
6,775,800 4,933,400 17,797,200 19,439,000
Costs and Expenses:
Cost of sales 2,960,500 2,468,600 9,285,700 8,680,900
Advertising 282,600 262,500 748,200 2,987,700
Selling 1,384,600 1,557,800 4,184,000 4,716,000
General and
administrative 1,167,000 1,163,900 3,309,400 3,954,400
Interest 65,100 138,000 201,100 423,600
----------- ------------ ------------ ------------
5,859,800 5,590,800 17,728,400 20,762,600
____________ ____________ ____________ ____________
Income (loss) before
income taxes 916,000 (657,400) 68,800 (1,323,600)
Income tax
benefit (Note 3) - - 483,000 -
------------ ------------ ------------ ------------
Net income (loss) $ 916,000 $ (657,400) $ 551,800 $(1,323,600)
============ ============ ============ ============
Net income (loss) per
common share
(Note 4):
Basic $ 0.09 $ (0.07) $ 0.05 $ (0.13)
=========== ============ ============ ============
Diluted $ 0.09 $ (0.07) $ 0.05 $ (0.13)
Weighted average
shares outstanding:
Basic 10,153,100 10,103,100 10,153,100 10,103,100
============ ============ ============ ============
Diluted 10,153,100 10,103,100 10,153,100 10,103,100
============ ============ ============ ============
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Balance Sheets
September 30, December 31,
2002 2001
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,342,500 $ 1,220,800
Investment securities 1,684,300 2,084,500
Trade receivables, net (Note 2) 401,200 432,200
Other receivables (Note 3) 503,000 21,400
Inventories:
Finished goods 2,758,600 3,214,800
Raw materials 924,100 826,900
Prepaid expenses 171,500 121,100
Deferred tax asset 823,800 823,800
----------- -----------
Total current assets 9,609,000 8,745,500
Property, plant and equipment at cost 27,035,400 27,025,600
Less accumulated depreciation 11,335,100 10,736,600
----------- ------------
15,700,300 16,289,000
Other assets 46,900 55,000
------------ ------------
TOTAL ASSETS $25,356,200 $25,089,500
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,658,500 $ 2,941,100
Accrued expenses 2,524,700 1,939,400
Current maturities of long-term debt 819,000 789,000
------------ -----------
Total current liabilities 6,002,200 5,669,500
Long-term debt, less current maturities 3,897,500 4,515,300
Deferred income taxes 1,259,100 1,259,100
------------ ------------
11,158,800 11,443,900
Shareholders' equity (Note 4):
Common stock 1,015,300 1,015,300
Capital in excess of par 4,847,000 4,847,000
Retained earnings 8,335,100 7,783,300
------------ ------------
Shareholders' equity 14,197,400 13,645,600
____________ ____________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $25,356,200 $25,089,500
============ ============
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
----------------------------
2002 2001
------------- ------------
Cash flows from operating activities:
Net income (loss) $ 551,800 $(1,323,600)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 606,600 612,900
Changes in assets and liabilities:
Trade and other receivables (450,600) 344,300
Inventories 359,000 (1,703,200)
Prepaid expenses (50,400) 80,700
Accounts payable and accrued expenses 302,700 1,200,500
------------ ------------
Total adjustments to net income (loss) 767,300 535,200
------------ ------------
Net Cash Provided (Used) by
Operating Activities 1,319,100 (788,400)
____________ ____________
Cash flows from investing activities:
Sale of investment securities 1,400,200 -
Purchase of investment securities (1,000,000) -
Purchase of property, plant & equipment (9,800) (105,600)
------------ ------------
Net Cash Provided (Used) by
Investing Activities 390,400 (105,600)
____________ ____________
Cash flows from financing activities:
Principal payments on long-term borrowings (587,800) (471,200)
------------ ------------
Net Cash Used by Financing Activities (587,800) (471,200)
____________ ____________
Net Increase (Decrease) in Cash and Cash
Equivalents 1,121,700 (1,365,200)
Cash and Cash Equivalents, beginning of period 1,220,800 5,485,000
------------ ------------
Cash and Cash Equivalents, end of period $ 2,342,500 $ 4,119,800
============= ============
Supplemental disclosures:
Cash paid during period for:
Interest $ 201,700 $ 426,600
============= ============
Income taxes $ 900 $ 1,100
============= ============
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Note 1.
Basis of Preparation of Financial Statements
These unaudited interim consolidated financial statements of Scott's
Liquid Gold-Inc. and subsidiaries (collectively, the "Company") have
been prepared 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 the
financial statements of the Company included in its 2001 Annual
Report on Form 10-K.
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Certain prior year amounts
have been reclassified to conform to the current year presentation.
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 and
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. Certain accounting
policies involving significant judgments, estimates, or
assumptions include inventory reserves for slow moving and
obsolete products and raw materials, allowance for doubtful
accounts which is based primarily upon factors surrounding the
credit risk of specific customers, allowance for estimated
returns, discounts and incentives which is based on historical
trends and information from customers, and valuation of
long-lived assets. Actual results could differ from those
estimates.
Recent Accounting Pronouncements
In April 2002, the FASB issued SFAS No. 145, "Rescission of
FASB Statement No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." This statement provides
guidance on the classification of gains and losses from the
extinguishment of debt and on the accounting for certain
specified lease transactions. SFAS No. 145 is not expected to
have a material impact on the Company.
In June 2002, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities" which
addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies
Emerging Issues Task Force ("EITF") Issue No. 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). Generally,
SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized as incurred,
whereas EITF Issue No. 94-3 required such a liability to be
recognized at the time that an entity committed to an exit
play. The Company is currently evaluating the provisions of
the new rule, which is effective for exit or disposal
activities that are initiated after December 31, 2002.
Note 2.
Allowance for doubtful accounts at September 30, 2002 and
December 31, 2001 were $100,000 and $85,000, respectively.
The allowance for bad debts is recorded based on estimates by
management including factors surrounding the credit risk of
specific customers and historical trends. The Company has
been exposed to potential losses on receivables due from specific
customers that have suffered financial difficulties. The
Company has provided reserves against certain receivables
from such customers in addition to amounts related to
unidentified losses. Those reserves are reduced as those
accounts are settled or written off.
At September 30, 2002, the Company reclassified $580,500 of its
bad debt reserve to its reserve for returns and customer
allowances. Prior year amounts have been reclassified to
conform to the current year presentation. The primary reason
for the reclassification is to take into account management's
treatment of certain reductions claimed by customers as a
return or customer allowance rather than bad debt.
Note 3.
Other receivables include $483,000 (at September 30, 2002) in
federal income taxes to be recouped pursuant to changes in the
federal tax law which allowed the Company to carryback the
net loss from the year 2001 against taxes paid on income
reported in earlier periods.
Note 4.
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 were excluded from the
computation of weighted average shares outstanding due to the
anti-dilutive effect.
As of September 30, 2002 and 2001, the Company had 1,177,500 and
1,184,200 stock options outstanding, respectively.
At September 30, 2002, there were authorized 50,000,000 shares of
the Company's $0.10 par value common stock and 20,000,000 shares
of preferred stock issuable in one or more series.
On February 22, 2001, the Company's Board of Directors adopted a
shareholder rights plan for its common stock. One right was
issued for each share of common stock issued and outstanding on
March 2, 2001. One right will also be issued for each share of
common stock that is issued or sold after that date and prior to
the "Distribution Date." The Distribution Date means generally a
date which is ten days after a person becomes an "Acquiring
Person" or the commencement of a tender offer that would make
a person a beneficial owner of 15% or more of the Company's
common stock. An Acquiring Person means generally a person
or group owning beneficially 15% or more of the outstanding
shares of common stock, with certain exceptions.
Each right entitles shareholders to buy one share of the
Company's common stock at an exercise price of $8.00 per
share, subject to adjustments; however, the rights are not
exercisable until the Distribution Date. The rights will
expire on February 21, 2011 or upon earlier redemption of
the rights. If any person becomes an Acquiring Person, or
certain other events relating to an Acquiring Person occur,
the right will entitle each holder to receive shares of
common stock (or stock of the acquiring party after a merger
or business combination) having a market value of two times
the exercise price of the right. The Board of Directors may
redeem the rights at a redemption price of $.01 per right at
any time prior to a Distribution Date or the expiration date
of the rights on February 21, 2011.
Note 5
In July 2002, the Company resolved the lawsuit filed
in the United States District Court for the District of
Colorado against three insurers which did not participate in
the settlement with the United States Army regarding the Rocky
Mountain Arsenal environmental matter. In that suit, the
Company sought to recover the amounts paid to the Army, plus
punitive damages and attorneys' fees. Two of those insurers
settled with the Company. The United States District Court
ruled in favor of the Company on its claim against the one
non-settling insurer, and the insurer appealed. On June 14,
2002, the United States Tenth Circuit Court of Appeals ruled
in favor of the Company by affirming in part the decision of
the United States District Court. On July 31, 2002, the
Company received $594,600 in payment of the judgment against
the insurer. Proceeds have been recorded as other income in
the accompanying statements of operations.
Note 6.
The Company operates in two different segments: household
products and skin care products. The Company's products are
sold in the United States and internationally (primarily
Canada), directly and through independent brokers, to mass
marketers, drug stores, supermarkets, wholesale distributors
and other retail outlets. Management has chosen to organize
the Company 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, and "Touch of Scent," a room air freshener. The
skin care segment includes "Alpha Hydrox," alpha hydroxy acid
cleansers and lotions, and a retinol product, and "Diabetic
Skin Care," a healing cream and moisturizer developed to
address skin conditions of diabetics, and skin care sachets of
Montagne Jeunesse distributed by the Company.
The following provides information on the Company's segments
as of and for the three and nine months ended September 30, 2002
and 2001:
Three Months Ended September 30,
-----------------------------------------------
2002 2001
------------------------- --------------------------
Household Skin Care Household Skin Care
Products Products Products Products
------------ ----------- ----------- ------------
Net sales to
external customers $ 2,407,600 $ 3,767,400 $ 2,805,900 $ 2,039,000
============ ============ ============ ============
Income (loss) before
profit sharing,
bonuses, and income
taxes $ 449,800 $ 466,200 $ 118,300 $ (775,700)
============ ============ ============ ============
Nine Months Ended September 30,
--------------------------------------------------------
2002 2001
------------------------- --------------------------
Household Skin Care Household Skin Care
Products Products Products Products
------------ ----------- ----------- ------------
Net sales to
external customers $ 7,560,200 $ 9,599,600 $ 8,531,000 $10,670,900
============ ============ ============ ============
Income (loss)
before profit
sharing, bonuses
and income taxes $ 769,300 $ (700,500) $ (258,800) $(1,064,800)
============ ============= ============ ============
Identifiable Assets $ 3,472,700 $ 6,824,100 $ 3,181,800 $ 8,175,400
============ ============ ============ ============
The following is a reconciliation of segment information to
consolidated information as of and for the three and nine months
ended September 30, 2002 and 2001:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
2002 2001 2002 2001
------------ ----------- ------------ ------------
Net sales to
external customers $ 6,175,000 $ 4,844,900 $17,159,800 $19,201,900
Other income 600,800 88,500 637,400 237,100
------------ ------------ ------------ -----------
$ 6,775,800 $ 4,933,400 $17,797,200 $19,439,000
============ ============ ============ ============
Income (loss) before
profit sharing,
bonuses and income
taxes for reportable
segments $ 916,000 $ (657,400) $ 68,800 $(1,323,600)
Corporate activities - - - -
------------ ------------ ------------ ------------
Consolidated income
(loss) before income
taxes $ 916,000 $ (657,400) $ 68,800 $(1,323,600)
============ ============ ============ ============
Identifiable assets
for reportable
segments $10,296,800 $11,357,200 $10,296,800 $11,357,200
Corporate assets 15,059,400 14,985,500 15,059,400 14,985,500
----------- ----------- ----------- ------------
Consolidated total
assets $25,356,200 $26,342,700 $25,356,200 $26,342,700
============ ============ ============ ============
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation (Unaudited)
Critical Accounting Policies
The Company has identified the policies below as critical to
the Company's business operations and the understanding of the
Company's results of operations. These policies involve
significant judgments, estimates and assumptions by the
Company's management. For a detailed discussion on the
application of these and other accounting policies, see Note 1
in the Notes to Consolidated Financial Statements of the
Company's annual report on Form 10-K for the year ended
December 31, 2001 and Note 1 in Notes to Consolidated
Financial Statements in Part I, Item 1 of this Report.
Revenue Recognition
The Company's revenue recognition policy is significant
because the amount and timing of revenue is a key
component of the Company's results of operations.
The Company follows the guidance of Staff Accounting
Bulletin No. 101 ("SAB 101"), which requires that a
strict series of criteria are met in order to recognize
revenue related to product shipment. If these criteria
are not met, the associated revenue is deferred until the
criteria are met. Generally, these criteria are that
there be an arrangement to sell the product, the Company
has delivered the product in accordance with that
arrangement, the sales price is determinable, and
collectibility is probable.
Reserves for estimated marketing rebates, 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 accounts
receivable, 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 current liabilities.
At September 30, 2002 and December 31, 2001, approximately
$550,000 and $1,236,000, respectively, had been reserved as a
reduction of accounts receivable, and approximately $165,000
and $150,000, respectively, had been reserved as current
liabilities. These reserves involve estimates made by
management based upon an assessment of historical trends,
information from customers, and anticipated returns
and allowances related to current sales activity. The
level of returns and allowances are impacted by, among
other things, promotional efforts performed by customers,
changes in customers, changes in the mix of products sold,
and the stage of the relevant product life cycle. Changes in
estimates may occur based on actual results and consideration
of other factors that cause returns and allowances. In the
event that actual results differ from these estimates, results
of future periods may be impacted.
The Company's reserves for accounts receivable consists of a
bad debt reserve and the above-described reserve for returns
and customer allowances. At September 30, 2002, the Company
reclassified $580,500 of its bad debt reserve to its reserve
for returns and customer allowances. Prior year amounts have
been reclassified to conform to the current year presentation.
The primary reason for the reclassification is to take into
account management's treatment of certain reductions claimed
by customers as a return or customer allowance rather than bad debt.
Reserves for bad debts ($100,000 and $85,000 at September 30,
2002 and December 31, 2001, respectively) are recorded based on
estimates by management including factors surrounding the credit
risk of specific customers and historical trends. The Company
has been exposed to potential losses on receivables due from
specific customers that have suffered financial difficulties.
The Company has provided reserves against certain receivables
from such customers in addition to amounts related to
unidentified losses. Those reserves are reduced as those
accounts are settled or written off. In the event that actual
losses differ from these estimates or there is an increase in
exposure relating to sales to specific customers, results of
future periods may be impacted.
Income Taxes
As of September 30, 2002, the Company has net deferred income
tax liabilities of $435,000 which relate to differences in the
book and tax bases of property and equipment that are offset
by net operating loss carryforwards, and expenses recorded for
book purposes that are not yet deductible for tax purposes.
Given the uncertainty surrounding the Company's ability to
utilize its deferred tax assets, the Company has recorded a
valuation allowance against certain of those assets.
During the quarter ended June 30, 2002, the Company recorded a
tax benefit of $483,000 related to taxes to be recouped
pursuant to changes in the federal tax law which allowed the
Company to carryback tax losses incurred in 2001 against taxes
paid in prior periods. The Company has also recorded
approximately $268,000 as accrued expenses relating to tax
contingencies.
In future periods we will assess our tax position after
considering the changes in our deferred assets and liabilities.
This process may result in the recording of an income tax
benefit or expense.
Inventory Valuation and Reserves
The Company's inventory is a significant component of the
Company's total assets. In addition, the carrying value of
such inventory directly impacts the gross margins that the
Company recognizes when the Company sells the inventory and
records adjustments to carrying values. The Company's
inventory is valued at the lower of cost or market, cost
being determined under the first-in, first-out method.
Management estimates reserves for slow moving and obsolete
products and raw materials. In the event that actual results
differ from these estimates, results of future periods may
be impacted.
Other Judgments and Estimates
Certain other accounting policies involving significant
judgments, estimates, or assumptions include: Contingent
liabilities related to pending or threatened litigation;
and the carrying amount, depreciable lives, and valuation
of long-lived assets.
Results of Operations
Summary of Results as a Percentage of Net Sales
Year Ended Nine Months Ended
December 31, September 30,
2001 2002 2001
------------- ----------- -----------
(Audited) (Unaudited) (Unaudited)
Net sales
Scott's Liquid Gold
household products 47.7% 44.1% 44.4%
Neoteric Cosmetics 52.3% 55.9% 55.6%
------- ------- -------
Total Net Sales 100.0% 100.0% 100.0%
Cost of Sales 46.7% 54.1% 45.2%
------- ------- -------
Gross profit 53.3% 45.9% 54.8%
Other revenue 1.2% 3.7% 1.2%
------- ------- -------
54.5% 49.6% 56.0%
_______ _______ _______
Operating Expenses 59.4% 48.0% 60.7%
Interest 2.2% 1.2% 2.2%
------- ------- -------
61.6% 49.2% 62.9%
_______ _______ _______
Income (loss) before
income taxes (7.1%) 0.4% (6.9%)
======== ======= =======
Nine Months Ended September 30, 2002
Compared to Nine Months Ended September 30, 2001
The net income of the Company for the nine months and three
months ended September 30, 2002 is attributable in large part
to the Company receiving in the third quarter of 2002 $594,600
as payment of a judgment in a lawsuit against an insurer.
This amount is included in Other Income on the Company's
statement of operations. Without this item, the Company would
have experienced net income of $321,400 for the three months
ended September 30, 2002, and a net loss of ($42,800) for the
nine months ended September 30, 2002. This matter and other
significant factors in regard to the Company's statement of
operations are discussed below.
Consolidated net sales for the first nine months of the current
year were $17,159,800 vs. $19,201,900 for the first nine months of
2001, a decrease of $2,042,100 or about 10.6%. Average selling
prices for the first nine months of the year 2002 were down by
$625,400 over those of the comparable period of 2001, average
selling prices of household products being down by $71,600,
while average selling prices of skin care products were down
by $553,800. This decrease was primarily due to an increase
in coupon expense during the first nine months of 2002 and a
reduced price promotion of our diabetic product in the third
quarter in 2002 versus 2001. 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 $2,263,200 in the first nine
months of 2002 versus $1,781,700 in the same period in 2001,
an increase of $481,500 or 27.0%. Of this increase $470,500
was an increase in coupon expenses.
During the first nine months of the year, net sales of skin
care products accounted for 55.9% of consolidated net sales
compared to 55.6% for the first nine months of 2001. Net
sales of these products for those periods were $9,599,600
in 2002 compared to $10,670,900 in 2001, a decrease of
$1,071,300 or 10.0%. The Company has continued to experience
a drop in unit sales of the Company's earlier established
alpha hydroxy acid products due at least in part to maturing
in the market for alpha hydroxy acid-based skin care products
and intense competition from producers of similar or
alternative products, many of whom are considerably larger
than Neoteric Cosmetics, Inc., a wholly-owned subsidiary.
Sales of the Company's Alpha Hydrox products (with and without
alpha hydroxy acid) in the first nine months of 2002, compared
to the first nine months of 2001, have also been affected by
decreases in the distribution of those products at retail stores,
including the Company's largest and other customers having reduced
in prior quarters the number of types of those products carried
on its shelves and discontinuation of these products at
certain retail chains, and may have been affected by decreases
in advertising expenses for Alpha Hydrox products. The Company
continues to address the decrease in sales of Alpha Hydrox
skin care products through focusing on its core products and
its niche marketing opportunities, including the distribution
and sale of products purchased from Montagne Jeunesse. In 2002,
the Company reduced the number of types of its Alpha Hydrox
products in order to concentrate marketing and distribution
resources of the Company and in response to slow, decreasing
sales of the Alpha Hydrox line of skin care products. For the
first nine months of 2002, the sales of Montagne Jeunesse were
not sufficient to offset the declining shipments of the Alpha
Hydrox products. The net sales of Montagne Jeunesse were
approximately $5,022,300 in the first nine months of 2002
compared to $2,337,000 in the first nine months of 2001;
this product was not sold by the Company until the second
quarter of 2001. The Company is also testing the use of
direct response television (infomercial) commercials for
the sale of its Alpha Hydrox products. The Company believes
that its future success is highly dependent on the favorable
acceptance in the marketplace of Montagne Jeunesse products
and the sales of its Alpha Hydrox products.
New products for 2001 included a line of skin care products
specifically designed for problems common to mature women
(Alpha Radiance) and a unique topical analgesic (Rubout) which
helps fade the discoloration of bruises. Sales of these
products have not met the Company's expectations. The
Company did not introduce new products in the first nine
months of 2002.
Sales of household products for the first nine months of this
year accounted for 44.1% of consolidated net sales compared to
44.4% for the same period of 2001. These products are comprised
of "Scott's Liquid Gold" for wood, a wood cleaner which
preserves as it cleans, and "Touch of Scent," a room air
freshener. During the nine months ended September 30, 2002,
sales of household products were $7,560,200, as compared to
sales of $8,531,000 for the same nine months of 2001. Sales of
"Scott's Liquid Gold" for wood were down by $661,600, a
decrease of 10.9%, largely in management's view because of the
lack of television advertisement to support this product and
additional competitive products. Sales of "Touch of Scent"
were down by $309,200 or 12.6%. As noted in previous reports
to shareholders, Touch of Scent sales were affected by a
decrease in the number of stores of the Company's largest
customer carrying Touch of Scent and which no longer sell
the Touch of Scent dispenser. As noted in previous reports
to shareholders, efforts in recent years to revitalize
Touch of Scent have produced less than satisfactory results.
The Company continues to seek products to replace or
augment Touch of Scent, particularly products which
would increase the utilization of the Company's
manufacturing facilities.
On a consolidated basis, cost of goods sold was $9,285,700
during the first nine months of 2002 compared to $8,680,900
for the same period of 2001, an increase of $604,800 (7.0% on
a sales decrease of 10.0%). As a percentage of consolidated
net sales for the first nine months of 2002, cost of goods
sold was 54.1% compared to 45.2% in 2001, an increase of
19.7% which was primarily due to changes in product mix
(the cost for Montagne Jeunesse is higher than products
manufactured by the Company) and to spreading on-going
(fixed) manufacturing costs over lower unit production in
the first nine months of 2002 than in 2001, and to the close
out sales of a few discontinued items.
The Company continues to take steps to reduce expenses. As
described below, one part of this effort involved a substantial
decrease in television advertising for the Company's products.
Operating expenses, comprised primarily of advertising, selling
and general and administrative expenses, decreased 20.9% as a
percentage of sales in the first nine months of 2002, when
compared to the first nine months of 2001, largely because of
the decline in advertising expenses. The various components of
operating expenses are discussed below.
Advertising expenses for the first nine months of 2002 were
$748,200 compared to $2,987,700 for the comparable nine months
of 2001, a decrease of $2,239,500 or 75.0%. Advertising
expenses applicable to household products decreased by $690,300
(72.7%) during the first nine months of 2002, whereas,
advertising expenses for Alpha Hydrox products decreased for
the comparative nine-month period by $1,549,200 (76.0%).
As a result of the license agreement entered into with TriStrata
Technology Inc. in the fourth quarter of 2000, in 2001 the
Company revised its advertisements for the Alpha Hydrox products
with alpha hydroxy acid to include that the products reduce or
diminish fine lines and wrinkles. The Company recognizes that,
whenever it is fiscally responsible to do so, it must seek to
advertise both effectively and aggressively because the markets
for skin care products, furniture polish and air fresheners are
highly competitive and, accordingly, the Company's brand names
need to be kept in front of current and potential consumers.
The Company's advertising program is highly dependent upon
sales of its skin care products.
Selling expenses for the first nine months of 2002 were
$4,184,000 compared to $4,716,000 for the comparable nine
months of 2001, a decrease of $532,000 or 11.3%. That
decrease was comprised of a decrease of $236,600 in freight
and brokerage costs, a decrease in travel expenses of $143,500,
a decrease in salary and fringe benefits of $72,500, a
decrease in postage of $32,400, and a net decrease in a
variety of other expenses, none of which, by itself, was
material, of $47,000.
General and administrative expenses for the first nine months
of 2002 were $3,309,400 compared to $3,954,400 for the
comparable period of 2001, a decrease of $645,000 or 16.3%.
That decrease is made up of a decrease in professional fees of
$575,400 (due to less legal fees than expected), a decrease in
equipment rental expenses of $36,000, a decrease in bad debt
expense of $103,500, and a decrease in travel expenses of
$57,300, offset by an increase in salary and fringe benefit
costs of $121,900 and a net increase in other administrative
expenses, none of which, by itself, was material,
of $5,300. Salary and fringe benefit costs would have
decreased but for the expensing of a separation agreement
pertaining to the retirement of the Company's executive
vice president. The entire amount of the separation agreement
was expensed in the third quarter of 2002, and the expenses
will be paid out over the next three years.
Interest expense for the first nine months of 2002 was $201,100
versus $423,600 for the comparable period of 2001 because of a
decrease in borrowings and the applicable interest rate.
Other income for the nine months ended September 30, 2002 was
$637,400 compared to $237,100 for the same period of 2001. The
total for 2002 includes $594,600 received from a lawsuit
settlement. This amount was the final judgment in the lawsuit
against an insurer not participating in the settlement of an
earlier environmental matter. The remaining other income
essentially consists of interest earned on the Company's cash
reserves.
The income tax benefit of $483,000 results from the carry-back
of a net loss as described in Note 3 to the Notes to
Consolidated Financial Statements in Part I, Item 1 above in
this Report.
During the first nine months of 2002 and of 2001, expenditures
for research and development were not material (under 2% of
revenues).
Three Months Ended September 30, 2002
Compared to Three Months Ended September 30, 2001
Consolidated net sales for the third quarter of the current year
were $6,175,000 vs. $4,844,900 for the comparable quarter of 2001,
an increase of $1,330,100 or about 27.5%. Average selling prices
for the third quarter of 2002 were down by $397,200 over those of
the comparable period of 2001, prices of household products being
down by $106,800, while average selling prices of skin care
products were down by $290,400. This decrease was primarily
due to an increase in coupon expense and a reduced price
promotion of our diabetic product in the third quarter in
2002 vs. 2001. 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 $528,600 in the third quarter of 2002
versus $740,100 in the same period in 2001, a decrease of
$211,500 or 28.6%. This decrease was primarily from a
decrease in cooperative advertising.
During the third quarter of 2002, net sales of skin care
products accounted for 61.0% of consolidated net sales
compared to 42.1% for the third quarter of 2001. Net
sales of these products for those periods were $3,767,400
in 2002 compared to $2,039,000 in 2001, an increase of
$1,728,400 or 84.8%. Please see the discussion above for
the first nine months of 2002 for additional information
regarding sales of skin care products, which is also applicable
to sales of skin care products in the third quarter, with
the exception that the net sales of Montagne Jeunesse were
sufficient to offset the decrease in alpha hydroxy acid based
products and provided all of the increase in product sales for
the third quarter of 2002 vs. 2001. The net sales of
Montagne Jeunesse were approximately $2,142,000 in the
third quarter of 2002 compared to $309,000 in the third
quarter of 2001.
Sales of household products for the third quarter of this year
accounted for 39.0% of consolidated net sales compared to 57.9%
for the same period of 2001. These products are comprised of
"Scott's Liquid Gold" for wood, a wood cleaner which preserves
as it cleans, and "Touch of Scent," a room air freshener.
During the third quarter of 2002, sales of household products
were $2,407,600, as compared to sales of $2,805,900 for the
same three months of 2001. Sales of "Scott's Liquid Gold" for
wood were down by $285,000, a decrease of 14.3%. Sales of
"Touch of Scent" were down by $113,300 or 13.9%. Please see
the discussion above for the first nine months of 2002 for
additional information regarding sales of household products,
which is also applicable to sales of household products in
the third quarter of 2002.
On a consolidated basis, cost of goods sold was $2,960,500
during the third quarter of 2002 compared to $2,468,600 for
the same period of 2001, an increase of $491,900 (19.9%), on a
sales increase of 27.5%). As a percentage of consolidated net
sales for the third quarter of 2002, cost of goods sold was 47.9%
compared to 51.0% in 2001, a decrease of 6.1%. This was
essentially due to the decrease in co-op advertising in the third
quarter of 2002 vs. 2001 and to changes in product mix.
Operating expenses, comprised primarily of advertising, selling
and general and administrative expenses, decreased 25.5% as a
percentage of sales in the third quarter of 2002, when compared
to the same period during 2001.
Advertising expenses for the third quarter of 2002 were $282,600
compared to $262,500 for the comparable quarter of 2001, an
increase of $20,100 or 7.7%. Advertising expenses applicable
to household products increased by $62,400 (65.0%) during the
third quarter of 2002, whereas, advertising expenses for Alpha
Hydrox products decreased for the comparative nine-month period
by $42,300 (25.4%). With respect to advertising expenses for
household products, the amount expended to advertise Scott's
Liquid Gold for wood increased by $49,500, while expenditures
to advertise Touch of Scent increased by $12,900. Advertising
expenses for Scott's Liquid Gold for wood and for Alpha Hydrox
products during the fourth quarter of 2002 are expected to
increase from those of the third quarter of 2002.
As a result of the license agreement entered into with TriStrata
Technology Inc. in the fourth quarter of 2000, in 2001 the
Company revised its advertisements for the Alpha Hydrox products
with alpha hydroxy acid to include that the products reduce or
diminish fine lines and wrinkles. The Company prepared a new
television commercial for Alpha Hydrox products which is running
during the second half of 2002. The Company recognizes that,
whenever it is fiscally responsible to do so, it must seek to
advertise both effectively and aggressively because the markets
for skin care products, furniture polish and air fresheners are
highly competitive and, accordingly, the Company's brand names
need to be kept in front of current and potential consumers.
The Company's advertising program is highly dependent upon sales
of its skin care products.
Selling expenses for the three months ended September 30, 2002
were $1,384,600 compared to $1,557,800 for the comparable three
months of 2001, a decrease of $173,200 or 11.1%. That decrease
was comprised of a decrease of $21,600 in freight and brokerage
costs, a decrease in salaries and fringe benefits of $20,800, a
decrease in promotional expenses of $73,300,a decrease in travel
expenses of $14,800 and a net decrease in a variety of other
expenses, none of which, by itself, was material, of $42,700.
General and administrative expenses for the third quarter of
2002 were $1,167,000 compared to $1,163,900 for the comparable
period of 2001, an increase of $3,100. Such increase was
attributable to an increase in salaries and fringe benefits of
$330,100, and a net increase in other administrative expenses,
none of which, by itself, was material, of $22,000 all offset
by a decrease in legal and professional fees of $258,700 (due
to less legal fees than expected), a decrease in bad debt
expense of $33,500, and a decrease in travel expenses of
$56,800. Salary and fringe benefit costs would have
decreased but for the expensing of a separation agreement
pertaining to the retirement of the Company's executive vice
president. The entire amount of the separation agreement was
expensed in the third quarter of 2002 and will be paid out
over the next three years.
Interest expense for the third quarter of 2002 was $65,100
versus $138,100 for the comparable period of 2001 because of
a decrease in borrowings and the applicable interest rate.
Other income for the three months ended September 30, 2002
was $600,800 compared to $88,500 for the same period of 2001.
The total for 2002 includes $594,600 from a lawsuit
mentioned above. The remaining other income essentially
consists of interest earned on the Company's cash reserves.
During the third quarter of 2002 and of 2001, expenditures
for research and development were not material (under 2% of
revenues).
Liquidity and Capital Resources
On November 21, 2000 the Company redeemed the entire 1994
$12 million bond issue and entered into a seven-year bank
loan at the prime rate (9.5% at that time and on
December 31, 2000), adjustable yearly (5.0% at
December 31, 2001), secured by the Company's land and buildings,
with principal and interest payable monthly. The loan agreement
with the bank contains a number of covenants, including the
requirement for maintaining a current ratio of at least 1:1
and a ratio of consolidated funded long-term debt (excluding
current maturities) to consolidated net worth of not more than
1:1. The Company may not declare any dividends that would
result in a violation of either of these covenants. The
foregoing requirements were met at September 30, 2002.
During the first nine months of 2002, the Company's working
capital increased by $530,800, and, its current ratio
(current assets divided by current liabilities) increased from
1.54:1 at December 31, to 1.60:1 at September 30, 2002.
This increase in working capital is attributable to a
reduction in long-term debt of $617,800, offset by depreciation
in excess of capital additions of $588,700, a decrease in other
assets of $8,100, and net income in the first nine months of
2002 of $551,800. At September 30, 2002, the ratio of
consolidated funded long-term debt (excluding current
maturities) to consolidated net worth was .28:1.
At September 30, 2002, trade accounts receivable were $31,000
lower than at year end. Other receivables increased by $481,600
from December 31, 2001 to September 30, 2002 primarily
because of a $483,000 federal income tax refund receivable.
Accounts payable decreased from the end of 2001 through
September of 2002 by $282,600 primarily due to the decrease in
advertising payables at the end of the third quarter versus at
the end of last year. At September 30, 2002, inventories were
$359,000 less than at December 31, 2001, largely due to the
reduction in sales (inventory was not replaced as sales
declined) and the sale of discontinued items. Accrued expenses
increased by $585,300 from December 31, 2001 to
September 30, 2002 primarily from an increase in accrued
salaries and related items of $588,400, an increase in accrued
slotting and coupon expense of $50,900, a net increase in other
accruals of $21,200, offset by a decrease in accrued
professional fees of $75,200.
In July, 2002, the Company received $594,600 upon conclusion of a
lawsuit against an insurer. This lawsuit is described in Part I,
Item 1, Financial Information, Note 5, of this Report on Form 10-Q.
The Company has no significant capital expenditures planned for
the remainder of 2002. The Company expects that its available
cash and cash flows from operating activities will fund the
next twelve months cash requirements.
In April, 2002, the Company entered into a listing agreement
for the lease or sale of all or part of two of its buildings
at its facilities in Denver, Colorado. The listing agreement
was subsequently limited to two floors of the Company's office
building. The Company does not know whether an acceptable
transaction for the listed building will be possible in the
current real estate market.
The Company's dependence on operating cash flow means that risks
involved in its business can significantly affect its liquidity.
Any loss of a significant customer, any further decreases in
distribution of its skin care products, any new competitive
products affecting sales levels of the Company's products, any
significant expense not included in the Company's internal
budget could result in the need to raise cash, such as through
a bank financing. The Company has no arrangements for an
external financing of debt or equity, and the Company is not
certain whether any such financing would be available on
acceptable terms. Please also see other risks summarized in
"Forward-Looking Statements" below.
Quantitative and Qualitative Disclosures About Market Risks
Market risk represents the risk of loss due to adverse changes
in financial and commodity market prices and rates. The Company
is not materially exposed to market risks regarding interest
rates because the interest on the Company's outstanding debt
is at the prime rate, adjustable yearly. The Company's
investments in debt and equity securities are short-term and
not subject to significant fluctuations in fair value. If
interest rates were to rise 10% from year-end levels, the fair
value of the Company's debt and equity securities would have
decreased by approximately $11,800. Further, the Company does
not use foreign currencies in its business. Currently, it
receives payments for sales to parties in foreign countries in
U.S. dollars. Additionally, the Company does not use derivative
instruments or engage in hedging activities. As a result, the
Company does not believe that near-term changes in market risks
will have a material effect on results of operations, financial
position or cash flows of the Company.
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 the Company's 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 the
Company's products in the marketplace; the degree of success
of any new product or product line introduction by the Company;
competitive factors; continuation of the Company's
distributorship agreement with Montagne Jeunesse; the need
for effective advertising of the Company's 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 the Company's products, including applicable
environmental regulations; the loss of any executive officer;
and other matters discussed in the Company's periodic filings
with the Securities and Exchange Commission. The Company
undertakes 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 3. Quantitative and Qualitative Disclosures
About Market Risk
Please see "Market Risks" in Item 2 of Part I of this Report
which information is incorporated herein by this reference.
Item 4. Controls and Procedures
The Company, under the supervision and with the participation
of the Company's management, including its Chief Executive
Officer and Chief Financial Officer, carried out an evaluation
of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of November 4,
2002 (the "Evaluation Date"). Based upon this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded as
of the Evaluation Date that the Company's disclosure controls
and procedures were effective for purposes of recording,
processing, summarizing and timely reporting material
information required to be disclosed in reports that the
Company files under the Exchange Act.
There were no significant changes in the Company's internal
controls and no other factors that could significantly affect
these controls subsequent to the Evaluation Date. The Company
did not need to implement any corrective actions with regard to
any significant deficiency or material weakness in its internal
controls.
PART II OTHER INFORMATION
Item 1. Not Applicable.
Item 2. Not Applicable.
Item 3. Not Applicable.
Item 4. Not Applicable.
Item 5. Not Applicable.
. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
The following reports were filed by the Company on Form 8-K
during the third quarter of 2002: A current report on Form 8-K
filed on July 18, 2002 reporting on Item 4, Changes in
Registrant's Certifying Accountant; an amendment to the current
report on Form 8-K filed July 23, 2002 regarding the
above-described Item 4; and a current report on Form 8-K
filed September 11, 2002 reporting an event under Item 5,
Other Events.
(b) Exhibits
10.1 Amendment dated October 21, 2002 to the Sales
Distribution Rights Agreement dated as of
December 1, 2000 between Neoteric Cosmetics, Inc.
and Montagne Jeunesse.
99. Section 906 Certification of 10-Q Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
SCOTT'S LIQUID GOLD-INC.
November 20, 2002 BY: /s/ Mark E. Goldstein
___________________________
Mark E. Goldstein
President and Chief
Executive Officer
November 20, 2002 BY: /s/ Jeffry B. Johnson
___________________________
Jeffry B. Johnson
Treasurer, Chief Financial
Officer, and Assistant
Corporate Secretary
CERTIFICATIONS
I, Mark E. Goldstein, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Scott's Liquid Gold-Inc.
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report.
3. Based on my knowledge, the financial statements and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c. presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.
DATE: November 20, 2002
/s/ Mark E. Goldstein
________________________
Mark E. Goldstein
President and Chief
Executive Officer
I, Jeffry B. Johnson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Scott's Liquid Gold-Inc.
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
quarterly report.
3. Based on my knowledge, the financial statements and
other financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c. presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
DATE: November 20, 2002
/s/ Jeffry B. Johnson
_________________________
Jeffry B. Johnson
Treasurer and Chief
Financial Officer
EXHIBIT INDEX
10.1 Amendment dated October 21, 2002 to the Sales
Distribution Rights Agreement dated as of
December 1, 2000 between Neoteric Cosmetics, Inc.
and Montagne Jeunesse.
99. Section 906 Certification of 10-Q Report
EXHIBIT 10.1
21 October, 2002
Neoteric Cosmetics, Inc.
4880 Havana Street
Denver, CO 80239
Attention: Mark E. Goldstein, President
Ladies and Gentlemen:
This letter agreement concerns the Sales Distribution Rights
Agreement (the "Agreement") dated as of December 1, 2000 between
you and us. We and you wish to waive mutually the provision in
clause 8 dealing with the minimum net sales in calendar year 2002.
Accordingly, we and you agree that the following phrase in
clause 8(1)(v) of the Agreement is hereby deleted and that
there is no replacement minimum sales level for the calendar
year 2002: "calendar year two (2002) to be 12 million USD."
In all other respects, the Agreement remains in full force
and effect.
Very truly yours,
MONTAGNE JEUNESSE, a trading
division of Medical
Express (UK) Ltd.
By: /s/ Brian Stevendale
_____________________________
Name: Brian Stevendale
Title: Director of Sales &
Marketing
Date: 21 October 2002
AGREED:
NEOTERIC COSMETICS, INC.
By: /s/ Mark Goldstein
______________________________
Name: Mark E. Goldstein
Title: President
Date: 21 October 2002
EXHIBIT 99.
CERTIFICATION OF 10-Q REPORT
OF
SCOTT'S LIQUID GOLD-INC.
FOR THE QUARTER ENDED SEPTEMBER 30, 2002
1. The undersigned are the Chief Executive Officer and the
Chief Financial Officer of Scott's Liquid Gold-Inc. ("Scott's
Liquid Gold"). This Certification is made pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. This Certification
accompanies the 10-Q Report of Scott's Liquid Gold for the
quarter ended September 30, 2002.
2. We certify that such 10-Q Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that the information contained in
such 10-Q Report fairly presents, in all material respects,
the financial condition and results of operations of Scott's
Liquid Gold.
This Certification is executed as of November 20, 2002.
/s/ Mark E. Goldstein
___________________________________
Mark E. Goldstein
President, Chief Executive Officer
and Chairman of the Board
/s/ Jeffry B. Johnson
___________________________________
Jeffry B. Johnson
Treasurer and Chief Financial
Officer