Back to GetFilings.com
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, 2003
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.
Indicate by check mark whether the Registrant: (1) 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 (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by checkmark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
As of September 30, 2003, the Registrant had 10,306,000
shares 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,
------------------------- ------------------------
2003 2002 2003 2002
----------- ----------- ----------- ----------
Net sales $ 6,023,600 $ 6,226,900 $17,367,300 $16,912,800
Operating costs and
expenses:
Cost Of Sales 3,302,200 2,986,200 9,223,500 9,017,700
Advertising 171,100 282,600 1,671,700 804,200
Selling 1,402,900 1,431,400 4,410,300 4,201,400
General and
administrative 875,400 1,190,500 2,875,100 3,380,200
----------- ----------- ----------- -----------
5,751,600 5,890,700 18,180,600 17,403,500
----------- ----------- ----------- -----------
Income (loss)from
operations 272,000 336,200 (813,300) (490,700)
Interest income 12,100 6,200 46,600 42,800
Interest expense 53,000 65,100 165,000 201,100
Other revenue - 594,600 - 594,600
----------- ----------- ----------- -----------
231,100 871,900 (931,700) (54,400)
Income tax expense
(benefit) - - - (483,000)
----------- ----------- ----------- -----------
Net income (loss) $ 231,100 $ 871,900 $ (931,700) $ 428,600
=========== =========== =========== ===========
Net income (loss) per
common share
(Note 4):
Basic $ .02 $ .09 $ (.09) $ .04
=========== =========== =========== ==========
Diluted $ .02 $ .09 $ (.09 $ .04
=========== =========== =========== ==========
Weighted average
shares outstanding:
Basic 10,187,100 10,153,100 10,164,400 10,153,100
=========== =========== =========== ===========
Diluted 10,203,500 10,153,100 10,164,400 10,153,100
=========== =========== =========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Balance Sheets
September 30, December 31,
2003 2002
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,032,700 $ 2,786,400
Investment securities 505,800 1,562,400
Trade receivables, net of allowance
for doubtful accounts of $134,600
and $105,000 1,487,900 1,808,000
Other receivables 27,300 35,100
Inventories 3,164,800 2,606,600
Prepaid expenses 397,600 429,500
Deferred tax asset 1,190,100 1,225,600
----------- -----------
Total current assets 9,806,200 10,453,600
Property, plant and equipment net 15,040,900 15,581,400
Other assets 36,100 44,200
----------- -----------
TOTAL ASSETS $24,883,200 $26,079,200
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,199,500 $ 1,698,100
Accrued expenses 1,694,000 1,879,600
Current maturities of long-term debt 861,000 830,000
----------- ----------
Total current liabilities 4,754,500 4,407,700
Long-term debt, less current maturities 3,036,100 3,685,400
Deferred income taxes 1,190,100 1,225,600
----------- -----------
8,980,700 9,318,700
Commitments and contingencies
Shareholders' equity:
Common stock; $0.10 par value
authorized 50,000,000 shares;
shares issued and outstanding
10,306,000 and 10,153,100 1,030,600 1,015,300
Capital in excess of par 4,906,700 4,847,000
Accumulated comprehensive income 7,100 8,400
Retained earnings 9,958,100 10,889,800
----------- -----------
Shareholders' equity 15,902,500 16,760,500
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $24,883,200 $26,079,200
=========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
--------------------------
2003 2002
------------ -----------
Cash flows from operating activities:
Net income (loss) $ (931,700) $ 428,600
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating
activities:
Depreciation and amortization 564,500 610,300
Changes in assets and liabilities:
Trade and other receivables 327,900 110,200
Inventories (558,200) (124,000)
Prepaid expenses 31,900 (50,400)
Accounts payable and accrued expenses 390,800 341,900
----------- -----------
Total adjustments to net income (loss) 756,900 888,000
----------- -----------
Net Cash Provided by
Operating Activities (174,800) 1,316,600
----------- -----------
Cash flows from investing activities:
Sale of investment securities 1,550,000 1,402,700
Purchase of investment securities (495,600) (1,000,000)
Purchase of property, plant & equipment (15,100) (9,800)
------------ ----------
Net Cash Provided (Used) by
Investing Activities 1,039,300 392,900
----------- ----------
Cash flows from financing activities:
Principal payments on long-term borrowings (618,200) (587,800)
----------- -----------
Net Cash Used by Financing Activities (618,200) (587,800)
----------- -----------
Net Increase in Cash and Cash Equivalents 246,300 1,121,700
Cash and Cash Equivalents, beginning of period 2,786,400 1,220,800
----------- -----------
Cash and Cash Equivalents, end of period $ 3,032,700 $ 2,342,500
=========== ===========
Supplemental disclosures:
Cash paid during period for:
Interest $ 166,100 $ 201,700
=========== ===========
Income taxes $ 400 $ 900
=========== ===========
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, the "Company")
manufacture and market quality household and skin care products.
In the first quarter of 2001, the Company began acting as a
distributor in the United States of beauty care products contained
in individual sachets and manufactured by Montagne Jeunesse. The
Company's business is comprised of two segments, household
products and skin care products.
(b) Principles of Consolidation
The consolidated financial statements include the accounts
of the Company and its 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 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. 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 and
allowances, and bad debts.
(d) Cash Equivalents
The Company considers all highly liquid investments with
an original maturity of nine months or less at the date of
acquisition to be cash equivalents.
(e) Investments in Marketable Securities
The Company accounts 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 the Company
classify investments in marketable securities according to
management's intended use of such investments. The Company
invests its excess cash and has 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. The
Company considers all investments as available for use in its
current operations and, therefore, classifies 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, 2003, are scheduled to mature
within one year.
(f) Inventories
Inventories are stated at the lower of cost (first-in,
first-out method) or market. The Company records a reserve for
slow moving and obsolete products and raw materials.
(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. 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 the
Company to concentrations of credit risk include cash and cash
equivalents, investments in marketable securities, and trade
receivables. The Company maintains its cash balances in the
form of bank demand deposits with financial institutions that
management believes are creditworthy. The Company establishes
an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical
trends and other information. The Company has no financial
instruments with off-balance sheet risk of accounting loss.
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. The Company's long-term debt bears interest at a variable
rate, the lender's base rate, which approximates the prime rate.
The carrying value of long-term debt approximates fair value as
of September 30, 2003 and December 31, 2002.
i) Long-Lived Assets
The Company accounts 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
The Company accounts 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 tax basis. 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 upon delivery of products to
customers, which is when title passes. 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, 2003 and December 31, 2002 approximately
$1,078,000 and $1,174,600, respectively, had been reserved as
a reduction of accounts receivable, and approximately $155,000
and $215,400, respectively, had been reserved as current
liabilities.
(l) Advertising Costs
The Company expenses advertising costs as incurred.
(m) Stock-based Compensation
The Company has elected to follow Accounting Principles
Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its
employee stock options. Under APB No. 25, employee stock
options are accounted for based upon the intrinsic value, which
is the difference between the exercise price and fair value of
the underlying common stock. Generally, if the exercise price
of employee stock options equals the market price of the
underlying stock on the date of the grant, no compensation
expense is recorded. The Company has adopted the disclosure
only provisions of SFAS No. 123, "Accounting for Stock-based
Compensation".
The Company granted 164,000 options for shares of the
Company's common stock during the first quarter of 2003 with
an exercise price equal to $0.46. No options were granted during
the third quarter of 2003 or 2002. Had compensation cost been
recorded based on the fair value of options granted by the
Company, the Company's pro-forma net loss and net loss per
share would have been as follows:
Nine Months Ended September 30,
-----------------------------------------------------------
2003 2002
---------------------------- ---------------------------
As Reported Pro Forma As Reported Pro-Forma
------------ ------------- ------------ ------------
Net income (loss) $ (931,700) $ (978,200) $ 428,600 $ 360,000
Basic income (loss)
per share $ (.09) $ (.10) $ .04 $ .04
Diluted income
(loss) per share $ (.09) $ (.10) $ .04 $ .04
The fair value of options granted has been estimated as of
the date of grant using the following assumptions as of:
Nine Months Ended
September 30,
----------------------
2003 2002
--------- ---------
Dividend rate $ - $ -
Expected volatility 170% 175%
Risk-free interest rate 3.06% 3.31%
Expected life (in years) 4.5 4.5
(n) Reclassifications
Certain 2002 amounts have been reclassified to conform to
the 2003 presentation.
Note 2.
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
2002 Annual Report on Form 10-K.
Recently Issued 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.
The Company adopted SFAS No. 145 January 1, 2003. Adoption of
SFAS No. 145 did not have a material impact on the Company.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," (effective January 1,
2003) which replaces 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)." SFAS No. 146 requires that
a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred and states
that an entity's commitment to an exit plan, by itself, does not
create a present obligation that meets the definition of a
liability. SFAS No. 146 also establishes that fair value is the
objective for initial measurement of the liability. The Company
adopted this statement on January 1, 2003; adoption did not have
an effect on results of operations and financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." This
statement amends FASB Statement No. 123 "Accounting for
Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. This
statement also amends the disclosure requirements of Statement
123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the
method used on reported results. The provisions of this statement
relating to alternative transition methods and annual disclosure
requirements are effective for the year ended December 31, 2002.
The provisions of this statement relating to interim financial
information are effective for the quarter and nine months ending
September 30, 2003. The transitional provisions did not have an
impact on the Company's financial statements as it has elected to
retain the intrinsic value method. The provisions relating to
annual and interim disclosures have changed the manner in which
the Company discloses information regarding stock-based
compensation.
In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (the Interpretation), which addresses the
disclosure to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees. The
Interpretation also requires the recognition of a liability by a
guarantor at the inception of certain guarantees. The Interpretation
requires the guarantor to recognize a liability for the
non-contingent component of the guarantee, this is the obligation
to stand ready to perform in the event that specified triggering
events or conditions occur. The initial measurement of this liability
is the fair value of the guarantee at inception. The recognition of
the liability is required even if it is not probable that payments
will be required under the guarantee or if the guarantee was issued
with a premium payment or as part of a transaction with multiple
elements. The Company adopted the disclosure provisions of the
Interpretation beginning with its fiscal 2003 consolidated
financial statements, and will apply the recognition and measurement
provisions for all guarantees entered into or modified after
December 31, 2002. However, the Company is not a guarantor of
indebtedness of others.
In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, "Consolidation of Variable Interest
Entities" (FIN No. 46)". This interpretation clarifies existing
accounting principles related to the preparation of consolidated
financial statements when the equity investors in an entity do
not have the characteristics of a controlling financial interest
or when the equity at risk is not sufficient for the entity to
finance its activities without additional subordinated financial
support from other parties. FIN No. 46 requires a company to
evaluate all existing arrangements to identify situations where
a company has a "variable interest" (commonly evidenced by a
guarantee arrangement or other commitment to provide financial
support) in a "variable interest entity" (commonly a thinly
capitalized entity) and further determine when such variable
interests require a company to consolidate the variable interest
entities' financial statement with its own. The Company is
required to perform this assessment by December 31, 2003 and
consolidate any variable interest entities for which it will
absorb a majority of the entities' expected losses or receive a
majority of the expected residual gains. Management has not yet
performed this assessment, however it does not have any variable
interest entities as of September 30, 2003.
In May 2003, FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity," which is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective
at the beginning of the first interim period beginning after
September 15, 2003. SFAS No. 150 establishes standards for how
an issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. The
adoption of this standard is not expected to have a material
impact on the Company's financial statements.
Note 3.
The following table is a reconciliation of the Company's net
loss to its total comprehensive loss for the three and nine
months ended September 30, 2003 and 2002:
Three Months Nine Months
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net loss $ 231,100 $ 871,900 $ (931,700) $ 428,600
Unrealized gain
(loss) on investment
securities (2,100) 3,900 (1,300) (1,400)
---------- ---------- ---------- ----------
Comprehensive loss $ 229,000 $ 875,800 $ (933,000) $ 427,200
========== ========== ========== ==========
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, which are comprised of
outstanding stock options of 1,121,100 and 1,186,500 at
September 30, 2003 and 2002, were excluded from the computation
of weighted average shares outstanding due to the anti-dilutive
effect.
A reconciliation of the weighted average number of common shares
outstanding for the three and nine months ended September 30, 2003
follows:
Total
Three Months Nine Months Shares
------------ ----------- ----------
Common shares outstanding
beginning of period 10,153,100 10,153,100 10,153,100
Stock issued to ESOP 34,000 11,300 152,900
Stock options exercised - - -
---------- ---------- ----------
Weighted average number
of common shares
outstanding 10,187,100 10,164,400 10,306,000
Dilutive effect of
common share equivalents 16,400 - -
---------- ---------- ----------
Diluted weighted average
number of common shares
outstanding 10,203,500 10,164,400 10,306,000
========== ========== ==========
At September 30, 2003, there were authorized 50,000,000 shares of
the Company's $.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.
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, a retinol product, "Diabetic
Skin Care," a healing cream and moisturizer developed to address
skin conditions of diabetics, and skin care and other 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, 2003
and 2002:
Three Months Ended September 30,
------------------------------------------------------
2003 2002
------------------------- ------------------------
Household Skin Care Household Skin Care
Products Products Products Products
----------- ------------ ----------- -----------
Net sales to
external customers $ 2,293,900 $ 3,729,700 $ 2,474,100 $ 3,752,800
=========== ============ =========== ===========
Income before
profit sharing,
bonuses, and income
taxes $ 154,000 $ 77,100 $ 432,900 $ 439,000
=========== =========== =========== ==========
Identifiable Assets $ 3,503,000 $ 7,123,000 $ 3,677,800 $ 7,261,000
=========== =========== =========== ===========
Nine Months Ended September 30,
-------------------------------------------------------
2003 2002
------------------------- -------------------------
Household Skin Care Household Skin Care
Products Products Products Products
----------- ----------- ----------- ------------
Net sales to
external customers $ 6,610,900 $10,756,400 $ 7,600,200 $ 9,312,600
=========== =========== =========== ===========
Income (loss)
before profit
sharing, bonuses
and income taxes $ (329,800) $ (601,900) $ 716,200 $ (770,600)
=========== =========== =========== ===========
Identifiable Assets $ 3,503,000 $ 7,123,000 $ 3,677,800 $ 7,261,000
=========== =========== =========== ===========
The following is a reconciliation of segment information to
consolidated information as of and for the three and nine months
ended September 30, 2003 and 2002:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
------------ ----------- ------------ -----------
Net sales to
external customers $ 6,023,600 $ 6,226,900 $17,367,300 $16,912,800
=========== =========== =========== ===========
Income (loss) before
profit sharing,
bonuses and income
taxes for reportable
segments $ 231,100 $ 871,900 $ (931,700) $ (54,400)
=========== =========== =========== ===========
Identifiable assets
for reportable
segments $10,626,000 $10,938,800 $10,626,000 $10,938,800
Corporate assets 14,257,200 15,541,900 14,257,200 15,541,900
----------- ----------- ----------- -----------
Consolidated total
assets $24,883,200 $26,480,700 $24,883,200 $26,480,700
=========== =========== =========== ===========
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation (Unaudited)
Results of Operations
Summary of Results as a Percentage of Net Sales
Year Ended Nine Months Ended
December 31, September 30,
2002 2003 2002
------------- ----------- -----------
(Audited) (Unaudited) (Unaudited)
Net sales
Scott's Liquid Gold
household products 40.7% 38.1% 44.9%
Neoteric Cosmetics 59.3% 61.9% 55.1%
------- ------- -------
Total Net Sales 100.0% 100.0% 100.0%
Cost of Sales 53.5% 53.1% 53.3%
------- ------- -------
Gross profit 46.5% 46.9% 46.7%
Operating expenses 43.7% 51.6% 49.6%
-------- ------- -------
Income (loss) from operations 2.8% (4.7%) (2.9%)
Interest and other income 2.6% 0.3% 3.8%
Interest expense (1.0%) (1.0%) (1.2%)
-------- ------- -------
Income (loss) before
income taxes 4.4% (5.4%) (0.3%)
======== ======= =======
Nine Months Ended September 30, 2003
Compared to Nine Months Ended September 30, 2002
Consolidated net sales for the first nine months of the current
year were $17,367,300 vs. $16,912,800 for the first nine months of
2002, an increase of $454,500 or about 2.7%. Average selling
prices for the first nine months of the year 2003 were up by
$319,100 over those of the comparable period of 2002. Average
selling prices of skin care products accounted for this increase,
which was primarily due to a decrease in coupon expense in 2003
versus 2002. 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
$1,422,100 in the first nine of 2003 versus $2,293,200 in the
same period in 2002, a decrease of $871,100 or 38.0%. Of this
decrease $463,400 was a decrease in coupon expenses and a
decrease of $436,800 in cooperative advertising expenses.
During the first nine months of the year, net sales of skin care
products accounted for 61.9% of consolidated net sales compared
to 55.1% for the first nine months of 2002. Net sales of these
products for those periods were $10,756,400 in 2003 compared to
$9,312,600 in 2002, an increase of $1,443,800 or 15.5%. 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 which
are considerably larger than Neoteric Cosmetics, Inc. Sales
of the Company's Alpha Hydrox products (with and without alpha
hydroxy acid) have also decreased during 2002 and the first
nine months of 2003, due to reduced distribution of those
products at retail stores, including the Company's largest and
other customers having reduced in prior quarters and the
third quarter of 2003 the number of types of those products
carried on their shelves and discontinuation of these products
at certain retail chains. In addition, increased television
advertising for Alpha Hydrox products in the first half of
2003 was not cost effective in terms of the impact on sales.
In the second quarter of 2003, the Company's largest customer
(which accounted for 23.6% of sales of Alpha Hydrox skin care
products in 2002) decreased significantly the number of stores
carrying Alpha Hydrox products of the Company. This change has
resulted, and is likely to result in the future, in lower
sales of those products. For the first nine months of 2003, the
sales of the Company's Alpha Hydrox products accounted for 20.2%
of net sales of skin care products and 10.1% of total net sales.
For the first nine months of 2003, sales of Montagne Jeunesse
products comprised a majority of net sales of the Company's skin
care products and offset declining shipments of Alpha Hydrox
products. Net sales of Montagne Jeunesse were approximately
$7,581,400 in the first nine months of 2003 compared to
$5,022,300 in the first nine months of 2002. The Company believes
that this increase in sales of Montagne Jeunesse is attributable
primarily to wider distribution of the product, with more retail
store chains carrying brands of Montagne Jeunesse sachets, new
skin and hair care items in sachets of Montagne Jeunesse, and
consumer acceptance of the product.
As part of its sales efforts in the first half of 2003, the
Company used direct response television (infomercial) commercials
for the sale of its Alpha Hydrox products. The Company has not
used television advertisements for the Montagne Jeunesse products.
The Company did not introduce new products during the first nine
months of 2003, except different items in Montagne Jeunesse sachets.
Sales of household products for the first nine months of this
year accounted for 38.1% of consolidated net sales compared to
44.9% for the same period of 2002. 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, 2003, sales of household
products were $6,610,900, as compared to sales of $7,600,200 for
the same nine months of 2002. Sales of "Scott's Liquid Gold" for
wood were down by $589,800, a decrease of 10.8%, largely in
management's view because of the limited television advertisement
to support this product, additional competitive products, and
possibly decreased distribution of the product. The Company has
as a sales goal for the second half of 2003 the re-establishment
of Scott's Liquid Gold for wood in certain national and local
retail store chains. Sales of "Touch of Scent" were down by
$399,500 or 18.5%. primarily due to a decrease in orders for,
and distribution of, the Company's Touch of Scent dispenser
package.
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" for wood or "Touch of Scent", could have a significant
adverse impact on the Company's revenues and operating results.
The Company believes that its future success is highly dependent
on favorable acceptance in the marketplace of Montagne Jeunesse
products and the sales of its Alpha Hydrox products and "Scott's
Liquid Gold" for wood.
On a consolidated basis, cost of goods sold was $9,223,500 during
the first nine months of 2003 compared to $9,017,700 for the same
period of 2002, an increase of $205,800. As a percentage of
consolidated net sales for the first nine months of 2003, cost of
goods sold was 53.1% compared to 53.3% in 2002. The cost of goods
sold as a percentage of consolidated net sales for the nine months
ended September 30, 2003 compared to the same period in 2002 is
almost unchanged as a result of offsetting factors. These factors
include higher sales in 2003 of Montagne Jeunesse products (which
have a higher cost than products manufactured by the Company) and
spreading ongoing manufacturing costs of the Company over lower
unit production in 2003 compared to 2002, offset by a decrease I
n 2003 of coupons and cooperative advertising deducted from
gross revenues.
The Company is working on ways to more fully utilize its production
capacity at its manufacturing facilities in Denver. The Company has
explored from time to time manufacturing private label products,
but those discussions have not resulted in any agreements. The
Company is currently considering with a party the possibility of
manufacturing certain products as part of a joint project to
manufacture and sell products in the United States. The Company
does not know whether it will be successful in these efforts to
manufacture products for third parties.
Operating expenses, comprised primarily of advertising, selling
and general and administrative expenses, increased by $571,300 or
2.0% in the first nine months of 2003, when compared to the first
nine of 2002, largely because of the increase in advertising
expenses. The various components of operating expenses are
discussed below.
Advertising expenses for the first nine months of 2003 were
$1,671,700 compared to $804,200 for the comparable nine months
of 2002, an increase of $867,500 or 107.9%. Advertising
expenses applicable to household products increased by $497,400
(191.5%) during the first nine months of 2003, and advertising
expenses for Alpha Hydrox products increased for the comparative
nine-month period by $370,100 (68.0%). The Company will be
decreasing the amount of television advertising for both its
skin care and household products for the remainder of the 2003
year when compared to the first nine months of the year.
Selling expenses for the first nine months of 2003 were
$4,410,300 compared to $4,201,400 for the comparable nine
months of 2002, an increase of $208,900 or 5.0%. That increase
was comprised of an increase of $74,400 in freight and brokerage
costs, an increase in travel expenses of $48,400, an increase in
salary and fringe benefits of $26,100, an increase in internet
and direct television sales expenses of $108,900 and a net
increase in a variety of other expenses, none of which by itself,
was significant, of $19,600, offset by a decrease in promotional
expenses of $51,800, and a decrease in postage of $16,700.
General and administrative expenses for the first nine months
of 2003 were $2,875,100 compared to $3,380,300 for the comparable
period of 2002, a decrease of $505,200 or 14.9%. That decrease
is made up of a decrease in salary and fringe benefits cost of
$804,600 (2002 included the expensing of a separation agreement
pertaining to the retirement of the Company's executive vice
president), offset by an increase in professional fees of $242,300,
and a net increase in other administrative expenses, none of which,
by itself, was material of $57,100
Interest expense for the first nine months of 2003 was $165,000
versus $201,100 for the comparable period of 2002. Interest
expense decreased because of the reduced principal of the
Company's bank loan. Interest income for the nine months ended
September 30, 2003 was $46,600 compared to $42,800 for the same
period of 2002, which consists of interest earned on the Company's
cash reserves in 2003 and 2002.
Other revenue for the nine and three months ended September 30,
2002 reflects $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 income tax benefit of $483,000 in the first nine months of
2002 results from the carry-back of the 2001 net operating loss
made possible by a change in the tax laws in 2002.
During the third quarter of 2003 and of 2002, expenditures for
research and development were not material (under 2% of revenues).
Three Months Ended September 30, 2003
Compared to Three Months Ended September 30, 2002
Consolidated net sales for the third quarter of the current year
were $6,023,600 vs. $6,226,900 for the comparable quarter of
2002, a decrease of $203,300 or about 3.3%. Average selling prices
for the third quarter of 2003 were up by $214,400 over those of
the comparable period of 2002, prices of household products being
up by $50,900, while average selling prices of skin care products
were up by $163,500. 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 $485,500 in the third quarter of 2003 versus $558,600 in
the same period in 2002, a decrease of $73,100 or 13.1%. This
decrease was due primarily to a decrease in coupon expense.
During the third quarter of 2003, net sales of skin care products
accounted for 61.9% of consolidated net sales compared to 60.3% for
the third quarter of 2002. Net sales of these products for those
periods were $3,729,700 in 2003 compared to $3,752,800 in 2002, a
decrease of $23,100 or 0.6%. Net sales of Montagne Jeunesse were
approximately $2,914,300 in the third quarter of 2003 compared to
$2,142,000 in the third quarter of 2002. Please see the discussion
above for the first nine months of 2003 for additional information
regarding sales of skin care products, which is also applicable to
sales of skin care products in the third quarter. However, the
increases in sales of Montagne Jeunesse products were not sufficient
to offset the continuing declines in sales of Alpha Hydrox products
during the third quarter of 2003.
Sales of household products for the third quarter of this year
accounted for 38.1% of consolidated net sales compared to 39.7%
for the same period of 2002. 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 2003, sales of household products
were $2,293,900, as compared to sales of $2,474,100 for the same
three months of 2002. Sales of "Scott's Liquid Gold" for wood
were down by $33,000, a decrease of 1.9%. Sales of "Touch of Scent"
were down by $147,200 or 20.4%. Please see the discussion above
for the first nine months of 2003 for additional information
regarding sales of household products, which is also applicable
to sales of household products in the third quarter of 2003.
On a consolidated basis, cost of goods sold was $3,302,200 during
the third quarter of 2003 compared to $2,986,200 for the same
period of 2002, an increase of $316,000 (10.6%, on a sales
decrease of 3.3%). As a percentage of consolidated net sales
for the third quarter of 2003, cost of goods sold was 54.8%
compared to 48.0% in 2002, an increase of 14.3%, which was
essentially due to changes in product mix (the cost of
Montagne Jeunesse is higher than products manufactured by the
Company) and to spreading on-going (fixed) manufacturing costs
over lower unit production in the third quarter of 2003 than
in 2002.
Operating expenses, comprised primarily of advertising, selling
and general and administrative expenses, decreased by $455,100
or 6.0% in the third quarter of 2003, when compared to the same
period during 2002, largely because of the decrease in
advertising expenses, and general and administrative expenses.
The various components of operating expenses are discussed below.
Advertising expenses for the third quarter of 2003 were $171,100
compared to $282,600 for the comparable quarter of 2002, a
decrease of $111,500 or 39.5%. Advertising expenses applicable
to household products decreased by $33,900 (21.4%), while
advertising expenses for Alpha Hydrox products decreased by
$77,600(62.5%).
Selling expenses for the three months ended September 30, 2003
were $1,402,900 compared to $1,431,400 for the comparable nine
months of 2002, a decrease of $28,500 or 2.0%. That decrease
was comprised of a decrease in internet and direct television
sales expenses of $18,600, a decrease in travel expenses of
$15,200, offset by a net increase in other selling expenses,
none of which by itself was significant, of $5,300.
General and administrative expenses for the third quarter of
2003 were $875,400 compared to $1,190,500 for the comparable
period of 2002, a decrease of $315,100 or 26.5%. Such decrease
was attributable to a decrease in salaries and fringe benefit
costs of $401,800 (2002 included the expensing of a separation
agreement pertaining to the retirement of the Company's
executive vice president), a net decrease in other administrative
expenses, none of which by itself was significant, of $82,600,
offset by an increase in professional fees of $125,400, and an
increase in travel expenses of $43,900.
Interest expense for the third quarter of 2003 was $53,000 versus
$65,100 for the comparable period of 2002. Interest expense
decreased because of the reduced principal of the Company's bank
loan. Interest income for the three months ended September 30,
2003 was $12,100 compared to $6,200 for the same period of 2002.
Other revenue consists of proceeds from a lawsuit settlement in 2002.
During the third quarter of 2003 and of 2002, expenditures for
research and development were not material (under 2% of revenues).
Liquidity and Capital Resources
The Company has a bank loan for approximately $3.9 million at the
bank's base rate, adjustable yearly (5.0% at September 30, 2003),
secured by the Company's land and buildings, with principal and
interest payable monthly through November 2007. 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. The Company 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 2003.
During the first nine months of 2003, the Company's working capital
decreased by $994,200, and concomitantly, its current ratio (current
assets divided by current liabilities) decreased from 2.4:1 at
December 31, 2002 to 2.1:1 at September 30, 2003. This decrease in
working capital is attributable to a net loss in the first nine
months of 2003 of $931,700, and a reduction in long-term debt of
$649,300, both offset by depreciation in excess of capital
additions of $540,400 and a decrease in other assets of $8,100.
At September 30, 2003, the ratio of consolidated funded debt to
consolidated net worth was .2:1.
At September 30, 2003, trade accounts receivable were $1,487,900
versus $1,808,000 at year-end, largely because sales in September
of 2003 were less than those of December of 2002. Accounts payable
increased from the end of 2002 through September of 2003 by
$501,400 primarily due to an increase in trade suppliers payables.
At September 30, 2003 inventories were $558,200 more than at
December 31, 2002, largely due to the increase in Montagne Jeunesse
inventory to support sales of these products in the upcoming
quarters. Accrued expenses decreased by $185,600 from
December 31, 2002 to September 30, 2003, primarily due to a
decrease in payroll and fringe benefit accruals, and a reduction
in accrual for coupon costs.
The Company has no significant capital expenditures planned for
2003. The Company expects that its available cash and cash flows
from operating activities will fund its cash requirements through
at least September 30, 2004.
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 or household chemical products,
any new competitive products affecting sales levels of the
Company's products, or 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 Risk
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
lender's base rate, which approximates 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 $13,000. 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; any
decrease in distribution of (i.e., retail stores carrying) the
Company's significant products; 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; adverse developments in any pending litigation; 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
Evaluation of disclosure controls and procedures.
The Company's management, with the participation of the Company's
principal executive and principal financial officers, carried out
an evaluation of the effectiveness of the design and operation of
the Company's disclosure controls and procedures as of September 30,
2003. Based upon this evaluation, the Company's principal executive
officer and principal financial officer concluded that the Company's
disclosure controls and procedures were effective as of that date
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.
Changes in internal controls.
There were not any changes in the Company's internal control over
financial reporting that occurred during the Company's quarter
ended September 30, 2003 that has materially affected, or is
reasonably likely to materially affect, the Company's internal
control over 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 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 2003: A report filed on August 8, 2003
regarding Item 12, Results of Operations and Financial Condition;
and a report filed on September 29, 2003 regarding Item 5, Other
Events
(b) Exhibits
31. Rule 13(a)-14(a) Certifications.
32. Section 1350 Certifications.
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 5, 2003 BY: /s/ Mark E. Goldstein
------------------------------------
Date Mark E. Goldstein
President and Chief Executive Officer
November 5, 2003 BY: /s/ Jeffry B. Johnson
-------------------------------------
Date Jeffry B. Johnson
Treasurer and Chief Financial Officer
EXHIBIT INDEX
Exhibit
No. Document
31. Rule 13(a)-14(a) Certifications.
32. Section 1350 Certifications.
EXHIBIT 31
CERTIFICATIONS
I, Mark E. Goldstein, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
quarter ended September 30, 2003 of Scott's Liquid Gold-Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements and other
financial information included in this 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 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-15(e) and
15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and;
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, 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 and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal control over financial reporting.
DATE: November 5, 2003
/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 for the
quarter ended September 30, 2003 of Scott's Liquid Gold-Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements and other
financial information included in this 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 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-15(e) and
15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, 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 report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and;
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, 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 and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal control over financial reporting.
DATE: November 5, 2003
/s/ Jeffry B. Johnson
--------------------------
Jeffry B. Johnson
Treasurer and Chief
Financial Officer
EXHIBIT 32
CERTIFICATION OF 10-Q REPORT
OF
SCOTT'S LIQUID GOLD-INC.
FOR THE QUARTER SEPTEMBER 30, 2003
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, 2003.
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 5, 2003.
/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