U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
____X____ Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended _____March 31, 1998_____
_________Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _________ to _________
Commission File Number ____0-7855___
UNITED-GUARDIAN, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-1719724
- ------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
230 Marcus Boulevard, Hauppauge, New York 11788
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(Address of Principal Executive Offices)
(516) 273-0900
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes ____X____ No ________
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court.
Yes __________ No _________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date
4,878,839
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UNITED-GUARDIAN, INC.
INDEX
Page No.
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Part I. Financial Information:
Consolidated Statements of Earnings -
Three Months Ended
March 31, 1998 and 1997 2
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3-4
Consolidated Statements of Cash Flows -
Three Months Ended
March 31, 1998 and 1997 5
Consolidated Notes to Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II Other Information 8
1
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UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
Net sales $ 2,388,899 $ 1,894,588
---------- ----------
Costs and expenses:
Cost of sales 1,433,155 1,192,057
Operating expenses 493,399 470,024
---------- ----------
1,926,554 1,662,081
---------- ----------
Earnings from operations 462,345 232,507
Other income (expense):
Interest expense (296) (14,027)
Gain on sale of assets 8,000 ---
Other 15,009 4,893
---------- ---------
Earnings before income taxes 485,058 223,373
Provision for income taxes 180,900 84,900
---------- ---------
Net earnings $ 304,158 $ 138,473
========== =========
Earnings per common share $ .06 $ .03
========== =========
Basic weighted average shares 4,878,470 4,792,723
========== =========
Diluted weighted average shares 4,890,300 4,794,212
========== =========
See notes to financial statements.
2
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UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
---------- -----------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 829,482 $ 822,596
Investments--short term 365,505 361,723
Accounts receivable
(less allowance for doubtful
accounts of $ 32,300 at
March 31, 1998 and
December 31, 1997) 1,104,306 905,896
Inventories 1,273,168 1,372,067
Prepaid expenses and other
current assets 235,547 225,854
Deferred income taxes 107,111 107,111
---------- ----------
Total current assets 3,915,119 3,795,247
---------- ----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,317,780 2,333,654
Building and improvements 1,858,843 1,843,171
Waste disposal plant 133,532 133,532
---------- ----------
4,379,155 4,379,357
Less: Accumulated depreciation 2,882,808 2,847,870
---------- ----------
1,496,347 1,531,487
Assets under capital leases, net 361 1,444
---------- ----------
1,496,708 1,532,931
---------- ----------
Other assets:
Processes and patents, net 497,910 533,984
Split dollar life insurance 348,161 261,559
Other 2,125 2,125
---------- ----------
848,196 797,668
---------- ----------
$ 6,260,023 $ 6,125,846
========== ==========
See notes to financial statements.
3
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UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
LIABILITIES AND (UNAUDITED)
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 241,700 $ 292,632
Dividends payable --- 292,610
Accrued expenses and other 239,523 165,841
Taxes payable 165,119 70,396
----------- -----------
Total current liabilities 646,342 821,479
----------- -----------
Deferred income taxes 20,116 20,116
----------- -----------
Stockholders' equity:
Common stock $.10 par value, 487,934 487,684
authorized 10,000,000 shares,
issued and outstanding
4,879,339 and 4,876,839 shares
respecitively
Capital in excess of par value 3,319,116 3,314,210
Retained earnings 1,786,515 1,482,357
----------- -----------
Total stockholders' equity 5,593,565 5,284,251
----------- -----------
$ 6,260,023 $ 6,125,846
=========== ===========
See notes to financial statements.
4
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UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
Cash flows from operating activities:
Net earnings $ 304,158 $ 138,473
Adjustments to reconcile net earnings
to net cash flows provided by
(used in) operations:
Depreciation and amortization 102,095 86,950
Net gain on sale of equipment (8,000) ---
(Increase) decrease in assets:
Accounts receivable (198,410) (174,186)
Inventories 98,899 175,354
Prepaid expenses and other assets (96,295) (37,176)
Increase (decrease) in liabilities:
Accounts payable (50,932) (12,788)
Accrued expenses and other 168,405 (134,130)
--------- ---------
Net cash provided by operating
activities 319,920 42,497
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and
equipment (29,798) (48,551)
Proceeds from the sale of equipment 8,000 ---
Purchase of short term investments (3,782) ---
--------- ---------
Net cash used in investing activities (25,580) (48,551)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term debt --- (29,166)
Principal payments on capital lease
obligations --- (1,083)
Proceeds from exercise of stock options 5,156 ---
Dividends paid (292,610) (238,144)
--------- ---------
Net cash used in financing
activities (287,454) (268,393)
--------- ---------
Net increase (decrease) in cash
and cash equivalents 6,886 (274,447)
Cash and cash equivalents at beginning
of period 822,596 826,079
---------- ----------
Cash and cash equivalents at
end of period $ 829,482 $ 551,632
========== ==========
See notes to financial statements.
5
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UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of March 31, 1998 and December 31, 1997 and the results of operations and
cash flows for the three months ended March 31, 1998 and 1997. The
accounting policies followed by the Company are set forth in the
Company's financial statements included in the December 31, 1997 Annual
Report.
2. The results of operations for the three months ended March
31, 1998 and 1997 are not necessarily indicative of the results to be
expected for the full year. Certain prior year amounts have been
reclassified to conform with the current year presentation.
3. For purposes of the Statement of Cash Flows, the Company
considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Cash payments for interest were $296 and $14,171 for the three
months ended March 31, 1998 and March 31, 1997 respectively.
Cash payments for income taxes were $86,566 and $208,126 for the
three months ended March 31, 1998 and March 31, 1997 respectively.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net Sales. Net Sales increased $494,311 (26.1%) for the three months
ended March 31, 1998 as compared to the comparable period in 1997. The
Guardian Laboratories division ("Guardian") had a sales increase of
$519,058 (35.0%) while the Eastern Chemical subsidiary ("Eastern") had a
sales decrease of $24,747 (6.0%). The increase in Guardian sales was
attributable to an increase in the sales of some of Guardian's newer
products, such as its Confetti (TM) Dermal Essentials line of products,
as well as an increase in the sales of Guardian's core products through
the increased marketing efforts of its distributors. The decrease in
Eastern's sales was attributable to normal fluctuations in the purchasing
patterns of its customers.
Cost of Sales. As a percentage of sales, cost of sales decreased
from 62.9% for the three months ended March 31, 1997 to 60.0% in the
comparable period in 1998. This decrease was due to the absorption of
plant fixed assets by higher revenue in 1998 as compared to 1997, along
with increased sales of Guardian (which operates at a higher gross profit
margin), offsetting decreased sales of Eastern.
Operating Expenses increased $23,375 (5.0%) for the three months
ended March 31, 1998 when compared to the comparable period in 1997. The
increase was due primarily to increases in payroll and payroll related
costs.
Interest Expense decreased $13,731 (97.9%) for the three months
ended March 31, 1998 when compared to the comparable period in 1997. This
decrease was mainly due to the repayment of all debt in 1997.
Interest Income increased $6,347 (129.7%) for the three months ended
March 31, 1998 when compared to the comparable period in 1997. This
increase is primarily due to an increase in short term invested balances.
Financial Condition
Working capital increased from $2,973,768 at December 31, 1997 to
$3,268,777 at March 31, 1998. The current ratio increased from 4.62 to 1
at December 31, 1997 to 6.06 to 1 at March 31, 1998. The Company believes
that its working capital is and will continue to be sufficient to support
its operating requirements and its need for capital expenditures.
Cash flows from operating activites increased $277,423 (652.8%) for
the three months ended March 31, 1998 when compared to the comparable
period in 1997. This increase in mainly due to the increased earnings in
1998 as compared to 1997 as a result of the increase in sales in 1998.
Cash flows from investing activies increased $22,971 (47.3%) in the
three months ended March 31, 1998 when compared to the comparable period
in 1997. This increase is mainly due to a decrease in aquisition of
Plant, Property and Equipment and an $8000 gain on the sale of plant
equipment.
Cash flows from financing activies decreased $19,061 (7.1%) in the
the three months ended March 31, 1998 when compared to the comparable
period in 1997. This decrease is primarily due to a combination of the
elimination of all debt and an increase in cash dividends paid in 1998.
7
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PART II - OTHER INFORMATION
Item 6 (b) Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during this
quarter.
UNITED-GUARDIAN, INC.
SIGNATURES
In accordance with 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.
UNITED-GUARDIAN, INC.
(Registrant)
By: Alfred R. Globus
Alfred R. Globus
Chief Executive Officer
By: Kenneth H. Globus
Kenneth H. Globus
Chief Financial Officer
Date: May 12, 1998
8
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<ARTICLE> 5
<CIK> 0000101295
<NAME> UNITED-GUARDIAN, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,194,987
<SECURITIES> 0
<RECEIVABLES> 1,104,306
<ALLOWANCES> 32,300
<INVENTORY> 1,273,168
<CURRENT-ASSETS> 3,915,119
<PP&E> 4,379,155
<DEPRECIATION> 2,882,808
<TOTAL-ASSETS> 6,260,023
<CURRENT-LIABILITIES> 646,342
<BONDS> 0
0
0
<COMMON> 487,934
<OTHER-SE> 3,319,116
<TOTAL-LIABILITY-AND-EQUITY> 6,260,023
<SALES> 2,388,899
<TOTAL-REVENUES> 2,388,899
<CGS> 1,433,155
<TOTAL-COSTS> 1,433,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 485,058
<INCOME-TAX> 180,900
<INCOME-CONTINUING> 304,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304,158
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
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