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 September 30, 1998
----------------------
_________ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
Commission File Number 0-7855
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UNITED-GUARDIAN, INC.
- -----------------------------------------------------------------------------
(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
- -----------------------------------------------------------------------------
(Address of Principal Executive Offices)
(516) 273-0900
- -----------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- -----------------------------------------------------------------------------
(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
4,881,639
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UNITED-GUARDIAN, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Statements of Earnings -
Three and Nine Months Ended
September 30, 1998 and 1997 2
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 3-4
Consolidated Statements of Cash Flows -
Nine Months Ended
September 30, 1998 and 1997 5
Consolidated Notes to Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
Part II. Other Information 9
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
--------- --------- --------- ---------
Revenue:
Net sales $ 6,605,874 $ 6,665,342 $ 2,106,279 $ 2,212,677
--------- --------- --------- ---------
6,605,874 6,665,342 2,106,279 2,212,677
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 3,848,171 4,101,482 1,224,411 1,372,760
Operating expenses 1,446,513 1,491,821 472,675 493,201
--------- --------- --------- ---------
5,294,684 5,593,303 1,697,086 1,865,961
--------- --------- --------- ---------
Earnings from
operations 1,311,190 1,072,039 409,193 346,716
Other income (expense):
Interest expense (391) (29,140) (95) (3,784)
Interest income and other 36,420 22,555 9,283 11,082
Gain on sale of assets 28,000 - - -
--------- --------- --------- ---------
Earnings before
income taxes 1,375,219 1,065,454 418,381 354,014
Provision for income
taxes 522,500 399,800 159,300 129,470
--------- --------- --------- ---------
Net earnings $ 852,719 $ 665,654 $ 259,081 $ 224,544
========= ========= ========= =========
Earnings per share
(basic and diluted) $ .17 $ .14 $ .05 $ .05
========= ========= ========= =========
Basic weighted average
shares 4,879,769 4,818,243 4,881,422 4,868,450
========= ========= ========= =========
Diluted weighted
average shares 4,901,604 4,834,402 4,892,493 4,898,052
========= ========= ========= =========
See notes to financial statements.
2
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
ASSETS (UNAUDITED) (DERIVED FROM AUDITED
FINANCIAL STATEMENTS)
Current assets:
Cash and cash equivalents $ 1,172,200 $ 822,596
Investments--short term 511,813 361,723
Accounts receivable
(less allowance for doubtful
accounts of $52,258 at
September 30, 1998 and
$32,300 at December 31,1997) 1,020,605 905,896
Inventories 1,188,945 1,372,067
Prepaid expenses and other
current assets 197,759 225,854
Deferred income taxes 107,111 107,111
----------- -----------
Total current assets 4,198 433 3,795,247
----------- -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,365,672 2,333,654
Building and improvements 1,941,046 1,843,171
Waste disposal plant 133,532 133,532
----------- -----------
4,509,250 4,379,357
Less: Accumulated depreciation 2,979,348 2,847,870
----------- -----------
1,529,902 1,531,487
Assets under capital leases,net - 1,444
----------- -----------
1,529,902 1,532,931
----------- -----------
Other assets:
Processes and patents, net 425,763 533,984
Split dollar life insurance 348,161 261,559
Other 1,525 2,125
----------- -----------
775,449 797,688
----------- -----------
$ 6,503,784 $ 6,125,846
=========== ===========
See notes to financial statements.
3
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 DECEMBER 31,1997
------------------ -----------------
LIABILITIES AND (UNAUDITED) (DERIVED FROM AUDITED
STOCKHOLDERS' EQUITY FINANCIAL STATEMENTS)
Current liabilities:
Accounts payable $ 185,577 $ 292,632
Dividends payable - 292,610
Accrued expense and other 122,522 165,841
Current portion of long-term
debt 9,953 -
Taxes payable - 70,396
----------- -----------
Total current liabilities 318,052 821,479
----------- -----------
Long-term debt 18,746 -
------------ -----------
Deferred income taxes 20,116 20,116
----------- -----------
Stockholders' equity:
Common stock $.10 par value,
authorized 10,000,000 shares,
issued and outstanding
4,881,639 and 4,876,839 shares 488,164 487,684
Capital in excess of par value 3,323,630 3,314,210
Retained earnings 2,335 076 1,482,357
----------- -----------
Total stockholders' equity 6,146,870 5,284,251
----------- -----------
$ 6,503,784 $ 6,125,846
=========== ===========
See notes to financial statements.
4
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
--------- --------
Cash flows provided by operating activities:
Net earnings $ 852,719 $ 665,654
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 308,788 296,769
Gain on sale of equipment (28,000) -
Provision for doubtful accounts 19,958 14,000
(Increase) decrease in assets:
Accounts receivable (134,667) (374,098)
Inventories 183,122 363,058
Prepaid expense and other assets (57,907) (61,718)
Increase (decrease) in liabilities:
Accounts payable (107,055) 268,902
Accrued expenses and other (113,715) 10,611
--------- ---------
Net cash provided by operating activities 923,243 1,183,178
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment (197,538) (234,520)
Acquisition of processes and patents - (100,000)
Proceeds from sale of equipment 28,000 -
Purchase of short term investments (150,090) -
--------- ---------
Net cash used in investing activities (319,628) (334,520)
--------- ---------
Cash flows from financing activities:
Proceeds from installment note 30,339 -
Principal payments on long-term debt (1,640) (584,167)
Principal payments on capital lease
obligations - (3,249)
Proceeds of stock options exercised 9,900 18,763
Dividends paid (292,610) (238,144)
--------- ---------
Net cash used in financing activities (254,011) (806,797)
--------- ---------
Net increase in cash and cash equivalents 349,604 41,861
Cash and cash equivalents at beginning
of period 822,596 826,079
--------- ----------
Cash and cash equivalents at
end of period $ 1,172,200 $ 867,940
========= ==========
See notes to financial statements.
5
<PAGE>
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 September 30, 1998 and the results of operations for the three and
nine months ended September 30, 1998 and 1997 and cash flows for the nine
months ended September 30, 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 and nine months ended
September 30, 1998 and 1997 are not necessarily indicative of the results
to be expected for the full year.
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 $391 and $32,283 for the nine months
ended September 30, 1998 and 1997 respectively.
Cash payments for taxes were $602,107 and $490,108 for the nine
months ended September 30, 1998 and 1997 respectively.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Gross Revenue from Operations.
-----------------------------
Revenue decreased $59,468 (.9%) for the nine months ended September
30, 1998 as compared to the comparable period in 1997. The Guardian
Laboratories division ("Guardian") had a sales increase of $69,101 (1.3%)
while the Eastern Chemical subsidiary ("Eastern") had a sales decrease of
$128,569 (9.9%).
For the three month period ended September 30, 1998, revenue
decreased $106,398 (4.8%) over the comparable period in 1997. Sales of
Guardian decreased $50,325 (2.8%) while sales of Eastern decreased
$56,073 (12.7%).
The Guardian nine month sales increase was due mainly to increases
in sales of Guardian's core product lines in the United States and
Europe, which offset some decreases experienced by the Company in Asian
markets. The three month sales decrease was due mainly to a decrease in
the Company's sales into Asia. The sales increase for the nine month
period in the cosmetic product lines were the result of an expansion of
the marketing of the Company's core product lines in conjunction with the
company's marketing partners in the United States and Europe. The Eastern
decreases in the nine and three month periods were due primarily to a
slight downsizing of the Eastern operations intended to streamline
Eastern's business, which resulted in a reduction in inventory and the
consequent loss of some sales.
Cost of Sales
-------------
As a percentage of sales, cost of sales decreased to 58.3% for the
nine months ended September 30, 1998 from 61.5% in the comparable period
in 1997. As a percentage of sales cost of sales decreased to 58.1% for
the three month period ended September 30, 1998 from 62% for the
comparable period in 1997.
The decreases in cost of sales for the nine and three month periods
were due mainly to a decrease in the cost of one of the Company's largest
volume inventory items in 1998.
7
<PAGE>
Operating expenses
------------------
Operating Expenses decreased $45,308 (3%) in the nine months ended
September 30, 1998 when compared to the comparable period in 1997. For
the three months ended September 30, 1998 there was a decrease of $20,526
(4.2%) over the comparable period in 1997.
The decreases in operating expenses for the nine and three month
periods were due primarily to the reversal of an accrued rebate expense
that the Company has determined is no longer required.
Interest Expense
----------------
Interest Expense decreased $28,749 (98.7%) in the nine months ended
September 30, 1998 when compared to the comparable period in 1997 and
$3,689 (97.5%) in the three month period ended September 30, 1998 over
the comparable period in 1997. These decreases were mainly due to the
substantial reduction of long term debt.
Interest Income and Other
-------------------------
Interest income and other increased $13,865 (61.5%) for the nine
months ended September 30, 1998 when compared to the comparable period in
1997 and decreased $1,799 (16.2%) for the three months ended September
30, 1998 when compared to the comparable period in 1997. The increase for
the nine month period was primarily due to an increase in short term
invested balances. The decrease for the three month period was primarily
due to a decrease in short term invested balances.
Gain on Sale of Assets
----------------------
The Company realized a gain on sale of equipment amounting to
$28,000 during the nine months period ended September 30,1998.
FINANCIAL CONDITION
Working capital increased from $2,973,768 at December 31, 1997 to
$3,880,381 at September 30, 1998. The current ratio increased from 4.62
to 1 at December 31, 1997 to 13.2 to 1 at September 30, 1998. The Company
has no commitments for any further significant capital expenditures
during the remainder of 1998, and believes that its working capital is
and will continue to be sufficient to support its operating requirements.
Cash flows from operating activities decreased $259,935 (22%) for
the nine months ended September 30, 1998 when compared to the comparable
period in 1997. This decrease is mainly due to the Company reducing its
accounts payable and accrued expenses.
Cash flows from investing activities increased $14,892 (4.5%) in the
nine months ended September 30, 1998 when compared to the comparable
period in 1997. This increase is due mainly due to proceeds on the sale
of equipment.
Cash flows from financing activities increased $552,786 (68.5%) for
the nine months ended September 30, 1998 when compared to the comparable
period in 1997. This increase is mainly due to the substantial reduction
of long term debt.
8
<PAGE>
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: November 10, 1998
9
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<ARTICLE> 5
<CIK> 0000101295
<NAME> UNITED-GUARDIAN, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,684,013
<SECURITIES> 0
<RECEIVABLES> 1,020,605
<ALLOWANCES> 52,258
<INVENTORY> 1,188,945
<CURRENT-ASSETS> 4,198,433
<PP&E> 4,509,250
<DEPRECIATION> 2,979,348
<TOTAL-ASSETS> 6,503,784
<CURRENT-LIABILITIES> 318,052
<BONDS> 0
0
0
<COMMON> 488,164
<OTHER-SE> 3,323,630
<TOTAL-LIABILITY-AND-EQUITY> 6,503,784
<SALES> 6,605,874
<TOTAL-REVENUES> 6,605,874
<CGS> 3,848,171
<TOTAL-COSTS> 3,848,171
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 391
<INCOME-PRETAX> 1,375,219
<INCOME-TAX> 522,500
<INCOME-CONTINUING> 852,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 852,719
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
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