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 June 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 June 30, 1998
-------------------
4,881,239
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UNITED-GUARDIAN, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Statements of Earnings -
Three and Six Months Ended
June 30, 1998 and 1997 2
Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3-4
Consolidated Statements of Cash Flows -
Six Months Ended
June 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 8
1
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenue:
Net sales $ 4,499,595 $ 4,452,665 $ 2,110,696 $ 2,558,077
Fees and retainers --- --- --- ---
--------- --------- --------- ---------
4,499,595 4,452,665 2,110,696 2,558,077
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 2,623,760 2,728,722 1,190,605 1,536,665
Operating expenses 973,838 998,620 480,439 528,596
--------- --------- --------- ---------
3,597,598 3,727,342 1,671,044 2,065,261
--------- --------- --------- ---------
Earnings from
operations 901,997 725,323 439,652 492,816
Other income (expense):
Interest expense (296) (25,356) - (11,329)
Gain on sale of assets 28,000 - 20,000 -
Other 27,137 11,473 12,128 6,580
--------- --------- --------- ---------
Earnings before
income taxes 956,838 711,440 471,780 488,067
Provision for
income taxes 363,200 270,330 182,300 185,430
--------- --------- --------- ---------
Net earnings $ 593,638 $ 441,110 $ 289,480 $ 302,637
========= ========= ========= =========
Basic and diluted
earnings per share $ 0.12 $ 0.09 $ 0.06 $ 0.06
========= ========= ========= =========
Basic weighted average
shares 4,878,929 4,792,723 4,880,243 4,822,230
========= ========= ========= =========
Diluted weighted
average shares 4,906,147 4,802,161 4,908,874 4,831,668
========= ========= ========= =========
See notes to financial statements.
2
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1998 1997
------------ -------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 764,933 $ 822,596
Investments--short term 517,094 361,723
Accounts receivable
(less allowance for doubtful
accounts of $32,300 at
June 30, 1998 and
December 31, 1997) 1,064,017 905,896
Inventories 1,245,893 1,372,067
Prepaid expenses and other
current assets 221,161 225,854
Deferred income taxes 107,111 107,111
----------- -----------
Total current assets 3,920,209 3,795,247
----------- -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,302,928 2,333,654
Building and improvements 1,897,333 1,843,171
Waste disposal plant 133,532 133,532
----------- -----------
4,402,793 4,379,357
Less: Accumulated depreciation 2,910,823 2,847,870
----------- -----------
1,491,970 1,531,487
Assets under capital leases, net --- 1,444
----------- -----------
1,491,970 1,532,931
----------- -----------
Other assets:
Processes and patents, net 461,837 533,984
Split dollar life insurance 348,161 261,559
Other 1,025 2,125
----------- -----------
811,023 797,668
----------- -----------
$ 6,223,202 $ 6,125,846
=========== ===========
See notes to financial statements.
3
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1998 1997
--------------- ------------
LIABILITIES AND (UNAUDITED)
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 188,677 $ 292,632
Dividends payable --- 292,610
Accrued expense and other 125,491 165,841
Taxes payable 1,954 70,396
--------- ---------
Total current liabilities 316,122 821,479
--------- ---------
Deferred income taxes 20,116 20,116
--------- ---------
Stockholders' equity:
Common stock $.10 par value, 488,124 487,684
authorized 10,000,000 shares,
issued and outstanding
4,881,239 and 4,876,839
shares respectively
Capital in excess of par value 3,322,845 3,314,210
Retained earnings 2,075,995 1,482,357
--------- ---------
Total stockholders' equity 5,886,964 5,284,251
--------- ---------
$ 6,223,202 $ 6,125,846
========= =========
See notes to financial statements.
4
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------
1998 1997
------- ------
Cash flows provided by operating activities:
Net earnings $ 593,638 $ 441,110
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 204,189 188,824
Gain on sale of equipment (28,000)
(Increase) decrease in assets:
Accounts receivable (158,121) (143,193)
Inventories 126,174 377,710
Prepaid expense and other assets (80,809) (106,657)
Increase (decrease) in liabilities:
Accounts payable (103,955) 119,301
Accrued expenses and other (108,792) (24,151)
-------- --------
Net cash provided by operating activities 444,324 852,944
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (91,081) (130,258)
Acquisition of intangible assets --- (100,000)
Proceeds from the sale of equipment 28,000 ---
Purchase of short term investments (155,371) ---
-------- --------
Net cash (used in) investing activities (218,452) (230,258)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt --- (380,833)
Principal payments on capital lease
obligations --- (2,166)
Proceeds from exercise of stock options 9,075 ---
Dividends Paid (292,610) (238,144)
-------- --------
Net cash (used in) financing activities (283,535) (621,143)
-------- --------
Net increase in cash and cash
equivalents (57,663) 1,543
Cash and cash equivalents at beginning
of period 822,596 826,079
-------- --------
Cash and cash equivalents at end of period $ 724,933 $ 827,622
======== ========
See notes to financial statements.
5
<PAGE>
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 June 30, 1998 and the results of operations for the three and six
months ended June 30, 1998 and 1997 and cash flows for the six months
ended June 30, 1998 and 1997. The accounting policies followed by the
Company are set forth in the Company's financial statements included in
its December 31, 1997 Annual Report to Shareholders.
2. The results of operations for the three and six months ended
June 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 $296 and $27,246 for the six
months ended June 30, 1996 and 1997 respectively.
Cash payments for taxes were $431,642 and $393,608 for the
six months ended June 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 increased $45,930 (1%) For the six months ended June
30, 1998 compared to the comparable period in 1997. The Guardian
Laboratories division ("Guardian") had a sales increase of $119,425
(3.3%) while the Eastern Chemical subsidiary ("Eastern") had a sales
decrease of $72,495 (8.5%).
For the three month period ended June 30, 1998, revenue
decreased $447,381 (17.5%) over the comparable period in 1997. Sales of
Guardian decreased $399,632 (18.9%) while sales of Eastern decreased
$47,749 (10.7%).
The Guardian sales decreases were mainly due to decreased
Asian sales, particularly in Korea and Taiwan. The Company believes that
sales into this region will continue to be lower than last year until
such time as the economies in Asia improve. The Eastern decreases were
due to both the ongoing effort on the part of the Company to streamline
the operations of the Eastern Division and reduce its older inventory, as
well as normal fluctuations in purchasing patterns of customers.
Cost of sales
-------------
As a percentage of sales, cost of sales decreased to 58.3%
for the six months ended June 30, 1998 from 61.3% for the comparable
period in 1997. For the three month perid ended June 30, 1998 cost of
sales decreased to 56.4% from 60.1% for the comparable period in 1997.
The decreases are mainly due to a decrease in the cost of one of the
Company's largest volume raw materials in 1998 as compared to 1997.
Operating expenses
------------------
Operating expenses decreased $24,782 (2.5%) in the six
months ended June 30, 1998 compared to the comparable period in 1997. For
the three months ended June 30, 1998 there was a decrease of $48,157
(9.1%) over the comparable period in 1997. These decreases were primarily
due to the reversal of an accrued rebate expense that the Company
believes is no longer required.
Interest expense
----------------
Interest expense decreased $25,060 (98.9%) in the six months
ended June 30, 1998 compared to the comparable period in 1997 and $11,329
(100.%) in the three month period ended June 30, 1998 over the comparable
period in 1997. These decreases were mainly due to the repayment of all
debt in 1997.
Gain on Sale of Assets
----------------------
The Company realized gains on the sale of assets of $28,000
and $20,000 during the six and three month periods ended June 30, 1998
respectively. No such gains were realized during the comparable periods
in 1997.
Interest income
---------------
Interest Income increased $10,810 (94.2%) for the six months
ended June 30, 1998 when compared to the comparable period in 1997 and
$4,462 (67.8%) for the three months ended June 30, 1998 when compared to
the comparable period in 1997. These increases are primarily due to an
increase in short term invested balances.
FINANCIAL CONDITION
Working capital increased from $2,973,768 at December 31,
1997 to $3,604,087 at June 30, 1998. The current ratio increased from
4.62 to 1 at December 31, 1997 to 12.4 to 1 at June 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 $408,620
(47.9%) for the six month s ended June 30, 1998 when compared the
comparable period in 1997. This decrease is mainly due to the Company
reducing its accounts payable and accrued expenses.
7
<PAGE>
Cash flows from investing activities decreased $11,806
(5.1%) in the six months ended June 30, 1998 when compared to the
comparable period in 1997. This decrease is mainly due to proceeds of
$28,000 received on the sale of plant equipment.
Cash flows from financing activities increased $337,608
(54.4%) in the six months ended June 30, 1998 when compared to the
comparable period in 1997. This increase is mainly due to the payoff of
all long term debt by the Company during the six months ended June 30,
1997.
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: August 6, 1998
8
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<ARTICLE> 5
<CIK> 0000101295
<NAME> UNITED-GUARDIAN, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,282,072
<SECURITIES> 0
<RECEIVABLES> 1,064,017
<ALLOWANCES> 32,300
<INVENTORY> 1,245,893
<CURRENT-ASSETS> 3,920,209
<PP&E> 4,402,793
<DEPRECIATION> 2,910,823
<TOTAL-ASSETS> 6,223,202
<CURRENT-LIABILITIES> 316,122
<BONDS> 0
0
0
<COMMON> 488,124
<OTHER-SE> 3,322,845
<TOTAL-LIABILITY-AND-EQUITY> 6,223,202
<SALES> 4,499,595
<TOTAL-REVENUES> 4,499,595
<CGS> 2,623,760
<TOTAL-COSTS> 2,623,760
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 296
<INCOME-PRETAX> 956,838
<INCOME-TAX> 363,200
<INCOME-CONTINUING> 593,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 593,638
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
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