U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
----------------
TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
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)
(631) 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
----- -----
<PAGE>
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
4,894,139
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<PAGE>
UNITED-GUARDIAN, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Statements of Earnings -
Three Months Ended
March 31, 2000 and 1999 2
Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 3-4
Consolidated Statements of Cash Flows -
Three Months Ended
March 31, 2000 and 1999 5
Consolidated Notes to Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II Other Information 10
1
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UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
Net sales $ 2,913,349 $ 2,413,975
---------- ----------
Costs and expenses:
Cost of sales 1,471,085 1,312,765
Operating expenses 487,865 483,129
---------- ----------
1,958,950 1,795,894
---------- ----------
Earnings from operations 954,399 618,081
Other income (expense):
Interest expense (73) (73)
Investment income 39,451 18,973
Other -- (45)
---------- ----------
Earnings before income taxes 993,777 636,936
Provision for income taxes 370,700 236,800
---------- ----------
Net earnings $ 623,077 400,136
========== ==========
Earnings per common share
(Basic and Diluted) $ .13 .08
========== ==========
Basic weighted average shares 4,890,258 4,883,139
========== ==========
Diluted weighted average shares 4,917,903 4,900,456
========== ==========
See notes to financial statements.
2
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2000 1999
---------- -----------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 2,015,412 $ 2,014,556
Temporary investments 1,279,438 1,050,238
Marketable securities 297,720 286,791
Accounts receivable
(less allowance for doubtful
accounts of $ 60,700 at
March 31, 2000 and
December 31, 1999) 1,464,312 984,791
Inventories 1,096,325 1,311,183
Prepaid expenses and other
current assets 220,241 220,723
Deferred income taxes 170,459 174,193
---------- ----------
Total current assets 6,543,907 6,042,475
---------- ----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,532,657 2,471,632
Building and improvements 1,981,845 1,980,404
Waste disposal plant 133,532 133,532
---------- ----------
4,717,034 4,654,568
Less: Accumulated depreciation 3,354,329 3,290,120
---------- ----------
1,362,705 1,364,448
---------- ----------
Other assets:
Processes and patents, net 125,879 138,840
Split dollar life insurance 348,161 348,161
Other 1,000 1,000
---------- ----------
475,040 488,001
---------- ----------
$ 8,381,652 $ 7,894,924
========== ==========
See notes to financial statements.
3
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UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
LIABILITIES AND (UNAUDITED)
STOCKHOLDERS' EQUITY
Current liabilities:
Dividends payable $ -- $ 391,131
Accounts payable 242,514 281,422
Accrued expenses and other 172,472 195,932
Taxes payable 301,244 --
Current portion of long-term
debt 10,241 10,192
----------- -----------
Total current liabilities 726,471 878,677
----------- -----------
Long-term debt, net of current
portion 3,457 6,036
----------- -----------
Deferred income taxes 10,000 10,000
----------- -----------
Stockholders' equity:
Common stock $.10 par value,
authorized 10,000,000 shares;
issued and outstanding,
4,894,139 and 4,889,339
repectively 489,414 488,934
Capital in excess of par value 3,355,274 3,343,417
Accumulated other comprehensive
income 20,835 14,736
Retained earnings 3,776,201 3,153,124
---------- -----------
Total stockholders' equity 7,641,724 7,000,211
---------- -----------
$ 8,381,652 $ 7,894,924
========== ===========
See notes to financial statements.
4
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
Cash flows from operating activities:
Net earnings $ 623,077 $ 400,136
Adjustments to reconcile net earnings
to net cash flows provided by
operations:
Depreciation and amortization 77,170 75,478
Provision for doubtful accounts -- (76)
(Increase) decrease in assets:
Accounts receivable (479,521) (175,302)
Inventories 214,858 60,475
Prepaid expenses and other assets 482 (15,856)
Increase (decrease) in liabilities:
Accounts payable (38,908) (54,218)
Accrued expenses and taxes payable 277,784 190,159
-------- --------
Net cash provided by operating
activities 674,942 480,796
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and
equipment (62,466) (6,475)
Net change in temporaty investments (229,200) 523,193
Purchase of marketable securities net (1,096) (509)
-------- --------
Net cash provided by (used in)
investing activities (292,762) 516,209
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt (2,530) (2,530)
Proceeds from exercise of stock options 12,337 --
Dividends paid (391,131) (341,820)
-------- --------
Net cash used in financing
activities (381,324) (344,350)
-------- --------
Net increase in cash and cash equivalents 856 652,655
Cash and cash equivalents at beginning
of period 2,014,556 1,320,610
-------- --------
Cash and cash equivalents at
end of period $ 2,015,412 $1,973,265
========= ==========
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 March 31, 2000 and December 31, 1999 and the results of operations and
cash flows for the three months ended March 31, 2000 and 1999. The
accounting policies followed by the Company are set forth in the
Company's financial statements included in the December 31, 1999 Annual
Report.
2. The results of operations for the three months ended March
31, 2000 and 1999 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 $ 73 and $73 for the three
months ended March 31, 2000 and March 31, 1999 respectively.
Cash payments for income taxes were $51,818 and $41,508 for the
three months ended March 31, 2000 and March 31, 1999 respectively.
4. Comprehensive Income
The components of comprehensive income are as follows:
2000 1999
------- -------
Net income $ 623,077 $ 400,136
------- -------
Other Comprehensive income
Unrealized gain on
marketable securites 9,833 120
------- -------
Net unrealized gain 9,833 120
------- -------
Income tax expense on
comprehensive income 3,734 -
------- -------
Other comprehensive income 6,099 120
------- -------
Comprehensive income $ 629,176 $ 400,256
The components of accumulated other comprehensive income are
unrealized gains on marketable securities.
6
<PAGE>
5. NATURE OF BUSINESS AND SEGMENT INFORMATION
The Company has the following two reportable business segments:
Guardian Laboratories and Eastern Chemical. The Guardian segment conducts
research, development and manufacturing of pharmaceuticals, medical
devices, cosmetics, products and proprietary specialty chemical products.
The Eastern segment distributes fine chemicals, solutions, dyes and
reagents.
The accounting polices used to develop segment information
correspond to those described in the summary of significant accounting
policies as set forth in the December 31, 1998 annual report. Segment
earnings or loss is based on earnings or loss from operations before
income taxes. The reportable segments are distinct business units
operating in different industries. They are separately managed, with
separate marketing and distribution systems. Corporate represents those
assets, liabilities and expenses not allocable to specific segments. The
following information about the two segments is for the three months
ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
2000 1999
---------------------------------- ----------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Earnings from external customers $ 2,463,441 $ 449,908 $ 2,913,349 $1,981,825 $ 432,150 $ 2,413,975
Depreciation and amortization 42,594 - 42,594 41,565 - 41,565
Segment earnings (loss) before
income taxes 939,618 58,607 998,225 654,979 5,971 660,950
Segment assets 2,673,727 536,158 3,209,885 2,734,473 582,511 3,316,984
Expenditure for segment assets 52,466 - 52,466 736 - 736
Reconciliation to Consolidated Amounts
Earnings before income taxes
- ----------------------------
Total earnings for reportable segments $ 998,225 $ 660,950
Other earnings 39,378 18,855
Corporate headquarters expense (43,826) (42,869)
-------- ---------
Consolidated earnings before income taxes $ 993,777 $ 636,936
Assets
- ------
Total assets for reportable segments $ 3,209,885 $ 3,316,984
Corporate headquarters 5,171,767 3,669,196
--------- ---------
Total consolidated assets $ 8,381,652 $ 6,986,180
========= =========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Other Significant Items
- -----------------------
2000 1999
-------------------------------------- --------------------------------------
Segment Consolidated Segment Consolidated
Totals Corporate Totals Totals Corporate Totals
---------- ----------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest expense $ - $ 73 $ 73 $ - $ 73 $ 73
Expenditures for assets 52,466 10,000 62,466 736 5,739 6,475
Depreciation and amortization 42,592 34,578 77,170 41,565 33,913 75,478
</TABLE>
<TABLE>
<CAPTION>
Geographic Information
- ----------------------
2000 1999
---------------------- ----------------------
Revenues Long-Lived Revenues Long-Lived
Assets Assets
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
United States $ 1,339,222 $ 1,488,584 $ 1,489,556 $ 1,654,367
France 686,022 287,247
Other countries 888,105 637,172
--------- --------- --------- ---------
$ 2,913,349 $ 1,488,584 $ 2,413,975 $ 1,654,367
========= ========= ========= =========
Major Customers
- ---------------
Customer A (Guardian) $ 706,719 $ 491,215
Customer B (Guardian) 662,267 260,269
All other customers 1,544,363 1,662,491
--------- ---------
$ 2,913,349 $ 2,413,975
========= =========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales increased $499,374 (20.7%) for the three months ended
March 31, 2000 as compared to the comparable period in 1999. The Guardian
Laboratories division ("Guardian") had a sales increase of $481,615
(24.3%) while the Eastern Chemical subsidiary ("Eastern") had a sales
increase of $17,759 (4.1%). The increase in Guardian's sales was mainly
due to increases in sales of some of Guardian's core products as a result
of the efforts of its marketing partners, as well as normal fluctuations
in the purchasing patterns of its customers. The increase in Eastern's
sales was primarily the result of normal fluctuations in the purchasing
patterns of its customers.
8
<PAGE>
Cost of sales as a percentage of net sales decreased from 54.4%
for the three months ended March 31, 1999 to 50.5% in the comparable
period in 2000. The decrease was mainly due to an effeciency in overhead
absorbtion created by an increase in production for the first quarter of
2000.
Operating expenses increased $4,736 (1.0%) in the three months
ended March 31, 2000 when compared to the comparable period in 1999. This
increase was mainly due to an increase in advertising costs
Investment income increased $20,478 (107.9%) for the three
months ended March 31, 2000 when compared to the comparable period in
1999. This increase is primarily due to an increase in temporary
investments.
The provision for income taxes increased from $236,800 for the
three months ended March 31, 1999 to $370,700 for the comparable period
in 2000. This increase is mainly due to the increase in earnings before
income taxes of $356,841 (56.0) between years. The Company's effective
rate of 37% remained unchanged for both periods.
Liquidity and Capital Resources
Working capital increased from $5,163,798 at December 31, 1999
to $5,817,436 at March 31, 2000. The current ratio increased from 6.9 to
1 at December 31, 1999 to 9.0 to 1 at March 31, 2000. The increase in
working capital is primarily due to increases in cash provided by
operations. 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 activities increased $194,146 (40.4%)
for the three months ended March 31, 2000 when compared to the comparable
period in 1999. This increase is mainly due to the increased earnings in
2000 as compared to 1999.
Cash flows from investing activities decreased $808,971
(156.7%)for the three months ended March 31, 2000 when compared to the
comparable period in 1999. This decrease is mainly due to an increase in
temporary investments.
Cash flows from financing activities decreased $36,974 (10.7%)
in the three months ended March 31, 2000 when compared to the comparable
period in 1999. This decrease is primarily due to the increase in cash
dividends paid.
Impact of the "Year 2000" Issue
At the end of 1999 the Registrant experienced no problems
related to the Year 2000 ("Y2K") issue, either internally or with any of
9
<PAGE>
its customers or suppliers. In 1998 the Registrant purchased new computer
equipment to enable it to run a new Y2K compliant version of its
accounting software, and at the end of 1999 and beginning of 2000 the
Registrant did not experience any Y2K problems with its accounting
software or any of its other computer programs. All of the Registrant's
costs associated with bringing its systems into Y2K compliance were
incurred in 1998, and no additionl costs were incurred in 1999.
All of the Registrant's key non-information technology systems
were determined to be Y2K compliant prior to the end of 1999, and none
experienced any problems at the end of 1999 and beginning of 2000.
Registrant believes that it has made all of the changes
necessary to avoid any future problems related to the Y2K isssuse, and
does not expect to incur any further expense in this area.
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.
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 11, 2000
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000101295
<NAME> UNITED-GUARDIAN, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,015,412
<SECURITIES> 1,577,158
<RECEIVABLES> 1,525,012
<ALLOWANCES> 60,700
<INVENTORY> 1,096,325
<CURRENT-ASSETS> 6,543,907
<PP&E> 4,717,034
<DEPRECIATION> 3,354,329
<TOTAL-ASSETS> 8,381,652
<CURRENT-LIABILITIES> 726,471
<BONDS> 0
0
0
<COMMON> 489,414
<OTHER-SE> 3,355,274
<TOTAL-LIABILITY-AND-EQUITY> 8,381,652
<SALES> 2,913,349
<TOTAL-REVENUES> 2,913,349
<CGS> 1,471,085
<TOTAL-COSTS> 1,471,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 993,777
<INCOME-TAX> 370,700
<INCOME-CONTINUING> 623,077
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 623,077
<EPS-BASIC> .13
<EPS-DILUTED> .13
</TABLE>
