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, 2000
----------------------
_______ 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.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-1719724
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(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)
(631) 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
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Cover Page 1 of 2
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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 October 24, 2000:
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4,860,739
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Cover Page 2 of 2
<PAGE>
UNITED-GUARDIAN, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Statements of Earnings -
Three and Nine Months Ended
September 30, 2000 and 1999 2
Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 3-4
Consolidated Statements of Cash Flows -
Nine Months Ended
September 30, 2000 and 1999 5
Consolidated Notes to Financial Statements 6-10
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-12
Part II. Other Information 13
1
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue:
Net sales $ 7,795,787 $ 7,093,503 $ 1,941,977 $ 2,127,486
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 3,791,152 3,786,891 916,405 1,168,119
Selling, general and
administrative 1,639,314 1,541,776 513,171 494,635
--------- --------- --------- ---------
5,430,466 5,328,667 1,429,576 1,662,754
--------- --------- --------- ---------
Earnings from
operations 2,365,321 1,764,836 512,401 464,732
Other income (expense):
Interest expense (354) (327) (220) (254)
Investment income 154,720 62,311 63,632 20,050
Other - (72) - -
--------- --------- --------- ---------
Earnings before
income taxes 2,519,687 1,826,748 575,813 484,528
Provision for
income taxes 940,000 681,400 214,500 180,800
-------- --------- --------- ---------
Net earnings $ 1,579,687 $ 1,145,348 $ 361,313 $ 303,728
========= ========= ========= =========
Earnings per common
share - Basic and
Diluted $ 0.32 $ 0.23 $ 0.07 $ 0.06
========= ========= ========= =========
Basic weighted average
shares 4,892,270 4,884,568 4,890,956 4,887,378
========= ========= ========= =========
Diluted weighted
average shares 4,920,441 4,902,309 4,920,396 4,905,588
========= ========= ========= =========
See notes to financial statements.
2
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ -------------
ASSETS (UNAUDITED) (DERIVED FROM AUDITED
FINANCIAL STATEMENTS)
Current assets:
Cash and cash equivalents $ 1,016,550 $ 2,014,556
Temporary investments 3,174,755 1,050,238
Marketable securities 291,126 286,791
Accounts receivable
(less allowance for doubtful
accounts of $54,949 at
September 30, 2000 and $60,700
December 31, 1999) 859,833 984,791
Inventories 1,465,292 1,311,183
Prepaid expenses and other
current assets 255,536 220,723
Deferred income taxes 173,780 174,193
----------- -----------
Total current assets 7,236,872 6,042,475
----------- -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,603,296 2,471,632
Building and improvements 1,981,846 1,980,404
Waste disposal plant 133,532 133,532
----------- -----------
4,787,674 4,654,568
Less: Accumulated depreciation 3,476,222 3,290,120
----------- -----------
1,311,452 1,364,448
----------- -----------
Other assets:
Processes and patents, net 99,957 138,840
Split dollar life insurance - 348,161
Note receivable-officer 143,161 -
Other 1,000 1,000
----------- -----------
244,118 488,001
----------- -----------
$ 8,792,442 $ 7,894,924
=========== ===========
See notes to financial statements.
3
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
--------------- ------------
LIABILITIES AND (UNAUDITED) (DERIVED FROM AUDITED
STOCKHOLDERS' EQUITY FINANCIAL STATEMENTS)
Current liabilities:
Dividends payable --- $ 391,131
Accounts payable $ 180,322 281,422
Accrued expense and other 187,943 195,932
Current portion of long-term
debt 8,602 10,192
--------- ---------
Total current liabilities 376,867 878,677
--------- ---------
Long-term debt, net of current
portion - 6,036
--------- ---------
Deferred income taxes 10,000 10,000
--------- ---------
Stockholders' equity:
Common stock $.10 par value,
authorized 10,000,000 shares,
issued 4,900,739 and 4,889,339
shares, outstanding 4,860,739
and 4,889,339 shares 490,074 488,934
Capital in excess of par value 3,372,258 3,343,417
Accumulated other comprehensive
income 15,432 14,736
Retained earnings 4,732,811 3,153,124
Treasury stock at cost 40,000 shares (205,000) -
--------- ---------
Total stockholders' equity 8,405,575 7,000,211
--------- ---------
$ 8,792,442 $ 7,894,924
========= =========
See notes to financial statements.
4
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
September 30,
-------------
2000 1999
------- -------
Cash flows provided by operating activities:
Net earnings $ 1,579,687 $ 1,145,348
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 224,985 241,823
Loss on sale of marketable securities - 3,214
Provision for doubtful accounts (5,751) (460)
Provision for inventory obsolescence - 10,000
(Increase) decrease in assets:
Accounts receivable 130,709 155,711
Inventories (154,109) (28,978)
Prepaid expense and other assets (34,813 (19,284)
Increase (decrease) in liabilities:
Accounts payable (101,100) (123,867)
Accrued expenses and other,
and taxes payable (7,989) 44,022
-------- --------
Net cash provided by operating activities 1,631,619 1,427,529
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (133,106) (75,968)
Net change in temporary investments (2,124,517) (314,914)
Purchase of marketable securities - net (3,226) (203,114)
Proceeds from sale of marketable securities - 24,854
-------- --------
Net cash (used in) investing activities (2,260,849) (569,142)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt (7,626) (7,483)
Proceeds from exercise of stock options 29,981 12,750
Dividends paid (391,131) (341,820)
-------- --------
Net cash (used in) financing activities (368,776) (336,553)
-------- --------
Net (decrease) increase in cash and cash
equivalents ( 998,006) 521,834
Cash and cash equivalents at beginning
of period 2,014,556 1,320,610
--------- ---------
Cash and cash equivalents at end of period $ 1,016,550 $ 1,842,444
========= =========
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 30,2000 and the results of operations for the three and nine
months ended September 30, 2000 and 1999 and cash flows for the nine
months ended September 30, 2000 and 1999. The accounting policies
followed by the Company are set forth in the Company's financial
statements included in its December 31, 1999 Annual Report to
Shareholders.
2. The results of operations for the three and nine months ended
September 30,2000 and 1999 are not necessarily indicative of the results
to be expected for the full year.
3. Inventories
Inventories consist of the following:
September 30, December 31,
2000 1999
----------- -----------
Raw materials and work-in-process ...... $ 355,197 $ 279,851
Finished products and fine chemicals ... 1,110,095 1,031,332
---------- ---------
1,465,292 $1,311,183
========== =========
4. 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 $354 and $327 for the nine
months ended September 30, 2000 and 1999 respectively.
Cash payments for taxes were $1,027,826 and $680,199 for the
nine months ended September 30, 2000 and 1999 respectively.
5. Comprehensive Income
The components of comprehensive income are as follows:
2000 1999
--------- ---------
Net income $1,579,687 $1,145,348
--------- ---------
Other Comprehensive Income
Unrealized gain (loss) on
marketable securities 1,109 (6,431)
------- -------
Net unrealized gain (loss) 1,109 (6,431)
------- -------
6
<PAGE>
Income tax benefit on
comprehensive gain (loss) 413 (2,400)
------- -------
Other comprehensive gain (loss) 696 (4,031)
--------- -------
Comprehensive income $1,580,383 $1,141,317
========= =========
The component of accumulated other comprehensive income is
unrealized gains on marketable securities.
6. Earnings Per Share
The following table sets for the computation of basic and
diluted earnings per share at September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30
2000 1999 2000 1999
------- ------- -------- -------
<S> <C> <C> <C> <C>
Numerator:
Net income $1,579,687 $1,145,348 $ 361,313 303,728
--------- --------- --------- -------
Denominator:
Denominator for basic earnings
per share (weighted average
shares) 4,892,270 4,884,568 4,890,956 4,887,378
Effect of dilutive securities:
Employee stock options 28,171 17,741 29,440 18,210
--------- --------- --------- ---------
Denominator for diluted earnings
per share (adjusted weighted-
average shares) and assumed
conversions 4,920,441 4,902,309 4,920,396 4,905,588
========= ========= ========= =========
Basic and diluted earnings
per share $ 0.32 $ 0.23 $ .07 $ .06
========= ========= ========= =========
</TABLE>
Options to purchase 21,000 shares of the Company's common stock
have been excluded from the computation of diluted earnings per share in
2000 and 1999 as their inclusion would be antidilutive.
7
<PAGE>
7. The life insurance policy of an officer was terminated on
July 8, 2000. The Company had carried the cost of the split dollar
insurance, aggregating $348,161, as "Other assets" on its balance sheet.
Upon termination, the officer executed a promissory note agreeing to
repay the Company its entire cost. The promissory note, which is due on
July 8, 2003, bears interest at 6.6% per annum. On September 12, 2000,
40,000 shares were surrendered by the officer in partial repayment of the
promissory note. The reduction in the note by $205,000 was determined
based upon the closing stock price on the date that such shares were
surrendered multiplied by the number of shares surrendered. The cost of
the surrendered shares have been classified as "Treasury stock" in the
accompanying balance sheet.
8. 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 policies used to develop segment information
correspond to those described in the summary of significant accounting
policies as set forth in the December 31, 1999 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. The following information
about the two segments is for the nine months ended September 30, 2000
and 1999.
8
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
2000 1999
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDAIN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $ 6,620,110 $ 1,175,677 $ 7,795,787 $ 5,704,723 $ 1,388,780 $ 7,093,503
Depreciation and amortization 123,729 - 123,729 136,605 - 136,605
Segment earnings before
income taxes 2,410,028 92,468 2,502,496 1,808,389 89,336 1,897,725
Segment assets 2,410,648 519,781 2,930,429 2,336,162 594,017 2,930,179
Expenditures for segment assets 117,650 - 117,650 36,718 36,718
Reconciliation to Consolidated Amounts
Earnings before income taxes
----------------------------
Total earnings for reportable segments $ 2,502,496 $ 1,897,725
Other earnings 154,366 61,912
Corporate headquarters expense (137,175) (132,889)
----------- -----------
Consolidated earnings before income
taxes $ 2,519,687 $ 1,826,748
Assets
------
Total assets for reportable segments $ 2,930,429 $ 2,930,179
Corporate headquarters 5,862,013 4,587,003
----------- -----------
Total consolidated assets $ 8,792,442 $ 7,517,182
=========== ===========
</TABLE>
9
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Other significant items
-----------------------
2000 1999
------------------------------------------ -------------------------------------------
Segment Consolidated Segment Consolidated
Totals Adjustments Totals Totals Adjustments Totals
------------ ------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Interest Expense - $ 354 $ 354 - $ 327 $ 327
Expenditures for assets $ 117,650 15,456 133,106 $ 36,718 39,250 75,968
Depreciation and amortization 123,729 101,256 224,985 136,605 105,218 241,823
</TABLE>
<TABLE>
<CAPTION>
Geographic Information
----------------------
2000 1999
--------------------------- ---------------------------
Revenues Long-Lived Revenues Long-Lived
Assets Assets
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
United States $ 4,078,743 $ 1,411,409 $ 3,384,935 $ 1,557,513
France 1,022,465 831,507
Other countries 2,694,579 2,877,061
----------- ------------- ----------- -------------
$ 7,795,787 $ 1,411,409 $ 7,093,503 $ 1,557,513
=========== ============= =========== =============
Major Customers
---------------
Customer A (Guardian) $ 1,365,181 $ 1,508,940
Customer B (Guardian) 969,341 777,342
All other customers 5,461,265 4,807,221
----------- -----------
$ 7,795,787 $ 7,093,503
=========== ===========
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Gross revenue from operations
-----------------------------
For the nine month period ended September 30, 2000 net sales
increased $702,284 (9.9%) versus the comparable period in 1999. The
Guardian Laboratories division ("Guardian") had a sales increase of
$915,387 (16.0%) while the Eastern Chemical subsidiary ("Eastern") had a
sales decrease of $213,103 (15.3%).
For the three month period ended September 30, 2000 revenue
increased $185,508 (8.7%) over the comparable period in 1999. Guardian
sales increased $4,307 (.3%), while Eastern sales decreased $189,815
(35.7%).
The increase in Guardian's sales was mainly due to the 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 decrease in Eastern's sales was
the result of both a downsizing of the Eastern operation as well normal
fluctuations in the purchasing patterns of customers.
Cost of sales
-------------
Cost of sales as a percentage of sales decreased to 48.6% for
the nine months ended September 30, 2000 from 53.4% for the comparable
period ended September 30, 1999. For the three month period ended
September 30, 1999 compared to the three month period September 30, 1999
the cost of sales as a percentage of sales decreased to 47.2% from 54.9%.
The nine month decrease was mainly due to an efficiency in overhead
absorption created by an increase in production during the first nine
months in 2000. The three month decrease is mainly due to the decrease in
Eastern Chemical sales which have higher cost of sales than Guardian.
Operating Expenses
------------------
Operating expenses increased $97,538 (6.3%) in the nine months
ended September 30, 2000 compared to the comparable period in 1999. For
the three months ended September 30,2000 operating expenses increased
$18,536 (3.7%) over the comparable period in 1999. These increases were
primarily due to the payment in the second quarter of 2000 of employee
bonuses in accordance with a new company-wide employee bonus program that
was implemented in the second quarter of 1999. The program calls for the
payment once a year of a bonus to all qualifying employees when the
Compensation Committee of the Board of Directors determines, usually at
the end of June of the year following the year upon which the bonus is
based, that operating results for the prior year and year to date are
satisfactory enough to do so.
11
<PAGE>
Investment income
---------------
Investment income increased $92,409 (148.3%) for the nine months
ended September 30, 2000 when compared to the comparable period in 1999,
and $43,582 (217.4%) for the three months ended September 30, 2000 when
compared to the comparable period in 1999. These increases are primarily
due to an increase in short term invested balances.
Provision for income taxes
--------------------------
The provision for income taxes increased $258,600 (38.0%) for
the nine months ended September 30,2000 when compared to the comparable
period in 1999, and $33,700 (18.6%) for the three months ended September
30, 2000 when compared to the comparable period in 1999. These increases
are due to increased earnings before taxes of $692,940 (37.9%)for the
nine months ended September 30,2000 and $91,286 (18.8%)for the three
months ended September 30,1999.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $5,163,798 at December 31, 1999
to $6,860,005 at September 30, 2000. The current ratio increased from 6.9
to 1 at December 31, 1999 to 19.2 to 1 at September 30, 2000. The Company
has no commitments for any further significant capital expenditures
during the remainder of 2000, and believes that its working capital is
and will continue to be sufficient to support its operating requirements.
Cash flows provided by operating activities increased $204,090
(14.3%) for the nine months ended September 30, 2000 when compared the
comparable period in 1999. This increase relates primarily to the
increase in earnings.
Cash flows used in investing activities increased $1,691,707
(297.2%) in the nine months ended September 30, 2000 when compared to the
comparable period in 1999. This increase is mainly due to additional
purchases of temporary investments.
Cash flows used in financing activities increased $32,223 (9.6%)
in the nine months ended September 30, 2000 when compared to the
comparable period in 1999. This increase is mainly due to the increase in
dividends paid in 2000 compared to 1999.
12
<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 2, 2000
13
