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, 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 Pages
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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 the latest practicable date:
4,899,039
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Cover Page 2 of 2 Pages
<PAGE>
UNITED-GUARDIAN, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Statements of Earnings -
Three and Six Months Ended
June 30, 2000 and 1999 2
Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999 3-4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999 5
Consolidated Notes to Financial Statements 6-9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-11
Part II. Other Information 12
1
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue:
Net sales $ 5,853,810 $ 4,966,017 $ 2,940,461 $ 2,552,042
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 2,874,747 2,618,772 1,403,662 1,306,007
Selling, general and
administrative 1,126,143 1,047,141 638,278 564,012
--------- --------- --------- ---------
4,000,890 3,665,913 2 041,940 1,870,019
--------- --------- --------- ---------
Earnings from
operations 1,852,920 1,300,104 898,521 682,023
Other income (expense):
Interest expense (134) (73) (61) -
Investment Income 91,088 42,261 51,637 23,288
Other - (72) - (27)
--------- --------- --------- ---------
Earnings before
income taxes 1,943,874 1,342,220 950,097 705,284
Provision for
income taxes 725,500 500,600 354,800 263,800
--------- --------- --------- ---------
Net earnings $ 1,218,374 $ 841,620 $ 595,297 $ 441,484
========= ========= ========= =========
Earnings per common
share - Basic and
Diluted $ 0.25 $ 0.17 $ 0.12 $ 0.09
========= ========= ========= =========
Basic weighted average
shares 4,892,934 4,883,139 4,895,609 4,883,139
========= ========= ========= =========
Diluted weighted
average shares 4,920,646 4,900,646 4,923,387 4,900,835
========= ========= ========= =========
See notes to financial statements.
2
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30 DECEMBER 31
2000 1999
------------ -------------
ASSETS (UNAUDITED) (DERIVED FROM AUDITED
FINANCIAL STATEMENTS)
Current assets:
Cash and cash equivalents $ 2,218,511 $ 2,014,556
Temporary investments 2,003,728 1,050,238
Marketable securities 291,843 286,791
Accounts receivable
(less allowance for doubtful
accounts of $54,949 at
June 30, 2000 and $60,700 at
December 31, 1999) 1,050,541 984,791
Inventories 1,070,583 1,311,183
Prepaid expenses and other
current assets 244,667 220,723
Deferred income taxes 173,259 174,193
----------- -----------
Total current assets 7,053,132 6,042,475
----------- -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,567,746 2,471,632
Building and improvements 1,981,845 1,980,404
Waste disposal plant 133,532 133,532
----------- -----------
4,752,123 4,654,568
Less: Accumulated depreciation 3,415,449 3,290,120
----------- -----------
1,336,674 1,364,448
----------- -----------
Other assets:
Processes and patents, net 112,918 138,840
Split dollar life insurance 348,161 348,161
Other 1,000 1,000
----------- -----------
462,079 488,001
----------- -----------
$ 8,851,885 $ 7,894,924
=========== ===========
See notes to financial statements.
3
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2000 1999
--------------- ------------
LIABILITIES AND (UNAUDITED) (DERIVED FROM AUDITED
STOCKHOLDERS' EQUITY FINANCIAL STATEMENTS)
Current liabilities:
Dividends payable $ - $ 391,131
Accounts payable 223,732 281,422
Accrued expenses and other 361,856 195,932
Current portion of long-term
debt 10,290 10,192
--------- ---------
Total current liabilities 595,878 878,677
--------- ---------
Long-term debt, net of current
portion 866 6,036
--------- ---------
Deferred income taxes 10,000 10,000
--------- ---------
Stockholders' equity:
Common stock $.10 par value,
authorized 10,000,000 shares,
issued and outstanding 4,899,039
and 4,889,339 respectively 489,904 488,934
Capital in excess of par value 3,367,328 3,343,417
Accumulated other comprehensive
income 16,411 14,736
Retained earnings 4,371,498 3,153,124
--------- ---------
Total stockholders' equity 8,245,141 7,000,211
--------- ---------
$ 8,851,885 $ 7,894,924
========= =========
See notes to financial statements.
4
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------
2000 1999
------- -------
Cash flows provided by operating activities:
Net earnings $ 1,218,374 $ 841,620
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 151,251 151,847
Provision for doubtful accounts - (460)
(Increase) decrease in assets:
Accounts receivable (65,750) (183,763)
Inventories 240,600 125,896
Prepaid expense and other current assets (23,944) (11,521)
Increase (decrease) in liabilities:
Accounts payable (57,690) (126,327)
Accrued expenses and other 165,924 180,788
-------- --------
Net cash provided by operating activities 1,628,765 978,080
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (97,555) (14,851)
Net change in temporary investments (953,490) (514,769)
Purchase of marketable securities (2,443) (2,523)
Proceeds from sale of marketable securities - 24,854
-------- --------
Net cash used in investing activities (1,053,488) (507,289)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt (5,072) (5,133)
Proceeds from exercise of stock options 24,881 -
Dividends Paid (391,131) (341,820)
-------- --------
Net cash used in financing activities (371,322) (346,953)
-------- --------
Net increase in cash and cash
equivalents 203,955 123,838
Cash and cash equivalents at beginning
of period 2,014,556 1,320,610
--------- ---------
Cash and cash equivalents at end of period $ 2,218,511 $ 1,444,448
========= =========
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 June 30, 2000 and December 31, 1999 and the results of operations and
cash flows for the three and six months ended June 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 six months ended
June 30, 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 $134 and $73 for the six
months ended June 30, 2000 and 1999 respectively.
Cash payments for taxes were $730,867 and $883,368 for the
six months ended June 30, 2000 and 1999 respectively.
4. Comprehensive Income
The components of comprehensive income are as follows:
Six months ended
June 30,
2000 1999
------- -------
Net income $1,218,374 $ 841,620
--------- -------
Other comprehensive income
Unrealized gain on
marketable securities 2,609 5,873
--------- -------
Net unrealized gains 2,609 5,873
--------- -------
Income tax expense on
comprehensive income 934 2,173
--------- -------
Other comprehensive income 1,675 3,700
--------- -------
Comprehensive income $1,220,049 $ 845,320
========= =======
The component of accumulated other comprehensive income is
unrealized gains on marketable securities.
6
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
5. Earnings Per Share
The following table sets for the computation of basic and
diluted earnings per share at June 30, 2000 and 1999.
2000 1999
------- -------
Numerator:
Net income $1,218,374 $ 841,620
--------- ---------
Denominator:
Denominator for basic earnings
per share (weighted average
shares) 4,892,934 4,883,139
Effect of dilutive securities :
Employee stock options 27,712 17,705
--------- ---------
Denominator for diluted earnings
per share (adjusted weighted-average
shares) and assumed conversions 4,920,646 4,900,646
========= =========
Basic and diluted earnings per share $ 0.25 $ 0.17
========= =========
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.
6. 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. Corporate represents those
assets, liabilities and expenses not allocable to specific segments. The
following information about the two segments is for the six months ended
June 30, 2000 and 1999.
7
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
2000 1999
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $ 5,020,389 $ 833,421 $ 5,853,810 $ 4,109,308 $ 856,709 $ 4,966,017
Depreciation and amortization 83,513 - 83,513 83,180 - 83,180
Segment earnings (loss before
income taxes) 1,867,382 80,506 1,947,888 1,366,608 20,272 1,386,880
Segment assets 2,452,040 459,530 2,911,570 2,291,795 515,283 3,207,078
Expenditures for segment assets 85,619 - 85,619 1,816 - 1,816
Reconciliation to Consolidated Amounts
Earnings before income taxes
----------------------------
Total earnings for reportable segments 1,947,888 1,386,880
Other earnings 90,954 42,116
Corporate headquarters expense (94,968) (86,776)
----------- -----------
Consolidated earnings before income
taxes 1,943,874 1,342,220
Assets
------
Total assets for reportable segments 2,911,570 3,207,078
Corporate headquarters 5,940,315 4,142,586
----------- -----------
Total consolidated assets $ 8,851,885 $ 7,349,664
=========== ===========
</TABLE>
8
<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 $ - $ 134 $ 134 $ - $ 73 $ 736
Expenditures for assets 85,619 11,936 97,555 1,816 13,035 14,8511
Depreciation and amortization 83,513 67,738 151,251 83,180 68,667 151,8479
</TABLE>
<TABLE>
<CAPTION>
Geographic Information
----------------------
2000 1999
--------------------------- ---------------------------
Revenues Long-Lived Revenues Long-Lived
Assets Assets
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
United States $ 2,982,324 $ 1,449,592 $ 2,951,333 $ 1,586,373
France 954,792 658,023
Other countries 1,916,694 1,356,661
----------- ------------- ----------- -------------
$ 5,853,810 $ 1,449,592 $ 4,966,017 $ 1,586,373
=========== ============= =========== =============
Major Customers
---------------
Customer A (Guardian) $ 1,060,834 $ 1,070,451
Customer B (Guardian) 911,790 612,594
All other customers 3,881,186 3,282,972
----------- -----------
$ 5,853,810 $ 4,966,017
=========== ===========
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Gross revenue from operations
-----------------------------
Net sales increased $887,793 (17.9%) for the six months ended
June 30, 2000 compared to the comparable period in 1999. The Guardian
Laboratories division ("Guardian") had a sales increase of $911,081
(22.2%) while the Eastern Chemical subsidiary ("Eastern") had a sales
decrease of $23,288 (2.7%).
For the three month period ended June 30, 2000, revenue
increased $388,419 (15.2%) over the comparable period in 1999. Guardian
sales increased $429,465 (20.2%), while Eastern sales decreased $41,046
(9.7%).
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 decrease in Eastern's sales was primarily
the result of normal fluctuations in the purchasing patterns of
customers.
Cost of sales
-------------
Cost of sales as a percentage of sales decreased to 49.1% for
the six months ended June 30, 2000 from 52.7% for the comparable period
ended June 30, 1999. For the three month period ended June 30, 2000
compared to the three month period June 30, 1999 the cost of sales as a
percentage of sales decreased to 47.7% from 51.2%. The decreases were
mainly due to an efficiency in overhead absorption created by in increase
in production during the first six months in 2000.
Operating Expenses
------------------
Operating expenses increased $79,002 (7.5%) in the six months
ended June 30, 2000 compared to the comparable period in 1999. For the
three months ended June 30, 2000 operating expenses increased $74,266
(13.2%) 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 fiscal year and year to date
are satisfactory enough to do so.
10
<PAGE>
Investment income
---------------
Investment income increased $48,827 (115.5%) for the six months
ended June 30, 2000 when compared to the comparable period in 1999, and
$28,349 (121.7%) for the three months ended June 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 $224,900 (44.9%) for
the six months ended June 30, 2000 when compared to the comparable period
in 1999, and $91,000 (34.5%) for the three months ended June 30, 2000
when compared to the comparable period in 1999. These increases are due
to increased earnings before taxes of $601,654 for the six months ended
June 30, 2000 and $244,813 for the three months ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $5,163,798 at December 31, 1999
to $6,457,254 at June 30, 2000. The current ratio increased from 6.9 to 1
at December 31, 1999 to 11.8 to 1 at June 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 $650,685
(66.5%) for the six months ended June 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 $546,199
(107.7%) in the six months ended June 30, 2000 when compared to the
comparable period in 1999. This increase is mainly due additional
investments in temporary investments.
Cash flows used in financing activities increased $24,369 (7.0%)
in the six months ended June 30, 2000 when compared to the comparable
period in 1999. This increase is mainly due to the increase in cash
dividends paid in 2000 when compared to 1999.
IMPACT OF THE "YEAR 2000" ISSUE
All of the Registrant's key information and non-information
technology systems were determined to be, or made to be, Year 2000
("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 issue, and does not expect to incur any
further expense in this area.
11
<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: August 3, 2000
12
