95Q930.wpd
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission File No. 0-11102
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1564329
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4041 S. W. 47 Avenue, Ft. Lauderdale, FL 33314
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - 305-587-6280
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
$.01 Par Value Common Stock 10,000,000 shares authorized, 3,512,970 issued
and outstanding at September 30, 1995.
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PART I - FINANCIAL INFORMATION
Item l. Financial Statements
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
SEPT. 30, DEC.31,
1995 1994
Current Assets:
Cash $ 596,029 $ 571,411
Trade Accounts Receivable Net Of
Allowances For Doubtful Accounts Of
$ 33,000 And $ 35,000 At September 30, 1995
And December 31, 1994 Respectively 1,344,976 1,990,558
Due From Officers 186,390 12,520
Inventories 2,206,199 1,927,646
Prepaid Expenses 231,573 102,967
Total Current Assets 4,565,167 4,605,102
Office Equipment And Improvements, Net 322,323 244,119
Other Assets:
Trademarks, Trade Names And Patents, Net 472,494 489,738
Due From Affiliated Companies, Net 507,354 370,747
Deposits And Other Assets 33,464 12,322
Total Other Assets 1,013,312 872,807
Total Assets $5,900,802 $5,722,028
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable Trade $ 412,230 $ 536,611
Notes Payable - Bank 1,195,000 1,566,667
Current Portion Of Long-Term Debt - 29,570
Accrued Expenses Payable 135,831 117,059
Total Current Liabilities 1,743,061 2,249,907
Long-term Debt, Less Current Portion - 7,501
Shareholders' Equity:
Common Stock 35,130 30,448
Additional Paid-In Capital 2,650,754 2,016,915
Retained Earnings 1,539,994 1,484,808
Foreign Currency Translation Adjustment ( 68,137) ( 67,551)
Total Shareholders' Equity $4,157,741 $3,464,620
Total Liabilities & Shareholders' Equity $5,900,802 $5,722,028
2
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OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1995 1994 1995 1994
Gross Sales $ 1,958,245 $ 2,006,143 $ 7,341,627 $ 6,822,180
Allowances 132,584 125,401 415,360 411,075
Net Sales 1,825,661 1,880,742 6,926,267 6,411,105
Cost Of Goods Sold 1,183,933 1,076,476 3,995,561 3,608,840
Gross Profit 641,728 804,266 2,930,706 2,802,265
Cost And Expenses
Adv. And Promotion 206,912 197,074 541,975 475,449
Selling And Admin. 506,124 480,627 1,525,067 1,415,446
Interest Expense 21,143 16,261 62,226 43,631
Total Expenses 734,179 693,962 2,129,268 1,934,526
Income (Loss) From
Operations ( 92,451) 110,304 801,438 867,739
Interest Income 7,624 - 18,451 -
Income (Loss) before provision
for income taxes ( 84,827) 110,304 819,889 867,739
Provision (Benefit) for
Income taxes ( 33,000) 46,000 308,000 327,000
Net Income (Loss) $( 51,827) $ 64,304 $ 511,889 $ 540,739
Earnings Per Share:
Net Income (Loss)
Per Share $( .01) $ .02 $ .15 $ .16
Earnings per share for the nine months ended September 30, 1995 and the three
months ended September 30, 1995 were calculated on the basis of 3,533,195
weighted average common stock and common stock equivalent outstanding. For
the nine and three months ended September 30, 1994, earnings per share were
calculated using 3,387,671 weighted average common stock and common stock
equivalent outstanding. Common stock equivalents consist of options to purchase
common stock. All earnings per share have been adjusted to reflect a 5% stock
dividend distributed to shareholders of record as of March 31, 1995.
3
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OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
CASH FLOWS PROVIDED BY 1995 1994
OPERATING ACTIVITIES:
Net Income $ 511,889 $ 540,739
Adjustment to Reconcile Net Income
To Net Cash Provided by Operations:
Depreciation 70,870 59,236
Change in Assets and Liabilities:
Decrease in Accounts Receivable 471,712 506,446
Increase in Inventory ( 278,553) ( 519,187)
Increase in Prepaid Expenses ( 149,748) ( 51,256)
Decrease in Accounts Payable
And Accrued Expenses ( 120,742) ( 240,335)
Net Cash Provided by Operating Activities 505,428 295,643
Cash Flows From Financing Activities:
Net Borrowings Under Line of Credit ( 371,667) ( 200,000)
Advances to Affiliates ( 136,607) ( 262,678)
Repayment of Debt ( 21,938) ( 124,875)
Sale of Stock 181,818 23,690
Net Cash Used by Financing Activities ( 348,394) ( 563,863)
Cash Flows From Investing Activities
Purchase Property, Plant, Equipment ( 131,830) ( 130,268)
Net Cash Used by Investing Activities ( 131,830) ( 130,268)
Increase (Decrease) in Cash Prior
to Effect of Exchange Rate on Cash 25,204 ( 398,488)
Effect of Exchange Rate on Cash ( 586) 3,164
Net Increase (Decrease) in Cash 24,618 ( 395,324)
Cash at Beginning of Period 571,411 516,892
Cash at September 30, $ 596,029 $ 121,568
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amount capitalized) $ 62,226 $ 39,506
Income taxes $ 314,751 $ 190,771
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchases with a maturity of three months or less to be
cash equivalents.
4
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OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. The information contained in this Report is unaudited, but reflects all
adjustments which are, in the opinion of the management, necessary for a fair
statement of results of the interim periods, consisting only of normal
recurring accruals. The results for such interim periods are not necessarily
indicative of results to be expected for the full year.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The primary sources of the Registrant's liquidity are its operations and short
term borrowings froma commercial lender. Currently the Registrant has available
a line of credit for $1,500,000 which was renewed in March 1995 for a one
year period. Management believes that the normal cash flows generated by
operations and such line is sufficient to meet the capital requirements of the
registrant for the foreseeable future.
The Registrant is involved in making sales in the Canadian market and as such
must deal with currency fluctuations of the Canadian currency. The
Registrant does not engage in currency hedging and deals with such risks as a
pricing issue.
During the past few years the Registrant has introduced various new products.
This has required the Registrant to increase overall inventory to meet
demand. As a result, inventory turnover rates have decreased. The effects of
such inventory turnover rates have not been material to the overall
operations of the Registrant. Additionally, the Registrant has opened new
manufacturing facilities for production of new products. Management is of the
opinion that all required capital to maintain such inventory increases can
continue to be provided from operations and current lending arrangements.
Results of Operations For The Three Month Period July 1-September 30
Gross sales decreased approximately $48,000 or 2% comparing the quarter ended
September 30, 1995 with the comparable period of the preceding year. Management
attributes this to the effects of inclement weather experienced during the third
quarter.
Cost of Goods Sold increased at approximately 7% as a percentage of gross
sales for the quarter ended September 30, 1995 when compared to the 1994
quarter. This was primarily due to the increased proportion of lower margin
products sold which was reflected in the product sales mix during this quarter.
Management attributes this to seasonal variation.
Advertising and promotion expenses increased approximately $10,000 or 5%
comparing the three month period ended September 30, 1995 to 1994. This is due
to timing differences.
Selling and administrative expenses increased approximately $25,000 or 5%
comparing the quarter ended September 30, 1995 to the comparable period in 1994.
This was not attributed to any particular factor.
Interest expense increased approximately $5,000 comparing the quarter ended
September 30, 1995 to the comparable period in 1994. This was primarily due to
higher interest rates.
5
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Results Of Operations For The Nine Month Period January 1-September 30
Gross sales increased approximately $519,000 or 8% comparing the nine month
periods in 1995 and 1994. This is due to the results of the record sales levels
experienced in the first quarter.
Cost of goods sold increased approximately 2 % of gross sales when comparing the
nine months ended September 30,1995 and 1994. This reflects the variations in
the sales mix experienced during the third quarter.
Advertising and promotion expenses increased approximately $66,000 or 14% when
comparing the nine months ended September 30, 1995 and 1994. This was due
primarily to special promotions on selected products during the second quarter
and timing differences.
Selling and administrative expenses increased during 1995 by approximately
$110,000 or 8% when compared to 1994. This was primarily due to increased
personnel cost, and additions to the sales representatives the Registrant uses
in expectations of projected marketing increases.
Interest expense increased in 1995 for the nine month period by approximately
$19,000 reflecting increased interest rates for the period.
6
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings: See the Registrant's 10K for the year ended
December 31, 1994
Item 2 - Changes in Securities: Not Applicable
Item 3 - Defaults Upon Senior Securities: Not Applicable
Item 4 - Submission of Matters to Vote of Security Holders: Not Applicable
Item 5 - Other Information: Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits: Not Applicable
(B) Reports on Form 8-K: Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
OCEAN BIO-CHEM, INC.
Date: 11/14/95 /s/ Peter Dornau
Peter G. Dornau
Chairman of the Board of Directors
and Chief Executive Officer
/s/ Peter Dornau
Peter G. Dornau
Chief Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1995 10-Q of Ocean Bio-Chem, Inc. and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 596,029
<SECURITIES> 0
<RECEIVABLES> 1,377,976
<ALLOWANCES> 33,000
<INVENTORY> 2,206,199
<CURRENT-ASSETS> 4,565,167
<PP&E> 605235
<DEPRECIATION> (282,912)
<TOTAL-ASSETS> 5,900,802
<CURRENT-LIABILITIES> 1,743,061
<BONDS> 0
<COMMON> 35,130
0
0
<OTHER-SE> 4,122,611
<TOTAL-LIABILITY-AND-EQUITY> 5,900,802
<SALES> 7,341,627
<TOTAL-REVENUES> 7,341,627
<CGS> 3,995,561
<TOTAL-COSTS> 2,129,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,226
<INCOME-PRETAX> 819,889
<INCOME-TAX> 308,000
<INCOME-CONTINUING> 819,889
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511,889
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
