10Q696
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 June 30, 1996
Commission File No. 2-70197
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1564329
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Registrant's telephone number, including area code - 954-587-6280
Indicate by check mark whether the registrant (1) 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.
3,517,169 issued and outstanding at June 30, 1996.
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PART I - Financial Information
Item l. Financial Statement
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
JUNE 30, DEC. 31,
1996 1995
Current Assets:
Cash $ 157,031 $ 997,309
Trade Accounts Receivable Net of Allowances for
Doubtful Accounts of approximately $ 42,000
and $ 48,000 at June 30, 1995 and
December 31, 1994, Respectively 2,140,040 2,006,418
Due from officers 157,880 154,420
Inventories 2,702,915 2,038,750
Prepaid Expenses 230,185 111,455
Total Current Assets 5,388,050 5,308,352
Office Equipment and Furnishings, Net 2,166,214 321,475
Other Assets
Trademarks, Trade Names and Patents, Net 455,250 466,746
Deposits and Other Assets 11,411 18,818
Due From Affiliated Companies, Net 649,000 632,379
Total Other Assets 1,115,661 1,117,943
Total Assets $ 8,669,926 $ 6,747,770
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable - Trade $ 777,756 $ 485,105
Notes Payable - Bank 2,230,000 1,990,000
Current Portion of Long-Term Debt 220,000 7,592
Accrued Expenses Payable 129,030 89,068
Total Current Liabilities 3,356,786 2,571,765
Long-term Debt, Less Current Portion 770,000 -
Shareholders' Equity:
Common Stock 36,928 35,130
Additional Paid-in Capital 3,161,429 2,650,754
Retained Earnings 1,430,863 1,568,646
Foreign Currency Translation Adjustment ( 86,080) ( 78,525)
Total Shareholders' Equity 4,543,140 4,176,005
Total Liabilities & Shareholders' Equity $ 8,669,926 $ 6,747,770
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OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
Gross Sales $3,815,253 $2,908,971 $6,302,864 $5,383,382
Allowances 99,177 131,625 232,146 282,776
Net Sales 3,716,076 2,777,346 6,070,718 5,100,606
Cost of Goods Sold 2,485,667 1,542,353 3,979,772 2,811,628
Gross Profit 1,230,409 1,234,993 2,090,946 2,288,978
Cost and Expenses:
Advertising and Promotion 176,282 229,858 257,552 335,063
Selling and Administrative 537,434 472,153 1,143,690 1,018,943
Interest Expense 62,644 15,154 104,014 41,083
Total Cost and Expenses 776,360 717,165 1,505,256 1,395,089
Income From Operations 454,049 517,828 585,690 893,889
Interest Income 655 6,932 3,831 10,827
Income Before Income Taxes 454,704 524,760 589,521 904,716
Provision for Income Taxes 182,000 201,000 222,000 341,000
Net Income $ 272,704 $ 323,760 $ 367,521 $ 563,716
Net Per Share $ .07 $ .09 $ .10 $ .16
Earnings per share were calculated based on the weighted average common stock
and common stock equivalent outstanding of 3,802,911 shares for the six months
and three months ending June 30, 1996 and 3,513,495 shares for the six months
and three months ended June 30, 1995. Common stock equivalents consist of
options to purchase common stock. All earnings per share have been restated
to reflect a 5% stock dividend distributed to shareholders of record as of
May 1, 1996.
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OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED JUNE 30
(Unaudited)
1996 1995
Cash flow used by operating activities:
Net Income $ 367,521 $ 563,716
Adjustments to Reconcile Net Income
to Net Cash Provided by Operations:
Depreciation and Amortization 87,628 44,567
Change in Assets and Liabilities:
(Increase) decrease in
Accounts Receivable ( 133,622) 558,181
Increase in Inventory ( 664,165) ( 467,740)
Increase in Prepaid Expenses ( 114,784) ( 145,426)
Increase in Accounts Payable
and Accrued Expenses: 338,082 501,271
Net Cash (Used) Provided by
Operating Activities: ( 119,340) 1,054,569
Cash Flows From Financing Activities:
Net Borrowings Under Line of Credit 240,000 ( 235,000)
Advances (to) From Affiliates ( 16,621) ( 161,997)
Borrowings (Payment) on Debts, Net 976,939 84,228
Sale of Stock 7,169 45,817
Net Cash Provided (Used) by
Financing Activities: 1,207,487 ( 435,408)
Cash Flows From Investing Activities:
Purchase Property, Plant, Equipment ( 1,920,870) ( 39,931)
Net Cash Used by Financing Activities: ( 1,920,870) ( 39,931)
Decrease in Cash Prior to
Effect of Exchange Rate on Cash ( 832,723) ( 579,230)
Effect of Exchange Rate on Cash ( 7,555) ( 7,267)
Net Decrease in Cash ( 840,278) ( 571,963)
Cash at Beginning of Period 997,309 571,411
Cash at June 30, $ 157,031 $ 1,143,374
Supplemental Information
Cash Used for Interest During Period $ 80,350 $ 41,300
Cash Used for Income Taxes During Period $ 194,000 $ 210,331
The company had no cash equivalents at June 30, 1996 and 1995.
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OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
l. 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 OPERATION
Liquidity and Capital Resources
The primary sources of the Registrant's liquidity are its operations and a line
of credit from a commercial bank to a limit of $2 million. On February 27,
1996 the Registrant obtained an increase to the line of credit for an additional
$900,000 for temporary financing of the Registrant's asset purchase from Kinpak,
Inc. in Alabama. The total borrowings under such line can aggregate up to
$2,900,000 and is subject to renewal in April 1997. The Registrant is required
to maintain minimum working capital of $1,500,000, debt to tangible net worth
of 2 to 1 and debt service coverage of 1.5 times. As of year end Registrant was
in compliance with all terms.
The Registrant is involved in making sales in the Canadian market and must deal
with the currency fluctuations of the Canadian currency. The Registrant does
not engage in currency hedging and deals with such currency risk as a pricing
issue.
During the past few years Registrant has introduced various new products to the
marketplace. This has required the Registrant to carry greater amounts of
overall inventory and has resulted in lower inventory turnover rates. The
effects of such inventory turnover have not been material to the overall
operations of Registrant. Registrant believes that all required capital to
maintain such increases can continue to be provided from operations and current
lending arrangements.
Results of Operations For The Three Month Period April 1-June 30:
Gross Sales increased approximately $ 906,000 or 31% when comparing the
quarter ended June 30, 1996 with the comparable period of the preceding year.
Management attributes the increase to the introduction of new products and the
filling operation of the Alabama Plant.
Cost of Goods Sold increased approximately 11% as a percentage of gross sales
when comparing the quarter ended June 30, 1996 with the quarter ended June 30,
1995. This increase was mainly attributable to the higher cost of sales of the
filling operation in Alabama and a change in the product sales mix.
Advertising and Promotion expenses decreased approximately $ 54,000 or 23%
when comparing the three months ended June 30, 1996 to the three months
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ended June 30, 1995. This was not due to any one factor.
Selling and Administrative expenses increased approximately $ 65,000 or 14%
when comparing the quarter ended June 30, 1996 to the comparable period in
1995. This included increases in sales representatives expense and personnel
cost.
Interest Expense increased approximately $ 47,000 comparing the quarter ended
June 30, 1996 to the comparable period in 1995. This was primarily due to
increased borrowings outstanding of the registrant's line of credit during this
period and the interest on the borrowings assumed in the purchase of the Alabama
Plant.
Results of Operations For the Six Month Period January 1 - June 30
Gross Sales increased 17% or approximately $ 919,000 when comparing the
six month periods of 1996 and 1995. Management attributes the increase to the
introduction of new products and the filling operation of the Alabama Plant.
Cost of Goods Sold increased approximately 11% as a percentage of gross sales
when comparing the six months ended June 30, 1996 to the six months ended
June 30, 1995. This increase was mainly attributable to the cost of sales of
the filling operation in Alabama and a change in the product sales mix.
Advertising and promotion expenses decreased approximately 23% or $ 78,000
when comparing the six months ended June 30, 1996 to the six months ended
June 30, 1995. This was primarily due to seasonal variations.
Selling and administrative expenses increased for the six months ended June 30,
1996 by approximately $ 125,000 or 12% when compared to the six months
ended June 30, 1995. This was caused primarily by increases in sales
representative expenses, personnel cost and administrative overhead of the
Alabama facility.
Interest expense increased in 1996 for the six month period by approximately
$ 63,000 when compared to the six month period of 1995 reflecting increased
levels of borrowings outstanding from the Company's commercial lender during
this period and the cost of debt associated with the Alabama Plant purchase.
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PART II: OTHER INFORMATION
Item l - Legal Proceedings: See the Registrant's 10K for the year ended
December 31, 1995
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:
On May 14, 1996, at the Registrant's annual meeting, shareholders
elected two directors; Peter Dornau and Jeffrey Tieger, 2,226,079 voted
for the directors, 0 shares voted against. Shareholders also approved
Infante, Lago & Co., Certified Public Accountants, by a vote of
2,226,079 for and 0 shares against, as the Registrant's auditors for
1996.
Item 5 - Other Matters: Not applicable
Item 6 - Exhibits: Not applicable
(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 its behalf by the
undersigned thereunto duly authorized.
OCEAN BIO-CHEM, INC.
Date: August 13,1996 /s/ Peter Dornau
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
/s/ Peter Dornau
Peter G. Dornau
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the June 30,
1996 10-Q of Ocean Bio-Chem,Inc. and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 157,031
<SECURITIES> 0
<RECEIVABLES> 2,140,040
<ALLOWANCES> 42,000
<INVENTORY> 2,702,915
<CURRENT-ASSETS> 5,388,050
<PP&E> 2,547,974
<DEPRECIATION> 381,760
<TOTAL-ASSETS> 8,669,926
<CURRENT-LIABILITIES> 3,356,786
<BONDS> 0
<COMMON> 36,928
0
0
<OTHER-SE> 4,506,212
<TOTAL-LIABILITY-AND-EQUITY> 8,669,926
<SALES> 6,302,864
<TOTAL-REVENUES> 6,306,695
<CGS> 3,979,772
<TOTAL-COSTS> 1,401,242
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,014
<INCOME-PRETAX> 589,521
<INCOME-TAX> 222,000
<INCOME-CONTINUING> 585,690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367,521
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
