10q996
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, 1996
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, 3,692,817 issued
and outstanding at September 30, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
SEPT. 30, DEC.31,
1996 1995
Current Assets:
Cash $ 845,180 $ 997,309
Trade Accounts Receivable Net Of
Allowances For Doubtful Accounts Of
$ 43,000 And $ 48,000 At September 30, 1996
And December 31, 1995 Respectively 2,451,979 2,006,418
Due From Officers 151,600 154,420
Inventories 2,657,244 2,038,750
Prepaid Expenses 192,977 111,455
Total Current Assets 6,298,980 5,308,352
Property, Plant and Equipment, Net 2,156,558 321,475
Other Assets:
Trademarks, Trade Names And Patents, Net 449,602 466,746
Due From Affiliated Companies, Net 604,264 632,379
Deposits And Other Assets 42,897 18,818
Total Other Assets 1,096,763 1,117,943
Total Assets $ 9,552,301 $6,747,770
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable Trade $ 1,144,678 $ 485,105
Note Payable - Bank 2,890,000 1,990,000
Current Portion Of Long-Term Debt 240,000 7,592
Accrued Expenses Payable 85,473 89,068
Total Current Liabilities 4,360,151 2,571,765
Long-term Debt, Less Current Portion 530,000 -
Shareholders' Equity:
Common Stock 36,928 35,130
Additional Paid-In Capital 3,161,429 2,650,754
Retained Earnings 1,539,645 1,568,646
Foreign Currency Translation Adjustment ( 75,852) ( 78,525)
Total Shareholders' Equity 4,662,150 4,176,005
Total Liabilities & Shareholders' Equity $ 9,552,301 $6,747,770
2
<PAGE>
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,
1996 1995 1996 1995
Gross Sales $ 2,972,020 $ 1,958,245 $ 9,274,884 $ 7,341,627
Allowances 123,267 132,584 355,413 415,360
Net Sales 2,848,753 1,825,661 8,919,471 6,926,267
Cost Of Goods Sold 1,916,677 1,183,933 5,896,449 3,995,561
Gross Profit 932,076 641,728 3,023,022 2,930,706
Cost And Expenses
Adv. And Promotion 138,035 206,912 395,587 541,975
Selling And Admin. 555,548 506,124 1,699,238 1,525,067
Interest Expense 67,863 21,143 171,877 62,226
Total Expenses 761,446 734,179 2,266,702 2,129,268
Income (Loss) From
Operations 170,630 ( 92,451) 756,320 801,438
Interest Income 2,152 7,624 5,983 18,451
Income (Loss) before provision
for income taxes 172,782 ( 84,827) 762,303 819,889
Provision (Benefit) for
Income taxes 64,000 ( 33,000) 286,000 308,000
Net Income (Loss) 108,782 ( 51,827) $ 476,303 $ 511,889
Earnings Per Share:
Net Income (Loss)
Per Share $ .03 $ ( .01) $ .13 $ .14
Earnings per share for the nine months ended September 30, 1996 and the three
months ended September 30, 1996 were calculated on the basis of 3,791,283
weighted average common stock and common stock equivalent outstanding. For the
nine and three months ended September 30, 1995, earnings per share were
calculated using 3,533,195 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 May 1, 1996.
3
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
CASH FLOWS PROVIDED BY 1996 1995
OPERATING ACTIVITIES:
Net Income $ 476,303 $ 511,889
Adjustment to Reconcile Net Income
To Net Cash Provided by Operations:
Depreciation and Amortization 139,821 70,870
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (442,741) 471,712
Increase in Inventory (618,494) ( 278,553)
Increase in Prepaid Expenses (105,601) ( 149,748)
(Increase) Decrease in Accounts Payable
And Accrued Expenses 655,978 ( 120,742)
Net Cash Provided by Operating Activities 105,266 505,428
Cash Flows From Financing Activities:
Net Borrowings Under Line of Credit 900,000 ( 371,667)
Advances to (from) Affiliates 28,115 ( 136,607)
Borrowings (Repaymen)t of Debt 762,408 ( 21,938)
Sale of Stock 7,169 181,818
Net Cash Provided (Used) by
Financing Activities 1,697,692 ( 348,394)
Cash Flows From Investing Activities
Purchase Property, Plant, Equipment (1,957,760) ( 131,830)
Net Cash Used by Investing Activities (1,957,760) ( 131,830)
Increase (Decrease) in Cash Prior
to Effect of Exchange Rate on Cash (154,802) 25,204
Effect of Exchange Rate on Cash 2,673 ( 586)
Net Increase (Decrease) in Cash (152,129) 24,618
Cash at Beginning of Period 997,309 571,411
Cash at September 30, $ 845,180 $ 596,029
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amount capitalized) $ 132,000 $ 62,226
Income taxes $ 271,000 $ 314,751
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
<PAGE>
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 a line
of credit from a commercial bank to a limit of $2 million. In February 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 1.7 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 July 1-September 30
Gross sales increased approximately $ 1,014,000 or 52% comparing the quarter
ended September 30, 1996 with the comparable period of the preceding year.
Management attributes this primarily to the packaging and sales of antifreeze
products during the quarter. The Company packages antifreeze products for a
third party on a contract basis. The Company's orders and backlog for the
packaging of antifreeze expire in the fourth quarter of 1996.
Cost of Goods Sold increased at approximately 4% as a percentage of gross sales
for the quarter ended September 30, 1996 when compared to the 1995 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.
Advertising and promotion expenses decreased approximately $ 69,000 or 33 %
comparing the three month period ended September 30, 1996 to 1995. This is
primarily due to cost reductions implemented by management.
Selling and administrative expenses increased approximately $ 49,000 or 10 %
comparing the quarter ended September 30, 1996 to the comparable period in 1995.
This was not attributed to any particular factor.
Interest expense increased approximately $47,000 comparing the quarter ended
September 30,1996 to the comparable period in 1995. This is primarily due to
higher interest rates and debt levels outstanding.
5
<PAGE>
Results Of Operations For The Nine Month Period January 1-September 30
Gross sales increased approximately $ 1,933,000 or 26 % comparing the nine month
periods in 1996 and 1995. This is primarily due to the sales and packaging of
antifreeze.
Cost of goods sold increased approximately 9% as a percentage of gross sales
when comparing the nine months ended September 30, 1996 and 1995. This reflects
the effects of the antifreeze sales during this period.
Advertising and promotion expenses decreased approximately $ 146,000 or 27%
when comparing the nine months ended September 30, 1996 and 1995. This is the
effects of cost reductions implemented by management.
Selling and administrative expenses increased during 1996 by approximately
$ 174,000 or 11% when compared to 1995. This was primarily due to the expenses
associated with the Alabama operations.
Interest expense increased in 1996 for the nine month period by approximately
$ 110,000 reflecting increased borrowings outstanding during the period and the
interest on the borrowings assumed in the purchase of the Alabama Plant.
6
<PAGE>
PART II - OTHER INFORMATION
Item 1 -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: 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 and 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: November 12, 1996 /s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board of Directors
/s/ Peter G. Dornau
Peter G. Dornau
Chief Financial Officer
7
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 845,180
<SECURITIES> 0
<RECEIVABLES> 2,451,979
<ALLOWANCES> 43,000
<INVENTORY> 2,657,244
<CURRENT-ASSETS> 6,298,980
<PP&E> 2,547,974
<DEPRECIATION> 381,761
<TOTAL-ASSETS> 9,552,301
<CURRENT-LIABILITIES> 4,360,151
<BONDS> 0
0
0
<COMMON> 36,928
<OTHER-SE> 4,625,222
<TOTAL-LIABILITY-AND-EQUITY> 9,552,301
<SALES> 9,274,884
<TOTAL-REVENUES> 9,280,867
<CGS> 5,896,449
<TOTAL-COSTS> 2,266,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,877
<INCOME-PRETAX> 762,303
<INCOME-TAX> 286,000
<INCOME-CONTINUING> 476,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 476,303
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
