10q997
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, 1997
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 - 954-587-6280
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, 3,706,709 issued and
outstanding at September 30, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
SEPT. 30, DEC.31,
1997 1996
Current Assets:
Cash $ 152,143 $ 394,569
Trade Accounts Receivable Net Of
Allowances For Doubtful Accounts Of
$26,000 And $27,000 At September 30,1997
And December 31, 1996, Respectively 2,761,808 2,235,183
Due From Officers 157,100 141,880
Inventories 3,819,307 2,534,862
Prepaid Expenses 189,029 132,238
------------ -----------
Total Current Assets 7,079,387 5,438,732
------------ -----------
Property, Plant and Equipment, Net 3,949,772 2,138,815
------------ -----------
Other Assets:
Funds held in escrow for construction 1,303,552 3,100,001
Trademarks, Trade Names And Patents, Net 428,155 443,754
Due From Affiliated Companies, Net 657,516 648,866
Deposits And Other Assets 333,593 185,229
----------- -----------
Total Other Assets 2,722,816 4,377,850
----------- -----------
Total Assets $13,751,975 $11,955,397
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable Trade $ 1,591,851 $ 643,409
Notes Payable - Bank 2,704,001 1,658,001
Current Portion Of Long-Term Debt 350,000 280,000
Accrued Expenses Payable 89,491 119,503
----------- -----------
Total Current Liabilities 4,735,343 2,700,913
----------- -----------
Long-term Debt, Less Current Portion 4,450,000 4,710,000
---------- -----------
Shareholders' Equity:
Common Stock 37,067 37,020
Additional Paid-In Capital 3,177,790 3,172,337
Retained Earnings 1,446,505 1,418,014
Foreign Currency Translation Adjustment ( 94,730) ( 82,887)
----------- -----------
Total Shareholders' Equity $ 4,566,632 $ 4,544,484
----------- -----------
Total Liabilities & Shareholders' Equity $13,751,975 $11,955,397
=========== ===========
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,
1997 1996 1997 1996
------ ------ ------ ------
Gross Sales $3,929,232 $ 2,972,020 $9,533,416 $9,274,884
Allowances 318,331 123,267 845,415 355,413
---------- ----------- ---------- ----------
Net Sales 3,610,901 2,848,753 8,688,001 8,919,471
Cost Of Goods Sold 2,634,352 1,916,677 6,148,457 5,896,449
---------- ----------- ---------- ----------
Gross Profit 976,549 932,076 2,539,544 3,023,022
Cost And Expenses
Adv. And Promotion 219,716 138,035 525,476 395,587
Selling And Admin. 637,726 555,548 1,795,631 1,699,238
Interest Expense 87,090 67,863 276,091 171,877
---------- ----------- ---------- ----------
Total Expenses 944,532 761,446 2,597,198 2,266,702
---------- ----------- ---------- ----------
Income (Loss) From
Operations 32,017 170,630 ( 57,654) 756,320
Interest Income 29,222 2,152 95,146 5,983
---------- ----------- ---------- ----------
Income before provision
for income taxes 61,239 172,782 37,492 762,303
Provision for Income
taxes 13,672 64,000 9,000 286,000
---------- ----------- ---------- ----------
Net Income $ 47,567 $ 108,782 $ 28,492 $ 476,303
========== =========== ========== ==========
Earnings Per Share:
Net Income Per Share $ .01 $ .03 $ .01 $ .13
========== =========== ========== ===========
Earnings per share for the nine months ended September 30, 1997 and the three
months ended September 30, 1997 were calculated on the basis of 3,744,201
weighted average common stock and common stock equivalent outstanding. For
the nine and three months ended September 30, 1996, earnings per share were
calculated using 3,791,283 weighted average common stock and common stock
equivalent outstanding. Common stock equivalents consist of options to
purchase common stock.
3
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
------ ------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net Income $ 28,492 $ 476,303
Adjustment to Reconcile Net Income
To Net Cash Provided by Operations:
Depreciation and Amortization: 164,185 139,821
Change in Assets and Liabilities:
Increase in Accounts Receivable ( 526,625) ( 442,741)
Increase in Inventory ( 1,284,445) ( 618,494)
Decrease (Increase) in Prepaid
Expenses And other assets 1,576,074 ( 105,601)
Decrease in Accounts Payable
And Accrued Expenses 918,430 655,978
----------- -----------
Net Cash Provided by Operating Activities 876,111 105,266
----------- -----------
Cash Flows From Financing Activities:
Net Borrowings Under Line of Credit 1,046,000 900,000
Advances to (from) Affiliates ( 8,650) 28,115
Borrowings (Repayment) of Debt, Net ( 190,000) 762,408
Sale of Stock 5,500 7,169
----------- -----------
Net Cash Provided by Financing Activities 852,850 1,697,692
----------- -----------
Cash Flows From Investing Activities
Purchase Property, Plant, Equipment ( 1,959,544) ( 1,957,760)
----------- ------------
Net Cash Used by Investing Activities ( 1,959,544) ( 1,957,760)
----------- ------------
Decrease in Cash Prior
to Effect of Exchange Rate on Cash ( 230,583) ( 154,802)
Effect of Exchange Rate on Cash ( 11,843) 2,673
----------- -----------
Net Decrease in Cash ( 242,426) ( 152,129)
Cash at Beginning of Period 394,569 997,309
----------- -----------
Cash at September 30, $ 152,143 $ 845,180
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amount capitalized) $ 276,091 $ 132,000
Income taxes $ 70,000 $ 271,000
----------- -----------
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 short
term borrowings from a commercial bank to a limit of $2.9 million. 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. For the fourth quarter
of 1997 the Registrant received a temporary increase of $400,000 on the line
of credit to finance a seasonal increase in inventory and receivables. Such
increase expires on December 31, 1997.
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 risks as a pricing
issue.
During the past few years the 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 $957,000 or 32% comparing the quarter
ended September 30, 1997 with the comparable period of the preceding year.
Management attributes this primarily to the packaging and sales of antifreeze
products during the quarter.
Cost of Goods Sold increased 2.5% as a percentage of gross sales for the
quarter ended September 30, 1997 when compared to the 1996 quarter. This
reflects the effect of the anti-freeze sales for the quarter.
Advertising and promotion expenses increased approximately $82,000 comparing
the three month period ended September 30, 1997 to 1996. This is primarily
due to customer advertising allowances.
Selling and administrative expenses increased approximately $82,000 or 14.7%
comparing the quarter ended September 30, 1997 to the comparable period in
1996. This was not attributed to any particular factor.
Interest expense increased approximately $19,000 comparing the quarter ended
September 30, 1997 to the comparable period in 1996. This was primarily due to
higher interest rates and debt levels outstanding, and interest on the
borrowings assumed for the purchase and expansion of the Alabama facility.
5
<PAGE>
Results Of Operations For The Nine Month Period January 1-September 30
- ----------------------------------------------------------------------
Gross sales increased approximately $258,000 or 2.7% comparing the nine month
periods in 1997 and 1996. This is primarily due to the sales and packaging of
anti-freeze.
Cost of goods sold increased approximately 1% as a percentage of gross sales
when comparing the nine months ended September 30, 1997 and 1996. This
reflects the effects of the antifreeze sales during this period.
Advertising and promotion expenses increased approximately $130,000 or 33%
when comparing the nine months ended September 30, 1997 and 1996. This
reflects seasonal variations.
Selling and administrative expenses increased during 1997 by approximately
$96,000 or 5.6% when compared to 1996. This was primarily due to the expenses
associated with the Alabama operations.
Interest expense increased in 1997 for the nine month period by approximately
$104,000 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, 1996
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: NOVEMBER 10, 1997 /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
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 152,143
<SECURITIES> 0
<RECEIVABLES> 2,787,808
<ALLOWANCES> 26,000
<INVENTORY> 3,819,307
<CURRENT-ASSETS> 7,079,387
<PP&E> 4,484,127
<DEPRECIATION> 534,355
<TOTAL-ASSETS> 13,751,975
<CURRENT-LIABILITIES> 4,735,343
<BONDS> 0
0
0
<COMMON> 37,067
<OTHER-SE> 4,529,565
<TOTAL-LIABILITY-AND-EQUITY> 13,751,975
<SALES> 9,533,416
<TOTAL-REVENUES> 9,628,562
<CGS> 6,148,457
<TOTAL-COSTS> 2,597,198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276,091
<INCOME-PRETAX> 37,492
<INCOME-TAX> 9,000
<INCOME-CONTINUING> (57,654)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,492
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
