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, 1999
Commission File No. 2-70197
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, Fort Lauderdale, Florida 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 (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;
3,822,499 issued and outstanding at September 30, 1999
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1999 1998
------------ ------------
Current assets:
<S> <C> <C>
Cash $ 337,964 $ 8,871
Trade accounts receivable, net of allowances
for doubtful accounts of $22,600 and
$26,000 at September 30, 1999 and December
31, 1998, respectively 3,213,771 2,329,712
Due from officer 161,100 161,100
Inventories 3,380,542 3,691,877
Prepaid expenses 107,725 85,123
----------- ------------
Total current assets 7,201,102 6,276,683
----------- ------------
Property, plant and equipment, net 4,526,444 4,374,991
----------- ------------
Other assets:
Funds held in escrow for equipment 297,627 583,432
Trademarks, trade names and patents, net 382,171 399,415
Due from affiliated companies, net 650,412 870,150
Deposits and other assets 279,016 342,123
------------ ------------
Total other assets 1,609,226 2,195,120
------------ ------------
Total assets $13,336,772 $12,846,794
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 896,081 $ 932,927
Notes payable - bank 2,581,003 3,009,118
Current portion of long-term debt 299,667 300,000
Accrued expenses payable 418,881 77,991
------------ ------------
Total current liabilities 4,196,632 4,320,036
------------ ------------
Long-term debt, less current portion 4,238,152 4,070,000
------------ ------------
Shareholders' equity:
Common stock - $.01 par value 10,000,000 shares
authorized, 3,822,499 and 3,753,017 shares
issued and outstanding at September 30, 1999
and December 31, 1998, respectively 38,225 37,530
Additional paid-in capital 3,282,932 3,232,327
Retained earnings 1,759,943 1,332,567
Foreign currency translation adjustment ( 172,237) ( 145,666)
------------ ------------
4,908,863 4,456,758
Less cost of common stock in treasury,
5,789 shares at September 30, 1999 ( 6,875) -
------------ ------------
4,901,988 4,456,758
------------ ------------
Total liabilities & shareholders' equity $13,336,772 $12,846,794
============ ============
</TABLE>
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross sales $ 4,995,382 $ 4,751,365 $12,088,582 $10,706,588
Allowances 567,324 425,187 1,258,762 958,654
------------ ------------ ------------ ------------
Net sales 4,428,058 4,326,178 10,829,820 9,747,934
Cost of goods sold 3,102,576 3,191,618 7,396,507 6,842,257
------------ ------------ ------------ ------------
Gross profit 1,325,482 1,134,560 3,433,313 2,905,677
------------ ------------ ------------ ------------
Costs and expenses:
Advertising and promotion 140,115 193,856 392,449 514,619
Selling and administrative 712,775 664,706 2,068,695 1,949,264
Interest expense 101,673 98,408 303,319 259,958
------------ ------------ ------------ ------------
Total costs and expenses 954,563 956,970 2,764,463 2,723,841
------------ ------------ ------------ ------------
Income from operations 370,919 177,590 668,850 181,836
Interest income 4,394 9,841 16,226 34,008
------------ ------------ ------------ ------------
Income before provision
for income taxes 375,313 187,431 685,076 215,844
Provision for income taxes 141,200 73,527 257,700 79,000
------------ ------------ ------------ ------------
Net income 234,113 113,904 427,376 136,844
Other comprehensive income,
net of income taxes:
Foreign currency
translation adjustment ( 4,104) ( 11,588) ( 26,571) ( 20,032)
------------------------- ------------ ------------
Comprehensive income $ 230,009 $ 102,316 $ 400,805 $ 116,812
============ ============ ============ ============
Basic earnings per
common share $ .06 $ .03 $ .11 $ .04
============ ============ =========== ==========
Earnings per share for the nine and three months ended September 30, 1999
were calculated on the basis of 3,794,618 weighted average shares of common
stock outstanding. For the nine and three months ended September 30, 1998,
earnings per share were calculated using 3,753,017 weighted average shares of
common stock outstanding. The company has adopted Statement of Financial
Accounting Standards No. 130 which requires items of comprehensive income to be
stated as part of the basic financial statements.
</TABLE>
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
---- ----
<TABLE>
<CAPTION>
Cash flows provided by operating activities:
<S> <C> <C>
Net Income $ 427,376 $ 136,844
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 243,777 198,190
Changes in operating assets and liabilities:
(Increase) in accounts receivable ( 884,059) ( 965,213)
(Increase) decrease in inventories 311,335 ( 343,599)
(Increase) decrease in prepaid expenses ( 22,602) 389,276
Increase (decrease) in accounts payable,
accrued expenses, and other 368,151 800,846
------------ ---------------
Net cash provided by operating activities 443,978 216,344
------------ ---------------
Cash flows from financing activities:
Net (reductions) under line of credit ( 428,115) ( 418,213)
Repayments of advances to affiliates 219,738 52,497
Borrowings (reductions) of debts, net 167,819 ( 260,000)
Common stock transactions 44,425 -
------------ ---------------
Net cash provided(used)by financing activities 3,867 ( 625,716)
------------ ---------------
Cash flows from investing activities:
Purchase of property, plant, and equipment, net ( 92,181) ( 240,289)
------------ ---------------
Net cash used by investing activities ( 92,181) ( 240,289)
------------ ---------------
Increase (decrease) in cash prior to effect of
foreign currency translation on cash 355,664 ( 649,661
Effect of foreign currency translation on cash ( 26,571) ( 31,596)
------------ ---------------
Net increase (decrease) in cash 329,093 ( 681,257)
Cash at beginning of period 8,871 787,411
------------ ---------------
Cash at end of period $ 337,964 $ 106,154
============ ===============
Supplemental Information:
Cash used during the periods for payment of:
Interest $ 329,093 $ 259,000
============ ===============
Income taxes $ 36,000 $ -
============ ===============
The company had no cash equivalents at September 30, 1999 and 1998.
</TABLE>
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED 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, short-term
borrowings from a commercial bank pursuant to a revolving line of credit
arrangement, and other borrowings.
The total borrowings under the line are secured by trade receivables and
inventories and can aggregate a maximum amount of $5,000,000. The line matures
in August, 2001. Under the terms of the line, the Registrant is required to
maintain minimum working capital of $1,500,000, a debt to tangible net worth of
ratio 2 to 1 and debt service coverage of 1.1 times.
On March 25, 1999, The Registrant borrowed $400,000 from an entity owned by
certain officers of the Company. The obligation requires monthly payments of
principal and interest at prevailing rates through maturity during April, 2004,
when a final balloon payment is due.
The Registrant is involved in making sales in the Canadian market and,
accordingly, is subject to the fluctuations of the Canadian currency. The
Registrant does not engage in currency hedging and deals with such risk as a
pricing issue.
Results of operations for the three month period July 1- September 30:
Gross sales increased approximately 5% or $244,000 for the quarter ended
September 30, 1999 when compared to the same quarter of the preceding year.
Management attributes this primarily to increased sales of new products
introduced late last year and a sales price increase on selected products
initiated during the first quarter of 1999.
Cost of goods sold decreased as a percentage of net sales when comparing
the quarter ended September 30, 1999 with the comparable quarter in 1998. The
percentages were 70.1% and 73.8% for the quarters during 1999 and 1998,
respectively. This change was due the aforementioned sales price increase,
increased absorption of manufacturing overhead at the Company's Alabama plant
and is somewhat offset by increasing raw chemical costs.
Advertising and promotion decreased approximately $ 53,000 comparing the three
months ended September 30, 1999 and 1998. This was primarily due to a planned
decrease in the advertising budget.
Selling and administrative expenses increased approximately $ 48,000 when
comparing the quarters ended September 30, 1999 and 1998. Such change is
attributable to increased personnel costs and anticipated incremental costs of
operations.
Interest expense which aggregated approximately $101,000 for the current quarter
was substantially unchanged when comparing the September 30, 1999 quarter to the
corresponding quarter in 1998.
<PAGE>
Results of operations for the nine month period January 1 - September 30:
Gross sales increased 13% or approximately $1,382,000 when comparing the nine
month periods of 1999 and 1998. Management attributes this primarily to
increased sales of new products introduced late last year and a sales price
increase on selected products initiated during the first quarter of 1999.
Cost of goods sold decreased to 68.3% as a percentage of net sales versus 70.2%
when comparing the nine months ended September 30, 1999 to the comparable period
in the preceding year. This change was due the aforementioned sales price
increase, increased absorption of manufacturing overhead at the Company's
Alabama plant and is somewhat offset by increasing raw chemical costs.
Advertising and promotion expenses decreased approximately $122,000 when
comparing the nine months ended September 30, 1999 to the nine months ended
September 30, 1998. This was primarily due to a planned decrease in the
advertising budget.
Selling and administrative expenses increased for the nine months ended
September 30, 1999 by approximately $119,000 or 6% when compared to the nine
months ended September 30, 1998. This was attributable to increased personnel
costs and anticipated incremental costs of operations.
Interest expense increased during the nine month period in 1999 by approximately
$43 ,000 when compared to the nine month period of 1998 reflecting the higher
levels of borrowings during the earlier periods of 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings: See the Registrant's 10K for the year ended
December 31, 1998
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
there unto duly authorized.
OCEAN BIO-CHEM, INC.
Date: November 7, 1999 /s/ Peter Dornau
-----------------------------------
Peter G. Dornau
Chairman of the Board of Directors
and Chief Executive Officer
Date: November 7, 1999 /s/ Edward Anchel
------------------------------------
Edward Anchel
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-01-1999
<CASH> 337,964
<SECURITIES> 0
<RECEIVABLES> 3,236,371
<ALLOWANCES> (22,600)
<INVENTORY> 3,380,542
<CURRENT-ASSETS> 7,201,102
<PP&E> 5,607,781
<DEPRECIATION> (1,081,337)
<TOTAL-ASSETS> 13,336,772
<CURRENT-LIABILITIES> 4,196,632
<BONDS> 0
0
0
<COMMON> 38,225
<OTHER-SE> 4,863,763
<TOTAL-LIABILITY-AND-EQUITY> 13,336,772
<SALES> 12,088,582
<TOTAL-REVENUES> 12,104,808
<CGS> 7,396,507
<TOTAL-COSTS> 2,764,463
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 303,319
<INCOME-PRETAX> 685,076
<INCOME-TAX> 257,700
<INCOME-CONTINUING> 427,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427,376
<EPS-BASIC> .11
<EPS-DILUTED> .11
</TABLE>
