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 March 31, 1999
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 (I.R.S. Employer
of 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,
3,766,517 shares issued and outstanding at March 31, 1999.
<PAGE>
PART I - Financial Information
Item l. Financial Statement
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DEC. 31,
Current Assets: 1999 1998
------------ ------------
<S> <C> <C>
Cash $ 339,616 $ 8,871
Trade accounts receivable net of allowance
for doubtful accounts of $26,000 and $35,000 at
March 31, 1999 and December 31, 1998, respectively 2,308,412 2,329,712
Due from officer 161,000 161,100
Inventories 3,319,698 3,691,877
Prepaid expenses 80,199 85,123
------------ ------------
Total Current Assets 6,209,025 6,276,683
------------ ------------
Property, Plant and Equipment, net 4,345,624 4374,991
------------ ------------
Other Assets:
Trademarks, trade names and patents, net
of accumulated amortization 393,687 399,415
Funds held in escrow for construction and equipment 530,055 583,432
Due from affiliated companies, net 524,800 870,150
Deposits and other assets 331,418 342,123
------------ ------------
Total Other Assets 1,779,960 2,195,120
------------ ------------
Total Assets $12,334,609 $12,846,794
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $508,259 $932,927
Note payable - bank 2,557,806 3,009,118
Current portion of long term debt 294,075 300,000
Other accrued liabilities 80,770 77,991
------------ ------------
Total Current Liabilities 3,440,910 4,320,036
------------ ------------
Long term debt, less current portion 4,395,925 4,070,000
------------ ------------
Shareholders' Equity:
Common stock - $.01 par value, 10,000,000 shares
authorized, 3,766,517 and 3,753,017 shares issued
and outstanding at March 31, 1999 and December 31, 1998,
respectively 37,665 37,530
Additional paid-in capital 3,241,592 3,232,327
Retained earnings 1,397,464 1,332,567
Foreign currency translation adjustment (172,072) (145,666)
------------ ------------
4,504,649 4,456,758
Less cost of common stock in treasury, 5,789 shares
at March 31, 1999 (6,875) --
------------ ------------
4,497,774 4,456,758
------------ ------------
Total Liabilities & Shareholders' Equity $12,334,609 $12,846,794
============ ============
</TABLE>
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MARCH 31,
1999 1998
----------- ------------
Gross sales $ 3,418,814 $ 2,787,441
Allowances 379,122 259,959
----------- -----------
Net sales 3,039,692 2,527,482
Cost of goods sold 2,107,223 1,820,304
----------- -----------
Gross profit 932,469 707,178
Costs and expenses:
Advertising and promotion 98,240 70,800
Selling and administrative 637,857 567,627
Interest expense 98,634 59,282
----------- -----------
Total costs and expenses 834,761 697,709
----------- -----------
Operating income 97,738 9,469
Interest income 6,160 15,682
----------- -----------
Income before income taxes 103,898 25,151
Provision for income taxes 39,000 5,166
----------- -----------
Net income 64,898 19,985
----------- -----------
Other comprehensive income, net of tax
Foreign currency translation adjustment 12,744 (3,191)
----------- -----------
Comprehensive income $ 52,154 $ 16,794
=========== ===========
Earnings per common share $ .02 $ .01
=========== ===========
Earnings per share were calculated on the basis of 3,757,517 and 3,753,017
weighted average shares of common stock outstanding for the quarters ended March
31, 1999 and 1998, respectively. The Company has adopted Statement of Financial
Accounting Standards No. 130 that requires items of comprehensive income to be
stated as part of the basic financial statements. The only item of comprehensive
income that the registrant has are foreign currency translation adjustments.
<PAGE>
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31
1999 1998
--------- ----------
Cash flow provided (used) by operating activities:
Net Income $ 64,898 $ 19,985
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 78,578 64,597
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 21,300 (258,718)
(Increase) decrease in inventory 372,179 (284,757)
Decrease in prepaid expenses 4,924 67,223
Increase (decrease) in accounts payable,
accrued expenses and other (411,184) 417,674
--------- ---------
Net cash provided by operating activities 130,695 26,004
--------- ---------
Cash provided by financing activities:
Net reduction under line of credit (451,312) (671,213)
Net reductions in advances to affiliates 345,350 17,795
Net reductions in current portion of long term debt (5,925) (10,000)
Long term borrowings, net 325,925 (80,000)
Common stock transactions, net 2,525 --
--------- ---------
Net cash provided (used) by financing activities 216,563 (743,418)
--------- ---------
Cash provided (used) by investing activities:
Purchase property, plant, equipment, net 9,893 (55,485)
--------- ---------
Net cash used by investing activities 9,893 (55,485)
--------- ---------
Increase (decrease) in cash prior to effect
of exchange rate on cash 357,151 (772,899)
Effect of exchange rate on cash (26,406) (4,039)
--------- ---------
Increase (decrease) in cash 330,745 (776,938)
Cash at beginning of period 8,871 787,411
--------- ---------
Cash at end of period $ 339,616 $ 10,473
========= =========
Supplemental Information:
Cash used for interest during period $ 85,192 $ 101,114
Cash used for income taxes during period $ -- $ --
========= =========
The company had no cash equivalents at March 31, 1999 and 1998.
<PAGE>
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.
Certain financial statement items for the quarter ended March 31, 1998 have been
reclassified to conform to the 1999 presentation.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS 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
ration 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 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:
Gross sales increased approximately 22% for the quarter ended March 31, 1999
when compared to the same quarter of the preceding year.
Cost of goods sold decreased as a percentage of gross sales when comparing the
quarter ended March 31, 1999 with the comparable quarter in 1998. The
percentages were 61.6 % and 65.3% for the quarters ended 1999 and 1998,
respectively. This change was primarily due to an improved product mix and a
general sales price increase.
Selling and administrative expenses increased approximately $83,700 when
comparing the quarter ended March 31, 1999 with March 31, 1998. This change was
primarily due to personnel costs and professional fees.
Advertising and promotion increased approximately $27,400 comparing the three
months ended March 31, 1999 and 1998. This was primarily due to increased
co-operative advertising.
Interest expense increased when comparing the March 31, 1999 quarter to the
corresponding quarter in 1998 by approximately $25,900 due primarily to
increased borrowings.
<PAGE>
PART II - Other Information
Item l - Legal Proceedings: Not applicable.
Item 2 - Changes in Securities:
During March, 1999, 13,500 shares of the Registrant's Common Stock were
issued to Edward Anchel in exchange for financial consulting services rendered
to the Company during the period December 1, 1998 trough February 28, 1999.
During March, 1999, the Registrant acquired 5,789 shares of its Common
Stock as Treasury Shares in exchange for cancellation of an employee loan in the
amount of $6,875.
During May, 1999, 55,982 shares of the Registrant's Common Stock were
issued to certain employees as a bonus for their respective services to the
Company. Such awards were not made pursuant to a formal Employee Bonus Plan. The
financial impact of these issuances, approximately $41,900, will be charged to
operations during the quarter ending June 30, 1999.
Item 3 - Defaults Upon Senior Securities: Not applicable
Item 4 - Submission of Matters to Vote of Security Holders: Not
applicable
Item 5 - Other Matters: Not applicable
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits: 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 hereunto duly authorized.
OCEAN BIO-CHEM, INC.
Date: May 10, 1999 By: /s/ PETER G. DORNAU
--------------------------------- -----------------------------------
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
By: /s/ PETER G. DORNAU
----------------------------------
Peter G. Dornau
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 339,616
<SECURITIES> 0
<RECEIVABLES> 2,334,412
<ALLOWANCES> (26,000)
<INVENTORY> 3,319,698
<CURRENT-ASSETS> 80,199
<PP&E> 5,273,278
<DEPRECIATION> (927,654)
<TOTAL-ASSETS> 12,334,609
<CURRENT-LIABILITIES> 3,440,910
<BONDS> 0
0
0
<COMMON> 37,665
<OTHER-SE> 4,460,109
<TOTAL-LIABILITY-AND-EQUITY> 12,334,609
<SALES> 3,418,814
<TOTAL-REVENUES> 3,424,974
<CGS> 2,107,223
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 736,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,634
<INCOME-PRETAX> 103,989
<INCOME-TAX> 39,000
<INCOME-CONTINUING> 64,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,898
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
