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, 2000
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,
4,105,889 shares issued and outstanding at March 31, 2000.
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX
Description Page
Part I:
Item 1. - Financial Statements:
Consolidated balance sheets as of March
31, 2000 and December 31, 1999 3
Consolidated statements of operations for
the three months ended March 31,
2000 and 1999 4
Consolidated statements of changes in
shareholders' equity for the three months
ended March 31, 2000 and 1999 5
Consolidated statements of cash flows
for the three months ended March 31,
2000 and 1999 6
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of Operations 7-8
Part II:
Item 1. - Legal Proceedings 8
Item 2. - Changes in Securities 8
Item 3. - Defaults upon Senior Securities 8
Item 4. - Submission of Matters to Vote by Security Holders 8
Item 5. - Other Matters 8
Item 6. - Exhibits and Reports on Form 8-k 8
Signatures 9
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements:
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DEC. 31,
2000 1999
------------- -----------
(UNAUDITED)
Current assets:
<S> <C> <C>
Cash $ 346,925 $ 433,772
Trade accounts receivable net of allowance
for doubtful accounts of $22,600 and $26,000 at
March 31, 2000 and December 31, 1999, respectively 2,526,251 2,804,072
Due from officer 161,100 161,100
Inventories 4,061,980 3,730,321
Prepaid expenses 96,283 146,102
------------- -----------
Total current assets 7,192,539 7,275,367
------------- -----------
Property, plant and equipment, net 4,623,514 4,515,305
------------- -----------
Other assets:
Trademarks, trade names and patents, net
of accumulated amortization 370,675 376,423
Funds held in escrow for construction and equipment 121,201 285,165
Due from affiliated companies, net 739,228 846,979
Deposits and other assets 244,551 248,213
------------- -----------
Total Other Assets 1,475,655 1,756,780
------------- -----------
Total assets $13,291,708 13,547,452
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 892,246 872,693
Note payable - bank 2,840,000 2,900,000
Current portion of long term debt 324,881 314,359
Other accrued liabilities 213,817 390,607
------------- -----------
Total Current Liabilities 4,270,944 4,477,659
------------- -----------
Long term debt, less current portion 4,070,656 4,152,332
------------- -----------
Shareholders' equity:
Common stock - $.01 par value, 10,000,000 shares
authorized; 4,105,889 and 3,822,499 shares
issued and outstanding at March 31, 2000 and
December 31, 1999, respectively 41,060 38,225
Additional paid-in capital 3,720,378 3,282,932
Retained earnings 1,363,106 1,764,051
Foreign currency translation adjustment ( 167,561) ( 160,872)
------------- -----------
4,956,983 4,924,336
Less cost of common stock in treasury, 5,789 shares
at March 31, 2000 and December 31, 1999 ( 6,875) 6,875)
------------- -----------
4,950,108 4,917,461
------------- -----------
Total liabilities and shareholders' equity $13,291,708 $13,547,452
============= ===========
3
</TABLE>
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 and 1999
(UNAUDITED)
2000 1999
----------- ------------
Gross sales $ 3,705,163 $3,418,814
Allowances 433,028 379,122
----------- ----------
Net sales 3,272,135 3,039,692
Cost of goods sold 2,262,198 2,107,223
----------- ----------
Gross profit 1,009,937 932,469
----------- ----------
Costs and expenses:
Advertising and promotion 183,152 98,240
Selling and administrative 727,334 637,857
Interest expense 121,906 98,634
----------- ----------
Total costs and expenses 1,032,392 834,731
----------- ----------
Operating income ( 22,455) 97,738
Interest income 5,791 6,160
----------- ----------
Income before income taxes ( 16,664) 103,898
Provision (benefit) for income taxes ( 6,500) 39,000
----------- ----------
Net income (loss) ( 10,164) 64,898
Other comprehensive income, net of tax
Foreign currency translation adjustment 6,689 12,744
----------- ----------
Comprehensive income (loss) ( 16,853) $ 52,154
=========== ==========
Earnings (loss) per common share $ - $ .02
=========== ==========
Earnings per share were calculated on the basis of 3,915,033 and 3,757,517
weighted average shares of common stock outstanding for the quarters ended March
31, 2000 and 1999, 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 is its foreign currency translation adjustment.
4
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Foreign
Common stock Additional currency Retained Treasury
Shares Amount paid-in capital adjustment earnings stock Total
--------- ------- --------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1,
2000 3,822,499 $38,225 $3,282,932 ($ 160,872) $1,764,051 ($ 6,875) $4,917,461
Net loss ( 10,164) ( 10,164)
Issuances of stock 283,390 2,835 437,446 ( 390,781) 49,500
Foreign currency
translation
adjustment ( 6,689) ( 6,689)
--------- ------- ---------- ----------- ---------- ---------- -----------
March 31,
2000 4,105,889 $41,060 $3,720,378 ($ 167,561) $1,363,106 ($ 6,875) $4,950,108
========= ======= ========== =========== ========== ---------- ===========
January 1,
1999 3,753,017 $37,530 $3,232,327 ($ 145,666) $1,332,567 ($ - ) $4,456,758
Net income 64,898 64,898
Acquisition of
treasury shares ( 6,875) ( 6,875)
Issuance of stock 13,500 135 9,265 9,400
Foreign currency
translation
adjustment ( 12,744) ( 12,744)
--------- ------- ---------- ----------- ---------- ---------- -----------
March 31,
1999 3,766,517 $37,665 $3,241,592 ($ 158,410) $1,397,465 ($ 6,875) $4,511,437
========= ======= ========== =========== ========== ========== ===========
</TABLE>
5
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 and 1999
(UNAUDITED)
2000 1999
---------- ----------
Cash flow provided (used) by operating activities:
Net income (loss) ($ 10,164) $ 64,898
Adjustments to reconcile net income
to net cash provided (used) by operations:
Depreciation and amortization 82,939 78,578
Changes in assets and liabilities:
Decrease in accounts receivable 277,821 21,300
(Increase) decrease in inventory ( 331,659) 372,179
Decrease in prepaid expenses 49,819 4,924
Decrease in accounts payable,
accrued expenses and other ( 153,575) ( 411,184)
----------- ----------
Net cash provided (used) by operating activities ( 84,819) 130,695
----------- ----------
Cash provided (used) by financing activities:
Net reductions under line of credit ( 60,000) ( 451,312)
Net reductions in advances to affiliates 107,751 345,350
Net (reductions), increases in current portion
of long term debt 10,522 ( 5,925)
Net (reductions) increases in long term borrowings ( 81,676) 325,925
Common stock transactions, net 49,500 2,525
----------- ----------
Net cash provided by financing activities 26,097 216,563
----------- ----------
Cash provided (used) by investing activities:
Purchase property, plant, equipment, net ( 21,436) 9,893
----------- ----------
Net cash used by investing activities ( 21,436) 9,893
----------- ----------
Increase (decrease) in cash prior to effect
of foreign currency translation on cash ( 80,158) 357,151
Effect of foreign currency translation on cash ( 6,689) ( 26,406)
----------- ----------
Increase (decrease) in cash ( 86,847) 330,745
Cash at beginning of period 433,772 8,871
----------- ----------
Cash at end of period $ 346,925 $ 339,616
=========== ==========
Supplemental Information:
Cash used for interest during period $ 121,906 $ 85,192
=========== ==========
Cash used for income taxes during period $ 204,743 $ -
=========== ==========
The company had no cash equivalents at March 31, 2000 and 1999.
6
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 1999 have been
reclassified to conform to the 2000 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,
inventories, and other assets, and can aggregate a maximum amount of $3,500,000.
Borrowings under the line are due on demand from the bank. Under the terms of
the line, the Registrant is required to maintain minimum working capital of
$1,500,000, a maximum debt to tangible net worth of ratio of 2.5 to 1 and a
minimum debt service coverage factor of 1.15 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 8% or $232,500 for the quarter ended March
31, 2000 when compared to the same quarter of the preceding year. Such increase
was consistent with prevailing trends and not associated with any single product
or customer.
Cost of goods sold decreased as a percentage of net sales when comparing the
quarter ended March 31, 2000 with the comparable quarter in 1999. The
percentages were 69.1 % and 69.3% for the quarters ended during 2000 and 1999,
respectively. This change was not significant and is not attributable to any one
individual factor.
Selling and administrative expenses increased approximately $89,500 or 14% when
comparing the quarters ended March 31, 2000 and 1999. This change was primarily
due to increased personnel costs and professional fees. The Company has recently
announced the pending introduction of a new automotive product line and has
opted to charge off costs associated with this project as incurred rather than
deferring them until the quarter in which revenues commence. It is currently
anticipated that initial revenues will be earned during the quarter ending June
30, 2000.
7
<PAGE>
Advertising and promotion increased approximately $84,900 or 86% comparing the
three months ended March 31, 2000 and 1999. This was primarily due to increased
catalog costs and co- operative advertising. The Company has previously reported
intentional levels of decreased advertising in prior quarters and has now
strategically decided to expand advertising efforts of the Star brite brand
during the current fiscal year.
Interest expense increased by approximately $23,300 when comparing the March 31,
2000 quarter to the corresponding quarter in 1999. This increase resulted
primarily due to recently promulgated prime interest rate increases.
Forward-looking Statements:
- --------------------------
Certain statements contained herein, including without limitation expectations
as to future sales and operating results, constitute forward-looking statements.
For this purpose, any statements contained in this report that are not
statements of historical fact may be deemed forward-looking statements. Without
limiting the generality of the foregoing, words such as "may", "will"',
"expect"', "anticipate", "intend", "could" or the negative other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
which may affect the Company's results include, but are not limited to, the
highly competitive nature of the Company's industry; reliance on certain key
customers; consumer demand for marine, recreational vehicle and automotive
products; advertising and promotional efforts, and other factors. The Company
will not undertake and specifically declines any obligation to update or correct
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
PART II - OTHER INFORMATION
Item l - Legal Proceedings: Not applicable.
Item 2 - Changes in Securities:
During March, 2000, 195,390 shares of the Registrant's Common Stock were issued
to shareholders pursuant to the recently announced 5% stock dividend; and 88,000
shares of the 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 aggregated
approximately $45,900 which was charged to operations during the quarter ended
March 31, 2000.
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: Not applicable
8
<PAGE>
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 11, 2000 By: /s/ PETER G. DORNAU
---------------- -----------------------
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
By: /s/ EDWARD ANCHEL
---------------------
Edward Anchel
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 346,925
<SECURITIES> 0
<RECEIVABLES> 2,548,851
<ALLOWANCES> 22,600
<INVENTORY> 4,061,980
<CURRENT-ASSETS> 7,192,539
<PP&E> 5,862,018
<DEPRECIATION> 1,238,504
<TOTAL-ASSETS> 13,291,708
<CURRENT-LIABILITIES> 4,270,944
<BONDS> 0
0
0
<COMMON> 41,060
<OTHER-SE> 4,909,048
<TOTAL-LIABILITY-AND-EQUITY> 13,291,708
<SALES> 3,272,135
<TOTAL-REVENUES> 3,277,926
<CGS> 2,262,198
<TOTAL-COSTS> 910,486
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 121,906
<INCOME-PRETAX> (16,664)
<INCOME-TAX> (6,500)
<INCOME-CONTINUING> (10,164)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,164)
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
