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, 2000
Commission File No. 2-70197
OCEAN BIO-CHEM, INC.
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(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
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(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.
YES X NO
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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 issued and outstanding at September 30, 2000
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX
Description Page
----------- ------
Part I:
Item 1. - Financial Statements:
Consolidated balance sheets as of September
30, 2000 and December 31, 1999 3
Consolidated statements of operations for
the three and nine months ended September 30,
2000 and 1999 4
Consolidated statements of changes in
shareholders' equity for the nine months
ended September 30, 2000 and 1999 5
Consolidated statements of cash flows
for the nine months ended September 30, 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 9
Item 2. - Changes in Securities 9
Item 3. - Defaults upon Senior Securities 9
Item 4. - Submission of Matters to Vote by Security Holders 9
Item 5. - Other Information 9
Item 6. - Exhibits and Reports on Form 8-K 9
Signatures 9
2
<PAGE>
PART I - Financial Information
Item l. Financial Statements
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(Unaudited)
Current assets:
<S> <C> <C>
Cash $ 133,015 $ 433,772
Trade accounts receivable net of allowances for
doubtful accounts of approximately $23,000
and $22,500 at September 30, 2000 and
December 31, 1999, respectively 3,287,639 2,804,072
Due from officer 161,100 161,100
Inventories 4,920,254 3,730,321
Prepaid expenses 332,603 146,102
----------- ------------
Total current assets 8,834,611 7,275,367
----------- ------------
Property, plant and equipment, net 5,506,224 4,515,305
----------- ------------
Other assets:
Funds held in escrow for equipment 40,862 285,165
Trademarks, trade names and patents, net 359,179 376,423
Deposits and other assets 237,451 248,213
Due from affiliated companies, net 520,698 846,979
----------- ------------
Total other assets 1,158,190 1,756,780
----------- ------------
Total assets $15,499,025 $13,547,452
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable - trade $ 2,022,371 $ 872,693
Note payable - bank 4,223,000 2,900,000
Current portion of long-term debt 355,505 314,359
Accrued expenses payable 28,183 390,607
----------- ------------
Total current liabilities 6,629,059 4,477,659
----------- ------------
Long-term debt, less current portion 3,973,129 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 September 30, 2000
and December 31, 1999, respectively 41,060 38,225
Additional paid-in capital 3,720,378 3,282,932
Foreign currency translation adjustment ( 203,246) ( 160,872)
Retained earnings 1,345,520 1,764,051
----------- ------------
4,903,712 4,924,336
Less cost of common stock in treasury,
5,789 shares at September 30, 2000 and
December 31, 1999 ( 6,875) ( 6,875)
------------ ------------
4,896,837 4,917,461
------------ ------------
Total liabilities & shareholders' equity $15,499,025 $ 3,547,452
============ ============
3
</TABLE>
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross sales $5,256,263 $ 4,995,382 $ 13,080,208 $12,088,582
Allowances 561,620 567,324 1,398,366 1,258,762
------------ ----------- ------------- -------------
Net sales 4,694,643 4,428,058 11,681,842 10,829,820
Cost of goods sold 3,735,976 3,102,576 8,528,862 7,396,507
------------ ----------- ------------- -----------
Gross profit 958,667 1,325,482 3,152,980 3,433,313
------------ ----------- ------------- -----------
Costs and expenses:
Advertising and promotion 198,178 140,115 544,666 392,449
Selling and administrative 738,431 712,775 2,292,624 2,068,695
Interest expense 117,021 101,673 371,221 303,319
------------ ----------- ------------- -----------
Total costs and expenses 1,053,630 954,563 3,208,511 2,764,463
------------ ----------- ------------- -----------
Income (loss) from operations ( 94,963) 370,919 ( 55,531) 668,850
Interest income 3,845 4,394 12,781 16,226
------------ ----------- ------------- -----------
Income (loss) before provision
(benefit) for income taxes ( 91,118) 375,313 ( 42,750) 685,076
Provision (benefit) for income
taxes ( 30,000) 141,200 ( 15,000) 257,700
------------ ----------- ------------- -----------
Net income (loss) ( 61,118) 234,113 ($ 27,750) 427,376
Other comprehensive income, net
of income taxes:
Foreign currency translation
adjustment ( 12,174) ( 4,104) ( 42,374) ( 26,571)
------------ ------------ ------------- ------------
Comprehensive income (loss) ($ 73,292) $ 230,009 ($ 70,124) $ 400,805
============ ============ ============= ============
Earnings (loss) per
common share ($ .02) $ .06 ($ .01) $ .11
============ =========== ============= ============
</TABLE>
Earnings (loss) per share for the nine and three months ended September 30, 2000
were calculated on the basis of 4,042,913 weighted average shares of common
stock outstanding. For the nine and three months ended September 30, 1999,
earnings per share were calculated using 3,794,618 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.
4
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 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 ( 27,750) ( 27,750)
Issuances of stock 283,390 2,835 437,446 ( 390,781) 49,500
Foreign currency
translation
adjustment ( 42,374) 42,374)
----------- ----------- --------------- ----------- ---------- ---------- -----------
September 30, 2000 4,105,889 $ 41,060 $ 3,720,378 ($ 203,246) $1,345,520 ($ 6,875) $4,896,837
=========== =========== =============== =========== ========== ========== ============
January 1, 1999 3,753,017 $ 37,530 $ 3,232,327 ($ 145,666) $1,332,567 ($ - ) $4,456,758
Net income 427,376 427,376
Acquisition of
treasury shares ( 6,875) ( 6,875)
Issuances of stock 69,482 695 50,605 51,300
Foreign currency
translation
adjustment ( 26,571) ( 26,571)
----------- ----------- --------------- ----------- ---------- ---------- -----------
September 30, 1999 3,882,499 $ 38,225 $ 3,282,932 ($ 172,237) $1,759,943 ($ 6,875) $4,901,988
=========== =========== =============== =========== ========== ========== ===========
</TABLE>
5
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------------- ------------
<S> <C> <C>
Cash flows provided by operating activities:
Net Income (loss) ($ 27,750) $ 427,376
to net cash provided by operations:
Depreciation and amortization 303,198 243,777
Changes in operating assets and liabilities:
(Increase) in accounts receivable ( 483,567) ( 884,059)
(Increase) decrease in inventories ( 1,189,933) 311,335
(Increase) in prepaid expenses ( 186,501) ( 22,602)
Increase in accounts payable,
accrued expenses, and other 798,016 368,151
------------- ------------
Net cash provided by operating activities ( 786,537) 443,978
------------- ------------
Cash flows from financing activities:
Net increases (reductions) under line of credit 1,323,000 ( 428,115)
Repayments of advances to affiliates 326,282 219,738
Borrowings (reductions) of debts, net ( 138,057) 167,819
Common stock transactions 49,500 44,425
------------- ------------
Net cash provided (used) by financing activities 1,560,725 3,867
------------- ------------
Cash flows from investing activities:
Purchase of property, plant, and equipment, net ( 1,032,571) ( 92,181)
------------- ------------
Net cash used by investing activities ( 1,032,571) ( 92,181)
------------- ------------
Increase (decrease) in cash prior to effect of
foreign currency translation ( 258,383) 355,664
Effect of foreign currency translation on cash ( 42,374) ( 26,571)
------------- ------------
Net increase (decrease) in cash ( 300,757) 329,093
Cash at beginning of period 433,772 8,871
------------- ------------
Cash at end of period $ 133,015 $ 337,964
============= ============
Supplemental Information:
Cash used during the periods for payment of:
Interest $ 371,221 $ 329,093
============= ============
Income taxes $ 20,000 $ 36,000
============= ============
The Company had no cash equivalents at September 30, 2000.
</TABLE>
6
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED 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 three and nine months ended September
30, 1999 have been reclassified to conform with the 2000 presentation.
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,
inventories, and other assets, and can aggregate a maximum amount of $5,000,000.
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, and certain other financial covenants.
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.
In connection with the previously announced Automotive Oils and Related Fluids
Program, the Company expended in excess of $ 1,050,000 of its resources during
the nine months ended September 30, 2000. Such amount was net of the balance
which remained in escrow from its Alabama Industrial Revenue Bond Issue for
future equipment needs aggregating $285,000 at January 1, 2000 and represented
new equipment, personnel and related costs associated with the Program. Through
September 30, 2000, the financial impact of these transactions was a reduction
in both liquidity and profitability. Although limited production commenced and
initial customer orders were received during July, 2000, it is not contemplated
that full-scale operations related to this line will be accomplished until late
2000 or early 2001. The Program comprises approximately forty (40) new line
items in the Company's product line and represents the Company's re-entry into
the automotive aftermarket.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD JULY 1- SEPTEMBER 30:
Gross sales increased approximately 5% or $261,000 for the quarter ended
September 30, 2000 when compared to the same quarter of the preceding year. This
was primarily due to increased sales of the Company's existing core product
line.
Cost of goods sold increased as a percentage of net sales when comparing the
quarter ended September 30, 2000 with the comparable quarter in 1999. The
percentages were 79.6% and 70.1% for the quarters during 2000 and 1999,
respectively. This change was due the lower than anticipated margins on
anti-freeze products resulting from increased materials costs and, decreased
absorption of manufacturing overhead at the Company's Alabama plant somewhat
related to the above mentioned Automotive Oils and Related Fluids Program.
7
<PAGE>
Advertising and promotion increased approximately $ 58,000 comparing the three
months ended September 30, 2000 and 1999. This was primarily due to a planned
increases in the advertising budget.
Selling and administrative expenses increased approximately $ 25,700 when
comparing the quarters ended September 30, 2000 and 1999. Such change was
attributable to increased personnel costs and anticipated incremental costs of
operations.
Interest expense, which aggregated approximately $ 117,000 for the current
quarter, increased approximately $15,000 when comparing the September 30, 2000
quarter to the corresponding quarter in 1999. Such increase was attributable to
recently promulgated interest rate increases as well as increased borrowings.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD JANUARY 1 - SEPTEMBER 30:
Gross sales increased 8% or approximately $992,000 when comparing the nine month
periods of 2000 and 1999. This was primarily due to increased sales of the
Company's existing core product line.
Cost of goods sold increased to 73% as a percentage of net sales versus 68.3%
when comparing the nine months ended September 30, 2000 to the comparable period
in the preceding year. This change was due the lower than anticipated margins on
anti-freeze products resulting from increased materials costs and, decreased
absorption of manufacturing overhead at the Company's Alabama plant somewhat
related to the above mentioned Automotive Oils and Related Fluids Program.
Advertising and promotion expenses increased approximately $152,000 when
comparing the nine months ended September 30, 2000 to the nine months ended
September 30, 1999. This was primarily due to a planned increases in the
advertising budget.
Selling and administrative expenses increased for the nine months ended
September 30, 2000 by approximately $224,000 or 11% when compared to the nine
months ended September 30, 1999. This was attributable to increased personnel
costs primarily associated with the above mentioned Automotive Oils and Related
Fluids Program and normal incremental costs of operations.
Interest expense increased during the nine month period in 2000 by approximately
$68 ,000 when compared to the nine month period of 1999 reflecting the effect of
recently promulgated interest rate increases as well as increased borrowings.
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.
8
<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 10, 2000 /s/ Peter Dornau
-------------------------- ---------------------------------
Peter G. Dornau
Chairman of the Board of Directors
and Chief Executive Officer
/s/ Edward Anchel
---------------------------------
Edward Anchel
Chief Financial Officer
9
