U. S. 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 June 30,
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 June 30, 2000
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX
Description Page
Part I:
Item 1. - Financial Statements:
Consolidated balance sheets as of June
30, 2000 and December 31, 1999 3
Consolidated statements of operations for
the three and six months ended June 30,
2000 and 1999 4
Consolidated statements of changes in
shareholders' equity for the six months
ended June 30, 2000 and 1999 5
Consolidated statements of cash flows
for the six months ended June 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 Matters 9
Item 6. - Exhibits and Reports on Form 8-K 9
Signatures 10
2
<PAGE>
PART I - Financial Information
Item l. Financial Statements
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(Unaudited)
Current assets:
<S> <C> <C>
Cash $ 161,759 $ 433,772
Trade accounts receivable net of allowances for
doubtful accounts of approximately $22,925
and $22,500 at June 30, 2000 and December
31, 1999, respectively 2,152,020 2,804,072
Due from officer 161,100 161,100
Inventories 4,346,534 3,730,321
Prepaid expenses 287,300 146,102
------------ ------------
Total current assets 7,108,713 7,275,367
------------ ------------
Property, plant and equipment, net 5,062,059 4,515,305
------------ ------------
Other assets:
Funds held in escrow for equipment 85,570 285,165
Trademarks, trade names and patents, net 364,927 376,423
Deposits and other assets 236,015 248,213
Due from affiliated companies, net 611,617 846,979
------------ ------------
Total other assets 1,298,129 1,756,780
------------ -----------
Total assets $13,468,901 $13,547,452
============ ============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable - trade $ 1,030,753 $ 872,693
Note payable - bank 3,100,000 2,900,000
Current portion of long-term debt 324,992 314,359
Accrued expenses payable 53,661 390,607
------------ ------------
Total current liabilities 4,509,406 4,477,659
------------ ------------
Long-term debt, less current portion 3,989,366 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 June 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 ( 191,072) ( 160,872)
Retained earnings 1,406,638 1,764,051
------------ ------------
4,977,004 4,924,336
Less cost of common stock in treasury,
5,789 shares at June 30, 2000 and
December 31, 1999 ( 6,875) ( 6,875)
------------ ------------
4,970,129 4,917,461
------------ ------------
Total liabilities & shareholders' equity $13,468,901 $13,547,452
============ ============
<
3
</TABLE>
<PAGE>
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Gross sales $4,118,783 $3,674,386 $7,823,945 $7,093,200
Allowances 403,718 312,316 836,746 691,438
------------ ----------- ----------- -----------
Net sales 3,715,065 3,362,070 6,987,199 6,401,762
Cost of goods sold 2,530,688 2,186,708 4,792,886 4,293,931
----------- ----------- ----------- -----------
Gross profit 1,184,377 1,175,362 2,194,313 2,107,831
----------- ----------- ----------- -----------
Cost and expenses:
Advertising and promotion 163,336 154,094 346,488 252,334
Selling and administrative 826,858 718,064 1,554,193 1,355,921
Interest expense 132,294 103,012 254,200 201,646
----------- ----------- ----------- -----------
Total cost and expenses 1,122,488 975,170 2,154,881 1,809,901
----------- ----------- ----------- -----------
Income from operations 61,889 200,192 39,432 297,930
Interest income 3,144 5,672 8,936 11,832
----------- ----------- ----------- -----------
Income before income taxes 65,033 205,864 48,368 309,762
Provision for income taxes 21,500 77,500 15,000 116,500
----------- ----------- ----------- -----------
Net income 43,533 128,364 33,368 193,262
Other comprehensive income, net of
income taxes:
Foreign currency translation
adjustment ( 23,511) ( 9,723) ( 30,200) ( 22,467)
----------- ----------- ----------- -----------
Comprehensive income $ 20,022 $ 118,641 $ 3,168 $ 170,795
=========== =========== =========== ===========
Earnings per
common share $ .01 $ .03 $ .01 $ .05
=========== =========== =========== ===========
</TABLE>
Earnings per share were calculated on the basis of 4,011,426 and 3,780,678
weighted average shares of common stock outstanding for the six months and three
months ended June 30, 2000 and 1999, respectively.
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. The only items of comprehensive income of the registrant
which are reflected in the accompanying financial statements are foreign
currency translation adjustments.
4
<PAGE>
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED
JUNE 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 income 33,368 33,368
Issuances of stock 283,390 2,835 437,446 ( 390,781) 49,500
Foreign currency
translation
adjustment ( 30,200) ( 30,200)
--------- ------- --------------- ----------- ----------- ---------- -----------
June 30,
2000 4,105,889 $41,060 $ 3,720,378 ($ 191,072) $1,406,638 ($ 6,875) $4,970,129
========= ======= =============== =========== =========== ========== ===========
January 1,
1999 3,753,017 $37,530 $ 3,232,327 ($ 145,666) $1,332,567 ($ - ) $4,456,758
Net income 309,762 309,762
Acquisition of
treasury shares ( 6,875) ( 6,875)
Issuances of stock 69,482 695 50,605 51,300
Foreign currency
translation
adjustment ( 22,467) ( 22,467)
--------- ------- --------------- ----------- ----------- ---------- -----------
June 30,
1999 3,882,499 $38,225 $ 3,282,932 ($ 168,133) $1,642,329 ($ 6,875) $4,788,478
========= ======= =============== =========== =========== ========== ===========
</TABLE>
5
<PAGE>
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ -----------
<S> <C> <C>
Cash flow provided by operating activities:
Net income $ 33,368 $ 193,262
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 168,997 159,496
Changes in assets and liabilities:
Decrease in accounts receivable 652,051 239,239
(Increase) in inventory ( 616,213) ( 28,248)
(Increase) decrease in prepaid expenses ( 141,198) ( 26,557)
Increase (decrease) in accounts payable,
accrued expenses and other ( 166,689) 29,551
------------ -----------
Net cash provided (used) by operating activities ( 69,684) 566,743
------------- -----------
Cash flows from financing activities:
Net increases (reductions) under line of credit 200,000 ( 852,422)
Reduction in advances from affiliates 235,362 296,853
Borrowings (payments) on debts, net ( 152,333) 243,922
Common stock transactions 49,500 44,425
------------ -----------
Net cash provided (used) by financing activities 332,529 ( 267,222)
------------ -----------
Cash flows from investing activities:
Purchases of property, plant, equipment, net
of funds held in escrow ( 504,658) ( 28,955)
------------ -----------
Net cash (used) by investing activities ( 504,658) ( 28,955)
------------ -----------
Increase (decrease) in cash prior to effect of
foreign currency translation adjustment ( 241,813) 270,566
Effect of foreign currency translation adjustment
on cash ( 30,200) ( 22,467)
------------ -----------
Net increase (decrease) in cash ( 272,013) 248,099
Cash at beginning of period 433,772 8,871
------------ -----------
Cash at end of period $ 161,759 $ 256,970
Supplemental information:
Cash used for payment of interest during period $ 254,200 $ 193,534
============ ===========
Cash used for payment of income taxes during
period $ 257,800 $ 16,000
============ ===========
The company had no cash equivalents at June 30, 2000 and 1999
</TABLE>
6
<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.
Certain financial statement items for the three and six months ended June 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
$2,500,000, 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.
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 approximately $440,000 of its resources during the
six months ended June 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. The
financial impact of these transactions was a short-term reduction in liquidity
and profitability. Production commenced and initial customer orders were
received during late July, 2000. 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 APRIL 1- JUNE 30:
Gross sales increased approximately 11 % or $444,400 for the quarter ended June
30, 2000 when compared to the same quarter of the preceding year. Management
attributes this primarily to increased sales of new products introduced last
year and a sales price increase on selected products.
7
<PAGE>
Cost of goods sold increased as a percentage of net sales when comparing the
quarter ended June 30, 2000 with the comparable quarter in 1999. The percentages
were 68.1% and 65% for the quarters ended 2000 and 1999, respectively. This
change was primarily due to increasing raw chemical costs and manufacturing
overhead at the Company's Alabama plant.
Selling and administrative expenses increased approximately $109,000 or 13%
comparing the quarters ended June 30, 2000 and June 30, 1999. Such increase was
primarily due to increased professional fees and personnel costs associated with
the new automotive line of products.
Advertising and promotion increased approximately $9,200 or 6% comparing the
three months ended June 30, 2000 and 1999. This was primarily due to a planned
increase in the advertising budget.
Interest expense increased approximately $29,300 during the current quarter.
This change was primarily due to the Federal Reserve's recently enacted series
of interest rate increases which was passed on by the Company's lender.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD JANUARY 1 - JUNE 30:
Gross Sales increased 10 % or approximately $730,700 when comparing the six
month periods of 2000 and 1999. Management attributes this primarily to
increased sales of new products introduced last year and a sales price increase
on selected products.
Cost of Goods Sold increased to 68.6 % as a percentage of net sales versus 67.1%
when comparing the six months ended June 30, 2000 to the comparable period in
the preceding year. This change was primarily due to increasing raw chemical
costs and manufacturing overhead at the Company's Alabama plant.
Advertising and promotion expenses increased approximately 37% or $94,200 when
comparing the six months ended June 30, 2000 to the six months ended June 30,
1999. This was primarily due to a planned increase in the advertising budget.
Selling and administrative expenses increased for the six months ended June 30,
2000 by approximately $198,300 or 14.6% when compared to the six months ended
June 30, 1999. Such increase was primarily due to increased professional fees
and personnel costs associated with the new automotive line of products.
Interest expense increased during the six month period in 2000 by approximately
$52,500 when compared to the six month period of 1999. This change was primarily
due to the Federal Reserve's recently enacted series of interest rate increases
which was passed on by the Company's lender.
8
<PAGE>
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: See the Registrant's Form 10-K for the year ended
December 31, 1999
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:
On June 9, 2000, at the Registrant's annual meeting of shareholders,
six directors; Peter Dornau, Jeffrey Tieger, Edward Anchel, Laz
Schneider, James Kolisch and John B. Turner were elected. 3,841,411
votes were cast in favor and 606 votes were cast against certain
directors. Shareholders also approved Berkovits, Lago & Co., LLP,
Certified Public Accountants, by a vote of 3,840,295
for and 1,722 against, as the Registrant's auditors for the year
ending December 31, 2000.
Item 5 - Other Matters: Not applicable
Item 6 - Exhibits: Not applicable
(A) Exhibits - Not applicable
(B) Reports on Form 8-K - Not applicable
9
<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 thereunto duly authorized.
OCEAN BIO-CHEM, INC.
Date: August 11, 2000 /s/ Peter Dornau
------------------------
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
/s/ Edward Anchel
------------------------
Edward Anchel
Chief Financial Officer
10
