10q398
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, 1998
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
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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.
3,753,017 issued and outstanding at March 31, 1998.
PART I - Financial Information
Item l. Financial Statement
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
MARCH 31, DEC. 31,
1998 1997
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Current Assets:
Cash $ 10,473 $ 787,411
Trade accounts receivable net of allowance
for doubtful accounts of $35,000 at March 31,
1998 and December 31, 1997. 2,416,951 2,158,233
Due from Officers 167,100 197,200
Inventories 3,521,964 3,237,207
Prepaid Expenses 89,184 92,588
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Total Current Assets 6,205,672 6,472,639
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Property, Plant and Equipment, Net 4,137,667 4,141,031
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Other Assets:
Trademarks, trade names and patents, net 416,659 422,407
Funds held in escrow for construction 1,027,582 1,042,612
Due from Affiliated Companies, Net 715,849 733,644
Deposits and other assets 407,636 464,209
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Total Other Assets 2,567,726 2,662,872
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Total Assets $ 12,911,065 $ 13,276,542
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities:
Accounts payable - trade $ 1,187,620 $ 718,217
Note payable - bank 2,582,945 3,254,158
Current portion of long term debt 330,000 340,000
Other Accrued Liabilities 94,134 183,747
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Total Current Liabilities 4,194,699 4,496,122
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Long term debt, less current portion 4,290,000 4,370,000
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Shareholders' Equity:
Common Stock - $.01 par value, 10,000,000
Shares authorized, 3,753,017 shares issued
and outstanding 37,530 37,530
Additional paid-in capital 3,232,327 3,232,327
Foreign Currency Translation Adjustment ( 112,984) ( 108,945)
Retained Earnings 1,269,493 1,249,508
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Total Shareholders' Equity 4,426,366 4,410,420
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Total Liabilities & Shareholders' Equity $ 12,911,065 $ 13,276.542
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OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MARCH 31,
1998 1997
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Gross Sales $ 2,787,441 $ 2,572,793
Allowances 259,959 288,914
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Net Sales 2,527,482 2,283,879
Cost of goods sold 1,820,304 1,661,883
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Gross Profit 707,178 621,996
Cost and expenses:
Advertising and promotion 70,800 117,707
Selling and administrative 567,627 614,109
Interest expense 59,282 99,552
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Total Cost and Expenses 697,709 831,368
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Operating Income (Loss) 9,469 ( 209,372)
Interest Income 15,682 30,797
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Income (Loss) before income taxes 25,151 ( 178,575)
(Benefit) provision for income taxes 5,166 ( 67,198)
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Net Income (loss) $ 19,985 $( 111,377)
Other comprehensive income, net of tax:
Foreign currency translation adjustment ( 3,191) ( 5,042)
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Comprehensive income $ 16,794 $( 116,419)
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Basic earnings (loss) per common share $ .01 $( .03)
=========== ============
Earnings per share were calculated on the basis of 3,753,017 and 3,745,374
weighted average shares of common stock outstanding for the quarters ended
March 31, 1998 and 1997, 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.The prior period has been restated to conform with
statement no. 130.
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31
1998 1997
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Cash flow provided (used) by
operating activities:
Net Income (Loss) $ 19,985 $( 111,377)
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 64,597 46,225
Change in assets and liabilities:
Increase in accounts receivable ( 258,718) ( 91,463)
Increase in inventory ( 284,757) ( 222,353)
(Increase) decrease in prepaid expenses 67,223 ( 73,027)
Increase in accounts payable and
accrued expenses: 417,674 404,926
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Net cash provided (used)
by operating activities: 26,004 ( 47,069)
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Cash provided by financing activities:
Net payments under line of credit ( 671,213) 230,000
Advances to affiliates 17,795 ( 77,047)
Short term borrowings, net ( 10,000) ( 40,000)
Long term borrowings, net ( 80,000) 40,000
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Net cash (used) provided by
financing activities: ( 743,418) 152,953
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Cash used by investing activities:
Purchase property, plant, equipment ( 55,485) ( 53,919)
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Net cash used by investing activities: ( 55,485) ( 53,919)
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Increase (decrease) in cash prior to effect
of exchange rate on cash ( 772,899) 51,965
Effect of exchange rate on cash ( 4,039) ( 8,137)
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Increase (decrease) in cash ( 776,938) 43,828
Cash at beginning of period 787,411 394,569
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Cash at end of period $ 10,473 $ 438,397
Supplemental Information ============ ============
Cash used for interest during period 101,114 $ 99,552
Cash used for income taxes during period - $ 69,790
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The company had no cash equivalents at March 31, 1998 and 1997.
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, 1997 have been
reclassified to conform to the 1998 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 and
short-term borrowings froma commercial bank. The Registrant's line of credit
commitment is currently $2.9 million by its commercial bank. The total
borrowings under the line can aggregate up to $2,900,000 and is subject to
renewal in June 1998. The Registrant is required to maintain minimum working
capital of $1,500,000, debt to tangible net worth of 2 to 1 and debt service
coverage of 1.7 times.
The Registrant is involved in making sales in the Canadian market and
accordingly must deal with 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 % for the quarter ended March 31, 1998
when compared to the same quarter of the preceding year.
Cost of Goods Sold increased as a percentage of gross sales when comparing the
quarter ended March 31, 1998 with the comparable quarter in 1997. The
percentages were 65.3% and 64.6% for the quarters ended 1998 and 1997,
respectively. This was primarily due to idle plant capacity during this
transition period.
Selling and Administrative expenses decreased approximately $ 46,000 when
comparing the quarter ended March 31, 1998 with March 31, 1997. This is
primarily due to reduced personnel cost.
Advertising and Promotion decreased approximately $ 47,000 comparing the three
months ended March 31, 1998 with the same period in 1997. This is primarily due
to timing differences.
Interest Expense decreased when comparing the March 31, 1998 quarter to the
corresponding quarter in 1997 by approximately $ 40,000 due primarily to
reduced levels of borrowing during the quarter and lower interest rates on
outstanding borrowings.
PART II - Other Information
Item l - Legal Proceedings: Not applicable.
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 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 thereunto duly authorized.
OCEAN BIO-CHEM, INC.
Date: May 14, 1998 By: /s/ Peter G. Dornau
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Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
By: /s/ Peter G. Dornau
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Peter G. Dornau
Chief Financial Officer