x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Florida
|
59-1564329
|
|
(State Or Other Jurisdiction Of
Incorporation Or Organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer o
|
Accelerated filer o
|
Non-accelerated filer o
|
Smaller reporting company x
|
Page
|
|||||
PART I
|
Financial Information:
|
||||
Item 1. Financial Statements
|
|||||
Condensed consolidated balance sheets as of
|
3 | ||||
June 30, 2011(unaudited) and December 31, 2010
|
|||||
Condensed consolidated statements of operations for the
|
4 | ||||
three months and six months ended June 30, 2011 and 2010 (unaudited)
|
|||||
Condensed consolidated statements of comprehensive income for the
|
5 | ||||
three months and six months ended June 30, 2011 and 2010 (unaudited)
|
|||||
Condensed consolidated statements of cash flows for the
|
6 | ||||
six months ended June 30, 2011 and 2010 (unaudited)
|
|||||
Notes to condensed consolidated financial statements
|
7-12 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition
|
12-16 | ||||
and Results of Operations
|
|||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk
|
16 | ||||
Item 4. Controls and Procedures
|
16 | ||||
PART II
|
Other Information:
|
||||
Item 1A. Risk Factors
|
16 | ||||
Item 6. Exhibits
|
17 | ||||
Signatures
|
18 |
June 30,
2011
|
December 31,
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash
|
$
|
538,597
|
$
|
615,044
|
||||
Trade accounts receivable net of allowance for doubtful accounts of approximately $85,600 and $63,600 at June 30, 2011 and December 31, 2010, respectively
|
3,509,620
|
2,266,695
|
||||||
Receivables due from affiliated companies
|
125,425
|
-
|
||||||
Inventories, net
|
9,184,234
|
7,725,580
|
||||||
Prepaid expenses and other current assets
|
430,198
|
289,930
|
||||||
Deferred tax asset
|
165,577
|
127,676
|
||||||
Total Current Assets
|
13,953,651
|
11,024,925
|
||||||
Property, plant and equipment, net
|
5,298,080
|
5,421,787
|
||||||
Other Assets:
|
||||||||
Trademarks, trade names and patents, net
|
896,366
|
947,814
|
||||||
Due from affiliated companies, net
|
-
|
212,736
|
||||||
Other assets
|
57,541
|
75,036
|
||||||
Total Other Assets
|
953,907
|
1,235,586
|
||||||
Total Assets
|
$
|
20,205,638
|
$
|
17,682,298
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable – trade
|
$
|
1,054,549
|
$
|
1,417,959
|
||||
Revolving line of credit
|
2,600,000
|
-
|
||||||
Notes payable related party
|
-
|
471,950
|
||||||
Current portion of long term debt
|
230,151
|
490,127
|
||||||
Income taxes payable
|
-
|
539,628
|
||||||
Accrued expenses payable
|
1,178,189
|
993,010
|
||||||
Total Current Liabilities
|
5,062,889
|
3,912,674
|
||||||
Deferred tax liability
|
261,046
|
81,030
|
||||||
Long term debt, less current portion
|
2,268,279
|
2,507,985
|
||||||
Total Liabilities
|
7,592,214
|
6,501,689
|
||||||
Commitments and contingencies
|
||||||||
Shareholders’ Equity:
|
||||||||
Common stock - $.01 par value, 10,000,000 shares authorized; 8,349,116 and 8,205,116 shares issued at June 30, 2011 and December 31, 2010, respectively
|
83,491
|
82,051
|
||||||
Additional paid in capital
|
8,075,219
|
7,689,183
|
||||||
Less cost of common stock in treasury, 351,503 shares at June 30, 2011 and December 31, 2010, respectively
|
(288,013)
|
(288,013)
|
||||||
Foreign currency translation adjustment
|
(267,968)
|
(271,939)
|
||||||
Retained earnings
|
4,703,908
|
3,666,211
|
||||||
Total Shareholders’ Equity of Ocean Bio-Chem, Inc.
|
12,306,637
|
10,877,493
|
||||||
Noncontrolling interest
|
306,787
|
303,116
|
||||||
Total Shareholders’ Equity
|
12,613,424
|
11,180,609
|
||||||
Total Liabilities and Shareholders’ Equity
|
$
|
20,205,638
|
$
|
17,682,298
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Gross sales
|
$ | 8,669,305 | $ | 7,692,395 | $ | 15,754,782 | $ | 13,090,811 | ||||||||
Less: discounts, returns, and allowances
|
451,331 | 338,976 | 804,301 | 539,518 | ||||||||||||
Net sales
|
8,217,974 | 7,353,419 | 14,950,481 | 12,551,293 | ||||||||||||
Cost of goods sold
|
5,240,420 | 4,640,107 | 9,463,886 | 8,105,416 | ||||||||||||
Gross profit
|
2,977,554 | 2,713,312 | 5,486,595 | 4,445,877 | ||||||||||||
Operating Expenses:
|
||||||||||||||||
Advertising and promotion
|
656,811 | 417,645 | 1,029,779 | 687,274 | ||||||||||||
Selling and administrative
|
1,673,694 | 1,642,143 | 2,776,614 | 2,425,382 | ||||||||||||
Total operating expenses
|
2,330,505 | 2,059,788 | 3,806,393 | 3,112,656 | ||||||||||||
Operating income
|
647,049 | 653,524 | 1,680,202 | 1,333,221 | ||||||||||||
Other income (expense)
|
||||||||||||||||
Interest expense
|
(47,443 | ) | (40,403 | ) | (73,219 | ) | (67,972 | ) | ||||||||
Other income
|
1,563 | - | 25,511 | 22,317 | ||||||||||||
Income before income taxes
|
601,169 | 613,121 | 1,632,494 | 1,287,566 | ||||||||||||
Provision for income taxes
|
224,352 | 294,700 | 627,968 | 574,700 | ||||||||||||
Net income
|
376,817 | 318,421 | 1,004,526 | 712,866 | ||||||||||||
Loss attributable to noncontrolling interests
|
12,579 | 53,589 | 33,171 | 53,589 | ||||||||||||
Net income attributable to Ocean-Bio Chem, Inc.
|
$ | 389,396 | $ | 372,010 | $ | 1,037,697 | $ | 766,455 | ||||||||
Income per common share – basic
|
$ | 0.05 | $ | 0.05 | $ | 0.13 | $ | 0.10 | ||||||||
Income per common share – diluted
|
$ | 0.05 | $ | 0.04 | $ | 0.12 | $ | 0.09 | ||||||||
Weighted average shares - basic
|
7,897,985 | 7,746,886 | 7,875,923 | 7,724,722 | ||||||||||||
Weighted average shares - diluted
|
8,418,591 | 8,615,326 | 8,315,186 | 8,362,719 |
For The
Three Months Ended
|
For The
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net Income
|
$ | 376,817 | $ | 318,421 | $ | 1,004,526 | $ | 712,866 | ||||||||
Foreign currency translation adjustment
|
518 | 32,557 | 3,971 | 6,868 | ||||||||||||
Comprehensive income
|
377,335 | 350,978 | 1,008,497 | 719,734 | ||||||||||||
Comprehensive loss attributable to noncontrolling interests
|
12,579 | 53,589 | 33,171 | 53,589 | ||||||||||||
Comprehensive income attributable to Ocean-Bio Chem, Inc.
|
$ | 389,914 | $ | 404,567 | $ | 1,041,668 | $ | 773,323 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income attributable to Ocean Bio-Chem, Inc.
|
$ | 1,037,697 | $ | 766,455 | ||||
Adjustment to reconcile net income to net cash (used in) provided by operations:
|
||||||||
Loss attributable to noncontrolling interest
|
(33,171 | ) | (53,589 | ) | ||||
Depreciation and amortization
|
418,708 | 333,289 | ||||||
Stock based compensation
|
365,598 | 337,386 | ||||||
Other operating non cash items
|
51,586 | 87,904 | ||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
(1,264,996 | ) | (159,942 | ) | ||||
Amounts due from affiliates
|
87,311 | (98,584 | ) | |||||
Inventory
|
(1,470,636 | ) | (1,186,777 | ) | ||||
Other assets
|
17,495 | 63,298 | ||||||
Deferred taxes
|
142,115 | - | ||||||
Prepaid expenses
|
(140,268 | ) | 209,024 | |||||
Accounts payable and other accrued liabilities
|
(717,859 | ) | (135,604 | ) | ||||
Net cash (used in) provided by operating activities
|
(1,506,420 | ) | 162,860 | |||||
Cash flows from investing activities:
|
||||||||
Purchases of property, plant and equipment
|
(243,553 | ) | (322,747 | ) | ||||
Trademarks, trade names and patents, net
|
- | (177,036 | ) | |||||
Contributions from (to) joint venture
|
36,842 | (103,627 | ) | |||||
Net cash used in investing activities
|
(206,711 | ) | (603,410 | ) | ||||
Cash flows from financing activities:
|
||||||||
Borrowings under revolving line of credit, net
|
2,600,000 | 750,000 | ||||||
Payments on related party notes
|
(471,950 | ) | - | |||||
Payments on long-term debt
|
(499,682 | ) | (240,049 | ) | ||||
Proceeds from exercise of stock options
|
6,300 | 7,085 | ||||||
Net cash provided by financing activities
|
1,634,668 | 517,036 | ||||||
Effect of exchange rates on cash
|
2,016 | (560 | ) | |||||
Net (decrease) increase in cash
|
(76,447 | ) | 75,926 | |||||
Cash at beginning of period
|
615,044 | 494,973 | ||||||
Cash at end of period
|
$ | 538,597 | $ | 570,899 | ||||
Supplemental disclosure of cash transactions:
|
||||||||
Cash paid for interest during period
|
$ | 81,421 | $ | 44,022 | ||||
Cash paid for income taxes during period
|
$ | 1,204,000 | $ | 450,000 | ||||
Supplemental disclosure of non-cash investing activities:
|
||||||||
Assets contributed to consolidated joint venture by noncontrolling partner
|
||||||||
Patents
|
$ | 440,339 | ||||||
Inventory
|
22,965 | |||||||
Equipment
|
14,700 | |||||||
Total assets contributed to consolidated joint venture by noncontrolling partner
|
$ | 478,004 |
June 30,
2011
|
December 31,
2010
|
|||||||
Raw materials
|
$
|
3,969,012
|
$
|
4,116,577
|
||||
Finished goods
|
5,556,830
|
3,938,629
|
||||||
Inventories, gross
|
9,525,842
|
8,055,206
|
||||||
Inventory reserves
|
(341,608)
|
(329,626)
|
||||||
Inventories, net
|
$
|
9,184,234
|
$
|
7,725,580
|
Estimate
Useful Life
|
June 30,
2011
|
December 31,
2010
|
||||||||
Land
|
$ | 278,325 | $ | 278,325 | ||||||
Building
|
30 years
|
4,402,275 | 4,402,275 | |||||||
Manufacturing and warehouse equipment
|
6-20 years
|
7,625,681 | 7,481,644 | |||||||
Office equipment and furniture
|
3-5 years
|
620,636 | 552,306 | |||||||
Construction in process
|
59,437 | 76,499 | ||||||||
Leasehold improvement
|
10-15 years
|
122,644 | 122,644 | |||||||
Property, plant and equipment, gross
|
13,108,998 | 12,913,693 | ||||||||
Less accumulated depreciation
|
(7,810,918 | ) | (7,491,906 | ) | ||||||
Property, plant and equipment, net
|
$ | 5,298,080 | $ | 5,421,787 |
Current Portion
|
Long Term Portion
|
|||||||||||||||
June 30,
2011
|
December 31,
2010
|
June 30,
2011
|
December 31,
2010
|
|||||||||||||
Industrial Development Bonds
|
$
|
200,000
|
$
|
460,000
|
$
|
2,220,000
|
$
|
2,445,000
|
||||||||
Capitalized equipment leases
|
30,151
|
30,127
|
48,279
|
62,985
|
||||||||||||
Total long term debt
|
$
|
230,151
|
$
|
490,127
|
$
|
2,268,279
|
$
|
2,507,985
|
12 month period ending June 30,
|
||||
2012
|
$ | 230,151 | ||
2013
|
460,397 | |||
2014
|
455,378 | |||
2015
|
449,161 | |||
2016
|
443,343 | |||
Thereafter
|
460,000 | |||
Total
|
$ | 2,498,430 |
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Earnings per common share -Basic
|
|
|
|
|
||||||||||||
Net income attributable to OBCI
|
|
$
|
389,396
|
|
|
$
|
372,010
|
|
|
$
|
1,037,697
|
|
|
$
|
766,455
|
|
Weighted average number of common shares outstanding
|
|
7,897,985
|
|
|
7,746,886
|
|
|
7,875,923
|
|
|
7,724,722
|
|
||||
Earnings per common share - Basic
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.13
|
|
|
$
|
0.10
|
|
Earnings per common share – Diluted
|
|
|
|
|
||||||||||||
Net income attributable to OBCI
|
|
$
|
389,396
|
|
|
$
|
372,010
|
|
|
$
|
1,037,697
|
|
|
$
|
766,455
|
|
Weighted average number of common shares outstanding
|
|
7,897,985
|
|
|
7,746,886
|
|
|
7,875,923
|
|
|
7,724,722
|
|
||||
Effect of employee stock-based awards
|
|
520,606
|
|
|
868,440
|
|
|
439,263
|
|
|
637,997
|
|
||||
|
|
|
|
|||||||||||||
Weighted average number of common shares outstanding - assuming dilution
|
|
8,418,591
|
|
|
8,615,326
|
|
|
8,315,186
|
|
|
8,362,719
|
|
||||
|
|
|
|
|||||||||||||
Earnings per common share - Diluted
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
|
$
|
0.12
|
|
|
$
|
0.09
|
|
June 30, 2011
|
Weighted
|
||||||||||||||
Date
|
Options
|
Exercisable
|
Exercise
|
Expiration
|
Average
|
||||||||||
Plan
|
granted
|
outstanding
|
options
|
price
|
date
|
Remaining life
|
|||||||||
2002 ISO
|
11/06/06
|
113,500
|
90,800
|
$ |
0.93
|
11/05/11
|
0.4
|
||||||||
2007 ISO
|
05/17/07
|
167,500
|
134,000
|
1.66
|
05/16/12
|
.9
|
|||||||||
2007 ISO
|
10/08/07
|
2,500
|
1,500
|
1.87
|
10/07/12
|
1.3
|
|||||||||
2007 ISO
|
12/17/07
|
154,600
|
92,760
|
1.32
|
12/16/12
|
1.5
|
|||||||||
2008 ISO
|
08/25/08
|
156,100
|
62,440
|
0.97
|
08/21/13
|
2.2
|
|||||||||
2002NQ
|
10/22/02
|
30,000
|
30,000
|
1.26
|
10/21/12
|
1.3
|
|||||||||
2002NQ
|
06/20/03
|
30,000
|
30,000
|
1.03
|
06/19/13
|
2.0
|
|||||||||
2002NQ
|
05/25/04
|
30,000
|
30,000
|
1.46
|
05/24/14
|
2.9
|
|||||||||
2002NQ
|
04/03/06
|
40,000
|
40,000
|
1.08
|
04/02/16
|
4.8
|
|||||||||
2002NQ
|
12/17/07
|
50,000
|
50,000
|
1.32
|
12/16/17
|
6.6
|
|||||||||
2008NQ
|
01/11/09
|
50,000
|
50,000
|
0.69
|
01/10/19
|
7.6
|
|||||||||
2008NQ
|
04/26/10
|
25,000
|
25,000
|
2.07
|
04/25/20
|
9.0
|
|||||||||
Non-Plan Option
|
03/25/09
|
115,000
|
115,000
|
0.55
|
03/24/14
|
2.8
|
|||||||||
964,200
|
751,500
|
$ |
1.16
|
2.5
|
3.1
|
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
|
|
3.2
|
Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
|
|
10.1
|
Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the registration statement on Form S-8 (file no. 333-174659), filed by Ocean Bio-Chem, Inc. on June 2, 2011
|
|
10.2
|
Credit Agreement, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Bank (the “Credit Agreement”) (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
|
|
10.3
|
Equipment Finance Addendum, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Equipment Finance Corporation (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
|
|
10.4
|
Promissory Note, dated July 6, 2011, issued by the Company to Regions Bank in connection with the revolving line of credit under the Credit Agreement (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
|
|
10.5
|
Promissory Note, dated July 6, 2011, issued by the Company and Kinpak, Inc. to Regions Equipment Finance Corporation in connection with the term loan under the Credit Agreement (incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.*
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.*
|
|
32.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.*
|
|
32.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.*
|
|
101
|
The following materials from Ocean Bio-Chem, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2011 and 2010, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2011 and 2010; (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
|
OCEAN BIO-CHEM, INC.
|
|||
Date: August 15, 2011
|
|
/s/ Peter G. Dornau | |
Peter G. Dornau | |||
Chairman of the Board, President
|
|||
and Chief Executive Officer
|
|||
(Principal Executive Officer)
|
|||
/s/ Jeffrey S. Barocas
|
|||
Jeffrey S. Barocas
|
|||
Vice President
|
|||
Chief Financial Officer
|
|||
|
(Principal Financial and Accounting Officer)
|
Dated: August 15, 2011
|
|
/s/ Peter G. Dornau | |
Peter G. Dornau
|
|||
Chairman of the Board, President
|
|||
and Chief Executive Officer
|
|||
(Principal Executive Officer) |
Dated: August 15, 2011
|
|
/s/ Jeffrey S. Barocas | |
Jeffrey S. Barocas
|
|||
Vice President
|
|||
Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
1.
|
The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
By:
|
/s/ Peter G. Dornau | |
Peter G. Dornau
|
|||
Chairman of the Board, President
|
|||
and Chief Executive Officer
|
|||
(Principal Executive Officer)
|
|
1.
|
The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
By:
|
/s/ Jeffrey S. Barocas | |
Jeffrey S. Barocas
|
|||
Vice President
|
|||
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Trade accounts receivable, allowance for doubtful accounts | $ 0 | $ 63,600 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 8,349,116 | 8,205,116 |
Common stock in treasury, shares | 351,503 | 351,503 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Gross sales | $ 8,669,305 | $ 7,692,395 | $ 15,754,782 | $ 13,090,811 |
Less: discounts, returns, and allowances | 451,331 | 338,976 | 804,301 | 539,518 |
Net sales | 8,217,974 | 7,353,419 | 14,950,481 | 12,551,293 |
Cost of goods sold | 5,240,420 | 4,640,107 | 9,463,886 | 8,105,416 |
Gross profit | 2,977,554 | 2,713,312 | 5,486,595 | 4,445,877 |
Operating Expenses: | Â | Â | Â | Â |
Advertising and promotion | 656,811 | 417,645 | 1,029,779 | 687,274 |
Selling and administrative | 1,673,694 | 1,642,143 | 2,776,614 | 2,425,382 |
Total operating expenses | 2,330,505 | 2,059,788 | 3,806,393 | 3,112,656 |
Operating income | 647,049 | 653,524 | 1,680,202 | 1,333,221 |
Other income (expense) | Â | Â | Â | Â |
Interest expense | (47,443) | (40,403) | (73,219) | (67,972) |
Other income | 1,563 | Â | 25,511 | 22,317 |
Income before income taxes | 601,169 | 613,121 | 1,632,494 | 1,287,566 |
Provision for income taxes | 224,352 | 294,700 | 627,968 | 574,700 |
Net income | 376,817 | 318,421 | 1,004,526 | 712,866 |
Loss attributable to noncontrolling interests | 12,579 | 53,589 | 33,171 | 53,589 |
Net income attributable to Ocean-Bio Chem, Inc. | $ 389,396 | $ 372,010 | $ 1,037,697 | $ 766,455 |
Income per common share - basic | $ 0.05 | $ 0.05 | $ 0.13 | $ 0.10 |
Income per common share - diluted | $ 0.05 | $ 0.04 | $ 0.12 | $ 0.09 |
Weighted average shares - basic | 7,897,985 | 7,746,886 | 7,875,923 | 7,724,722 |
Weighted average shares - diluted | 8,418,591 | 8,615,326 | 8,315,186 | 8,362,719 |
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 15, 2011
|
|
Document Information [Line Items] | Â | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Trading Symbol | OBCI | Â |
Entity Registrant Name | OCEAN BIO CHEM INC | Â |
Entity Central Index Key | 0000350737 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Common Stock, Shares Outstanding | Â | 7,997,613 |
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REVOLVING LINE OF CREDIT
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
REVOLVING LINE OF CREDIT |
6. REVOLVING LINE OF CREDIT
The
Company’s revolving line of credit with
Regions Bank matured on June 30, 2011. At June
30, 2011, the Company was in compliance with the terms of the
revolving line of credit, including financial
covenants. At June 30, 2011, the Company’s
principal obligation under the revolving line of credit was
$2,600,000.
On
July 6, 2011, under the terms of the Credit Agreement, the Company
renewed its revolving line of credit with Regions
Bank. Under the new revolving line of credit, the
Company may borrow up to the lesser of (i) $6 million or (ii) a
borrowing base equal to 80% of eligible accounts receivable plus
50% of eligible inventory. Interest on the revolving
line of credit is payable at the 30 day LIBOR rate plus 1.74% per
annum (unless the Company’s debt service coverage ratio (net
profit plus interest, depreciation, amortization and rent expense
divided by debt service plus interest) falls below 2.0 to 1, in
which case the additional percentage will be 2.75% per
annum). In no event will the interest rate be less than
2.0% per annum. The Company’s obligations under
the revolving line of credit are secured by the Company’s
accounts receivable and inventory, as well as real property and
equipment at Kinpak’s Montgomery, Alabama facility.
The
Company’s obligations under the revolving line of credit and
the term loan are cross-collateralized under the Credit
Agreement. The Credit Agreement includes financial
covenants requiring a minimum debt service coverage ratio of 1.75
to 1.00, and a maximum debt to capitalization ratio (funded debt
divided by the sum of total net worth and funded debt) of 0.75 to
1.
|
SECURITES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
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Jun. 30, 2011
|
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SECURITES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS |
11. SECURITES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
On
June 3, 2011, the Company’s shareholders approved the 2011
Omnibus Equity Compensations Plan (the
“Plan”). Under the Plan, equity grants and
awards of up to 750,000 shares of the Company’s common stock
may be issued to the Company’s directors, officers,
employees, consultants and advisors.
On
June 3, 2011, the Company issued stock awards covering 139,000
shares of common stock under the Plan. The Company
recognized compensation expense based upon the market price per
share at the time of issuance, $2.82, and an assumed forfeiture
rate of 15%.
Stock
based compensation recognized during the three months ended June
30, 2011 and 2010 attributable to equity grants and awards totaled
approximately $321,000 and $247,000, respectively. There
was no stock compensation expense related to equity grants and
awards during the three months ended March 31, 2011 and
2010. Stock compensation expense attributable to stock
options was $22,000 and $66,000 for the three months ended June 30,
2011 and 2010, respectively. Stock compensation expense
attributable to stock options was $45,000 and $90,000 for the six
months ended June 30, 2011 and 2010,
respectively.
At
June 30, 2011 there was approximately $115,000 of unrecognized
compensation cost related to options awarded to
employees. This cost will be charged against operations
as the respective options vest through 2013.
The
following schedule reflects the status of outstanding options under
the Company’s three qualified stock option plans and two
non-qualified plans, as well as a non-plan option at June 30,
2011. The plans labeled ISO are incentive stock option
plans, and the plans labeled NQ are non-qualified
plans. No further grants will be made under these plans;
future grants will be made under the Omnibus Equity Compensation
Plan.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
RECENT ACCOUNTING PRONOUNCEMENTS |
2. RECENT ACCOUNTING PRONOUNCEMENTS
There
have been no recent accounting pronouncements or changes in
accounting pronouncements during the six months ended June 30, 2011
that are expected to have a material impact on the Company’s
financial position, results of operations or cash
flows. Accounting pronouncements that became effective
during the six months ended June 30, 2011 had no material
impact on disclosures or on the Company’s financial position,
results of operations or cash flows.
|
RELATED PARTY TRANSACTIONS
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
RELATED PARTY TRANSACTIONS |
8. RELATED PARTY TRANSACTIONS
At
June 30, 2011 and December 31, 2010, the Company had amounts
receivable from affiliated companies owned by the Company’s
Chief Executive Officer, aggregating approximately $125,000 and
$213,000, respectively. The accounts receivable relate
to sales of the Company’s products to the affiliated
companies, which distribute these products outside of the
United States and Canada, and administrative services provided
to the affiliated companies.
Sales
to the affiliated companies aggregated approximately $404,000 and
$340,000 during the three months ended June 30, 2011 and 2010,
respectively, and $834,000 and $771,000 for the six months ended
June 30, 2011 and 2010, respectively. Administrative
fees aggregated approximately $50,000 and $45,300 during the three
months ended June 30, 2011 and 2010, respectively, and $100,000 and
$95,300 for the six month period ended June 30, 2011 and 2010,
respectively.
The
transactions with the affiliated companies were made in the
ordinary course of business but were not made on substantially the
same terms and conditions as those prevailing at the same time for
comparable transactions with other customers. Management
believes that the sales transactions did not involve more than
normal credit risk or present other unfavorable
features.
The
Company currently uses the services of an entity that is owned by
the Company’s Chief Executive Officer to conduct product
research and development. The Company paid $10,500 and
$14,500 to the entity for the three months ended June 30, 2011 and
2010, respectively, and $21,000 and $22,000 during the six months
ended June 30, 2011 and 2010, respectively, for these
services.
A
director of the Company is a regional executive vice president of a
company that sources most of the Company’s insurance needs at
an arm’s length competitive basis. During the
three months ended June 30, 2011 and 2010, the Company paid an
aggregate of approximately $110,000 and $91,000 in insurance
premiums on policies obtained through the director’s company,
respectively, and during the six months ended June 30, 2011 and
2010 the Company paid an aggregate of approximately $224,000 and
$168,000 in insurance premiums on policies obtained through the
director’s company, respectively.
The
Company leases office and warehouse facilities in
Fort Lauderdale, Florida from an entity controlled by its
Chief Executive Officer. See Note 9
“Commitments” for a description of the lease
terms.
|
COMMITMENTS
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
COMMITMENTS |
9. COMMITMENTS
On
May 1, 2008, the Company renewed for ten years its existing lease
with an entity owned by its Chief Executive Officer for its
executive offices and warehouse facilities in Fort Lauderdale,
Florida. The lease requires minimum base rent of $94,800
for the first year and provides for a maximum annual 2% increase in
base rent in subsequent years. Additionally, the leasing
entity is entitled to reimbursement of all taxes, assessments, and
any other expenses that arise from ownership. Each of
the parties to the lease has agreed to review the terms of the
lease every three years at the request of the other
party. Rent expense under the lease was $24,000 and
$26,000 for the three months ended June 30, 2011 and 2010,
respectively. Rent expense for the six months ended June
30, 2011 and 2010 amounted to approximately $49,000 and $52,000,
respectively.
The
Company leases a 1.5 acre docking facility on the Alabama River
from the Alabama State Port Authority, located approximately eleven
miles from the Company’s Alabama manufacturing
facility. The lease expires September 30, 2014, and
requires the Company to pay rent and additional expenses totaling
approximately $7,800 annually.
|
LONG TERM DEBT
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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LONG TERM DEBT |
7. LONG TERM DEBT
At
June 30, 2011, the Company had outstanding rent obligations
under the Second Supplemental Lease Agreement (the “Lease
Agreement”) between its subsidiary, Kinpak, Inc.
(“Kinpak”), and the Industrial Development Board of the
City of Montgomery, Alabama (the
“Board”). The Company’s payments under
the lease agreement were used to pay debt service on the Series
2002 Bonds, which were issued by the Board. The Company
entered into the Lease Agreement to fund the expansion of
Kinpak’s facilities and acquisition of related
equipment. Kinpak previously entered into a similar
lease arrangement with the Board in 1997, in connection with the
Board’s issuance of industrial revenue bonds (the
“Series 1997 Bonds”), related to Kinpak’s
facilities and related equipment. On March 1, 2011, the
Series 1997 Bonds were paid in full. At June 30, 2011,
$2,420,000 was outstanding under the Series 2002
Bonds. At December 31, 2010, $425,000 and $2,480,000
were outstanding under the Series 1997 Bonds and Series 2002 Bonds,
respectively. The bonds bore interest at tax-free rates
that adjusted weekly. During the six months ended June
30, 2011 the interest rate per annum was 4.0%, and during year
ended December 31, 2010, interest rates per annum ranged between
2.0% and 4.0%. Interest expense for the three months
ended June 30, 2011 and June 30, 2010 was approximately $25,000 and
$27,000, respectively, and for the six months ended June 30, 2011
and June 30, 2010 was $40,000 and $54,000,
respectively.
On
July 6, 2011, Regions Equipment Finance Company (REFCO) provided to
the Company a new $2,430,000 term loan with a fixed interest rate
of 3.54%. Principal and interest on the term loan are
payable in equal monthly installments through July 6, 2017,
the date the term loan matures. The proceeds of the term
loan were used to pay the Company’s remaining obligations
under the Lease Agreement.
At
June 30, 2011 and December 31, 2010, the Company was obligated
under various capital lease agreements covering equipment utilized
in the Company’s operations. The capital leases,
aggregating $78,430 and $93,112 at June 30, 2011 and December 31,
2010, respectively, have varying maturities through 2015 and carry
interest rates ranging from 7% to 14%.
The
composition of these obligations at June 30, 2011 and December 31,
2010 were as follows:
Required
principal payments under these obligations are set forth
below:
|
INVENTORIES
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
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INVENTORIES |
3. INVENTORIES
The
composition of inventories at June 30, 2011 and December 31, 2010
are as follows:
The
inventory reserves shown in the table above reflect slow moving and
obsolete inventory.
The Company operates a vendor managed inventory program with one of
its customers to improve the promotion of the Company’s
products. The Company manages the inventory levels at
this customer’s warehouses and recognizes revenue as the
products are sold by the customer. The inventories
managed at the customer’s warehouses amounted to
approximately $398,000 and $352,000 at June 30, 2011 and December
31, 2010, respectively.
|
PROPERTY, PLANT, & EQUIPMENT
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY, PLANT, & EQUIPMENT |
4. PROPERTY, PLANT, & EQUIPMENT
The
Company’s property, plant and equipment consisted of the
following at June 30, 2011 and December 31,
2010:
|
NONCONTROLLING INTEREST
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
NONCONTROLLING INTEREST |
5. NONCONTROLLING INTEREST
On
May 10, 2010, the Company announced the formation of OdorStar, a
joint venture between the Company and BBL Distributors,
LLC. OdorStar owns patents that relate to a formula and
delivery system, for use with products containing chlorine dioxide,
designed to safely prevent and eliminate all types of odors
relating to mold, mildew and other sources of unpleasant
odors. The Company and BBL Distributors, LLC share
equally in profits or losses from OdorStar. Because the
Company manages OdorStar, it has consolidated OdorStar in its
financial statements. The Company’s condensed
consolidated financial statements include $592,000 and $625,000 in
assets and $7,000 and $10,000 in liabilities from OdorStar at June
30, 2011 and December 31, 2010, respectively. The
Company’s condensed consolidated financial statements also
include OdorStar’s operating losses of approximately $25,000
and $107,000 during the three months ended June 30, 2011 and 2010,
respectively, and $66,000 and $107,000 during the six months ended
June 30, 2011 and 2010, respectively.
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Net Income | $ 376,817 | $ 318,421 | $ 1,004,526 | $ 712,866 |
Foreign currency translation adjustment | 518 | 32,557 | 3,971 | 6,868 |
Comprehensive income | 377,335 | 350,978 | 1,008,497 | 719,734 |
Comprehensive loss attributable to noncontrolling interests | 12,579 | 53,589 | 33,171 | 53,589 |
Comprehensive income attributable to Ocean-Bio Chem, Inc. | $ 389,914 | $ 404,567 | $ 1,041,668 | $ 773,323 |
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SUMMARY OF ACCOUNTING POLICIES
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
SUMMARY OF ACCOUNTING POLICIES |
1. SUMMARY OF ACCOUNTING POLICIES
Interim reporting
The
accompanying unaudited condensed consolidated financial statements
include the accounts of Ocean Bio-Chem, Inc. and its subsidiaries,
all of which are wholly-owned, and OdorStar Technology LLC
(“OdorStar”), a joint venture in which the Company has
a controlling interest. All significant inter-company
transactions and balances have been eliminated in
consolidation. Certain prior-period data have been
reclassified to conform to the current period
presentation. Unless the context indicates otherwise,
the term “Company” includes Ocean Bio-Chem, Inc.
and its subsidiaries.
The
unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted
accounting principles (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete
financial statements.
The
financial information furnished herein reflects all adjustments,
consisting of normal recurring items that, in the opinion of
management, are necessary for a fair presentation of the
Company’s financial position, results of operations and cash
flows for the interim periods. The results of operations
for the three and six months ended June 30, 2011 are not
necessarily indicative of the results to be expected for the year
ending December 31, 2011.
For
further information, please refer to the audited consolidated
financial statements and notes thereto contained in the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2010.
Use of estimates
The
preparation of condensed consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from those estimates
and assumptions.
Revenue recognition
Revenue
from product sales is recognized when persuasive evidence of a
contract exists, the sales price is fixed and determinable, the
title of goods passes to the customer, and collectability of the
related receivable is probable. Reported net sales are
net of customer prompt pay discounts, contractual allowances,
authorized customer returns, consumer rebates and other sales
incentives.
Advertising and Promotion Expense
Advertising
and promotion expense consists of advertising costs and catalog
costs. Advertising costs are expensed in the period in
which the advertising occurs and were approximately $657,000 and
$418,000 for the three months ended June 30, 2011 and 2010,
respectively and approximately $1,030,000 and $687,000 for the six
months ended June 30, 2011 and 2010, respectively. The
Company capitalizes the direct cost of producing its
catalogs. Capitalized catalog costs are amortized, once
a catalog is distributed, over the expected net sales period, which
is generally from one to 12 months. At June 30, 2011 and
December 31, 2010, the Company did not have any significant cost of
advertising materials on hand.
Stock based compensation
The
Company records stock-based compensation in accordance with the
provisions of Financial Accounting Standards Board Accounting
Standards Codification (“FASB ASC”) Topic 718,
“Accounting for Stock Compensation,” which establishes
accounting standards for transactions in which an entity exchanges
its equity instruments for goods or services. Under FASB
ASC Topic 718, the Company recognizes an expense for the fair value
of its outstanding stock options and grants as they vest, whether
held by employees or others.
Noncontrolling interest
Noncontrolling
interest represents the portion of OdorStar equity that the Company
does not own. Profits and losses in OdorStar are
allocated equally between the Company and its joint venture
partner, and contributions to OdorStar are made equally by the
Company and its joint venture partner. Because the
Company manages OdorStar, it has a controlling interest in
OdorStar, and the Company consolidates OdorStar in its financial
statements. The Company accounts for and reports its
noncontrolling interest in accordance with the provisions of the
FASB ASC 810.
Subsequent events
The
Company evaluates events through the date the financial statements
are filed for events requiring adjustment to or disclosure in the
financial statements.
On
July 6, 2011, the Company and its subsidiary Kinpak, Inc.
(“Kinpak”) entered into a Credit Agreement (the
“Credit Agreement”) with Regions Bank and, pursuant to
an Equipment Finance Addendum to the Credit Agreement, Regions
Equipment Finance Corporation
(“REFCO”). Under the Credit Agreement, the
Company’s revolving line of credit with Regions Bank was
renewed, and under the Equipment Finance Addendum, REFCO provided
to the Company a new fixed term loan in the amount of $2,430,000,
the proceeds of which were used to repay the Company’s
remaining obligations in connection with the 2002 Series of
Industrial Development Revenue Bonds (Kinpak, Inc. Project) issued
by the City of Montgomery, Alabama (the “Series 2002
Bonds”).
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EARNINGS PER SHARE
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Jun. 30, 2011
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EARNINGS PER SHARE |
10. EARNINGS PER SHARE
Basic
earnings per share is calculated based on net income attributable
to Ocean-Bio Chem, Inc. and the weighted average number of shares
outstanding during the reported period. Diluted earnings
per share reflect additional dilution from potential common stock
issuable upon the exercise of outstanding stock options and, during
2010, warrants. The following table sets forth the
computation of basic and diluted earnings per common share, as well
as a reconciliation of the weighted average number of common shares
outstanding to the weighted average number of shares outstanding on
a diluted basis
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