Ocean BioChem Inc. (OBCI, Financial) filed Quarterly Report for the period ended 2012-09-30.
Ocean Bio-chem, Inc. has a market cap of $15.5 million; its shares were traded at around $1.86 with a P/E ratio of 7.8 and P/S ratio of 0.5.
Advertising and promotion expenses increased to approximately $783,000 for the three months ended September 30, 2012 from $476,000 during the corresponding period in 2011, an increase of approximately $307,000 or 64.5%. As a percentage of net sales, advertising and promotion expense was approximately 7.6% in the third quarter of 2012 compared to approximately 4.8% in the third quarter of 2011. The increase in advertising expenditures was designed to increase consumer awareness of Star Tron® products into new markets, including automotive, power sports, motorcycle, small engine and outdoor power equipment markets. We sponsored several television programs and purchased print advertisements in several national magazines targeted to automotive, boating and engine maintenance and repair enthusiasts, as well as in specific industry magazines. In addition, we increased expenditures for customer cooperative advertising allowances to promote our Star Tron and Star brite products in their sales promotion flyers. Selling and administrative expenses increased by approximately $65,000 or 5.2%, from approximately $1,241,000 during the three months ended September 30, 2011 to approximately $1,306,000 during the same period in 2012. The increase in expenses was directly attributable to the Company s selling activities, including travel and entertainment expenses and an increase in the allowance for doubtful accounts, reflecting increased accounts receivable balances. As a percentage of net sales, selling and administrative expenses were 12.7% and 12.6% for the third quarter of 2012 and 2011, respectively. Interest expense decreased by approximately $13,000 to approximately $22,000 during the three months ended September 30, 2012, compared to approximately $35,000 during the three months ended September 30, 2011. The decrease reflects the lower average borrowings as a result of decreased inventory levels. Operating income – As a result of the foregoing, operating income was approximately $1,175,000 in the third quarter of 2012 compared to approximately $1,628,000 in the 2011 period, a decrease of $453,000 or 27.8% predominately as a result of lower gross margins and higher advertising spending. Income taxes - We had income tax expense in the third quarter of 2012 of approximately $389,000, or 33.8% of pretax income, compared to approximately $479,000, or 29.8% of pretax income, during the corresponding period in 2011. The lower 2011 income tax rate reflects a one time benefit related to state income taxes. Net income and Net income attributable to Ocean Bio-Chem, Inc. - As a result of the items mentioned above, net income for the third quarter of 2012 decreased by approximately $367,000, or 32.6%, to $761,000 from approximately $1,128,000 in the third quarter of 2011. Net income attributable to Ocean Bio-Chem. Inc. decreased by approximately $367,000, or 32.3%, to $771,000 in the third quarter 2012, from approximately $1,138,000 in 2011. Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011 Net sales were approximately $24,148,000 for the nine months ended September 30, 2012 compared to approximately $24,834,000 during the corresponding period in 2011, a decrease of $686,000 or 2.8%. We believe the sales decrease principally reflects a determination by some of our largest customers to reduce their inventory levels in our sector. This decrease was partially offset by increased sales of winterizing products (antifreeze), as described above in the discussion of results for the three months ended September 30, 2012. Cost of goods sold and gross profit – Our gross profit percentage (gross profit as a percentage of net sales) decreased by 1.3% in the first nine months of 2012 as compared to the same period in 2011. The decrease reflects increased per unit cost of sales, as a result of our planned inventory reduction that is described in the discussion of results for the three months ended September 30, 2012, as well as lower sales volumes. In addition, the decrease reflects the higher mix of lower margin products (antifreeze). Advertising and promotion expenses increased to approximately $1,890,000 for the nine months ended September 30, 2012 from approximately $1,506,000 during the corresponding period in 2011, an increase of approximately $384,000 or 25.5%. As a percentage of net sales, advertising and promotion expense increased from 6.1% during the nine months of 2011 to 7.8% in the nine months of 2012. The significant year to date increase occurred in the third quarter and reflected the factors addressed above in the discussion of results for the quarter ended September 30, 2012. Selling and administrative expenses decreased by approximately $53,000 or 1.3%, from approximately $4,018,000 during the nine months ended September 30, 2011 to approximately $3,965,000 during the same period in 2012. The decrease is due to decreased non-cash stock-based compensation. As a percentage of net sales, selling and administrative expenses increased from 16.2% to 16.4% due to lower year to date sales.
Advertising and promotion expenses increased to approximately $783,000 for the three months ended September 30, 2012 from $476,000 during the corresponding period in 2011, an increase of approximately $307,000 or 64.5%. As a percentage of net sales, advertising and promotion expense was approximately 7.6% in the third quarter of 2012 compared to approximately 4.8% in the third quarter of 2011. The increase in advertising expenditures was designed to increase consumer awareness of Star Tron® products into new markets, including automotive, power sports, motorcycle, small engine and outdoor power equipment markets. We sponsored several television programs and purchased print advertisements in several national magazines targeted to automotive, boating and engine maintenance and repair enthusiasts, as well as in specific industry magazines. In addition, we increased expenditures for customer cooperative advertising allowances to promote our Star Tron and Star brite products in their sales promotion flyers. Selling and administrative expenses increased by approximately $65,000 or 5.2%, from approximately $1,241,000 during the three months ended September 30, 2011 to approximately $1,306,000 during the same period in 2012. The increase in expenses was directly attributable to the Company s selling activities, including travel and entertainment expenses and an increase in the allowance for doubtful accounts, reflecting increased accounts receivable balances. As a percentage of net sales, selling and administrative expenses were 12.7% and 12.6% for the third quarter of 2012 and 2011, respectively. Interest expense decreased by approximately $13,000 to approximately $22,000 during the three months ended September 30, 2012, compared to approximately $35,000 during the three months ended September 30, 2011. The decrease reflects the lower average borrowings as a result of decreased inventory levels. Operating income – As a result of the foregoing, operating income was approximately $1,175,000 in the third quarter of 2012 compared to approximately $1,628,000 in the 2011 period, a decrease of $453,000 or 27.8% predominately as a result of lower gross margins and higher advertising spending. Income taxes - We had income tax expense in the third quarter of 2012 of approximately $389,000, or 33.8% of pretax income, compared to approximately $479,000, or 29.8% of pretax income, during the corresponding period in 2011. The lower 2011 income tax rate reflects a one time benefit related to state income taxes. Net income and Net income attributable to Ocean Bio-Chem, Inc. - As a result of the items mentioned above, net income for the third quarter of 2012 decreased by approximately $367,000, or 32.6%, to $761,000 from approximately $1,128,000 in the third quarter of 2011. Net income attributable to Ocean Bio-Chem. Inc. decreased by approximately $367,000, or 32.3%, to $771,000 in the third quarter 2012, from approximately $1,138,000 in 2011. Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011 Net sales were approximately $24,148,000 for the nine months ended September 30, 2012 compared to approximately $24,834,000 during the corresponding period in 2011, a decrease of $686,000 or 2.8%. We believe the sales decrease principally reflects a determination by some of our largest customers to reduce their inventory levels in our sector. This decrease was partially offset by increased sales of winterizing products (antifreeze), as described above in the discussion of results for the three months ended September 30, 2012. Cost of goods sold and gross profit – Our gross profit percentage (gross profit as a percentage of net sales) decreased by 1.3% in the first nine months of 2012 as compared to the same period in 2011. The decrease reflects increased per unit cost of sales, as a result of our planned inventory reduction that is described in the discussion of results for the three months ended September 30, 2012, as well as lower sales volumes. In addition, the decrease reflects the higher mix of lower margin products (antifreeze). Advertising and promotion expenses increased to approximately $1,890,000 for the nine months ended September 30, 2012 from approximately $1,506,000 during the corresponding period in 2011, an increase of approximately $384,000 or 25.5%. As a percentage of net sales, advertising and promotion expense increased from 6.1% during the nine months of 2011 to 7.8% in the nine months of 2012. The significant year to date increase occurred in the third quarter and reflected the factors addressed above in the discussion of results for the quarter ended September 30, 2012. Selling and administrative expenses decreased by approximately $53,000 or 1.3%, from approximately $4,018,000 during the nine months ended September 30, 2011 to approximately $3,965,000 during the same period in 2012. The decrease is due to decreased non-cash stock-based compensation. As a percentage of net sales, selling and administrative expenses increased from 16.2% to 16.4% due to lower year to date sales.
Interest expense decreased by approximately $32,000 to $76,000 during the nine months ended September 30, 2012, compared to approximately $108,000 during the nine months ended September 30, 2011. The decrease reflects the impact of the July 2011 refinancing of both our short term borrowing and long term debt at lower interest rates, as well as lower average borrowings as a result of lower average monthly inventory levels. Operating income – As a result of the foregoing, operating income was approximately $2,416,000 in the first nine months of 2012 compared to approximately $3,309,000 in the 2011 period, a decrease of $893,000 or 27.0%. Income taxes - The Company had income tax expense in the first nine months of 2012 of approximately $871,000, or 37.2% of pretax income, compared to approximately $1,107,000, or 34.2% of pretax income, during the corresponding period in 2011. The lower 2011 income tax rate reflects a one time benefit related to state income taxes. Net income and Net income attributable to Ocean Bio-Chem, Inc. - As a result of the items mentioned above, net income for the first nine months of 2012 decreased by approximately $664,000, or 31.1%, to $1,469,000 from approximately $2,133,000 during the corresponding period in 2011. Net income attributable to Ocean Bio-Chem. Inc. decreased by approximately $677,000, or 31.1%, to $1,498,000 in the first nine months of 2012, from approximately $2,175,000 in 2011. Liquidity and capital resources: Our cash balance was approximately $775,000 at September 30, 2012 compared to approximately $585,000 at December 31, 2011. At September 30, 2012, we had $1,700,000 in short-term borrowings outstanding under our revolving line of credit compared to $850,000 outstanding at December 31, 2011. Net cash used in operating activities during the nine months ended September 30, 2012 was approximately $63,000 compared to net cash used in operating activities of approximately $1,903,000 for the nine months ended September 30, 2011. The improvement reflects our inventory management efforts. During the nine months ended September 30, 2011, we increased inventory by approximately $2,967,000 in anticipation of higher petroleum prices, and higher seasonal sales of winterizing products. During the nine months ended September 30, 2012, we determined to modestly reduce inventory levels, particularly due to decreased purchases by some of our largest customers which, as noted above, are engaged in inventory reduction programs. We reduced inventory levels by approximately $83,000 during the nine months ending September 30, 2012, and by approximately $1,125,000 as compared to September 30, 2011. These cash flow improvements were partially offset by lower net income and lower non-cash charges. Net cash used in investing activities was approximately $374,000 for the nine months ended September 30, 2012 compared to approximately $276,000 for the nine months ended September 30, 2011. We continue to invest in our manufacturing facilities as we deem appropriate. Net cash provided by financing activities was approximately $627,000 for the nine months ended September 30, 2012 compared to net cash provided of approximately $2,376,000 during the nine months ended September 30, 2011. During the nine months ended September 30, 2012, we borrowed $850,000 under our revolving line of credit, and received approximately $78,000 from the exercise of stock options, which was partially offset by approximately $301,000 used for scheduled payments of principal on our long-term debt. During the first nine months of 2011 we borrowed $3,400,000 on our revolving line of credit. Under the credit agreement among us, our subsidiary, Kinpak, Inc. and Regions Bank (and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation (“REFCO”)), we have borrowings under a term loan, which is payable, together with interest at the fixed rate of 3.54% per annum, in 72 consecutive monthly payments of $37,511, with the final payment on July 6, 2017. At September 30, 2012, the remaining principal balance on the term loan was $1,996,968. In addition, the credit agreement provides for a revolving line of credit, under which we may borrow up to the lesser of (i) $6 million and (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 our debt service coverage ratio (net profit plus taxes, interest, depreciation, amortization and rent expense divided by debt service plus interest and lease/rent expense) falls below 2.0 to 1, in which case interest will be payable at the 30 day LIBOR rate plus 2.75% per annum). In no event will the interest rate be less than 2.0% per annum. Outstanding amounts under the revolving line of credit are payable on demand. If no demand is made, we may repay and reborrow funds from time to time.
Under the credit agreement among us, our subsidiary, Kinpak, Inc. and Regions Bank (and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation (“REFCO”)), we have borrowings under a term loan, which is payable, together with interest at the fixed rate of 3.54% per annum, in 72 consecutive monthly payments of $37,511, with the final payment on July 6, 2017. At September 30, 2012, the remaining principal balance on the term loan was $1,996,968. In addition, the credit agreement provides for a revolving line of credit, under which we may borrow up to the lesser of (i) $6 million and (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 our debt service coverage ratio (net profit plus taxes, interest, depreciation, amortization and rent expense divided by debt service plus interest and lease/rent expense) falls below 2.0 to 1, in which case interest will be payable at the 30 day LIBOR rate plus 2.75% per annum). In no event will the interest rate be less than 2.0% per annum. Outstanding amounts under the revolving line of credit are payable on demand. If no demand is made, we may repay and reborrow funds from time to time.
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Ocean Bio-chem, Inc. has a market cap of $15.5 million; its shares were traded at around $1.86 with a P/E ratio of 7.8 and P/S ratio of 0.5.
Highlight of Business Operations:
We are principally engaged in manufacturing, marketing and distributing a broad line of appearance and maintenance products for boats, recreational vehicles, automobiles and home care under the Star brite® and other trademarks within the United States of America and Canada. In addition, we produce private label formulations of many of our products for various customers and provide custom blending and packaging services for these and other products. We sell our products through national retailers and to national and regional distributors who, in turn, sell our products to specialized retail outlets. Critical accounting estimates: See “Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 for information regarding the Company's critical accounting estimates. Results of Operations: Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011 Net sales were approximately $10,262,000 for the three months ended September 30, 2012 compared to approximately $9,884,000 during the corresponding period in 2011, an increase of $378,000 or 3.8%. The increase in sales primarily reflected increased sales of winterizing products (antifreeze) to marine customers. In addition, we continued to realize sales growth of our enzyme fuel treatment product, Star Tron®, into the automotive and small engine markets. These increases were partially offset by decreased sales to some of our largest customers as a result of their continuation of inventory reduction programs in our sector during the third quarter of 2012. Cost of goods sold and gross profit – Cost of goods sold increased by approximately $459,000 or 7.0% to approximately $6,997,000 during the three months ended September 30, 2012, from approximately $6,538,000 during the same period in 2011. We had a higher mix of lower margin sales of antifreeze in the third quarter 2012 compared to the comparative quarter 2011. In addition, the allocation of fixed manufacturing costs over our lower inventory levels, as a result of our planned inventory reduction, led to higher per unit costs of sales. Inventories at September 30, 2012 were $9,535,000 compared to $10,660,000 at September 30, 2011, a decrease of $1,125,000. The increase in cost of goods sold also reflects our increased sales volume. Gross profit decreased by approximately $81,000 for the three months ended September 30, 2012, as compared to the same period in 2011, as a the result of the factors described above.Advertising and promotion expenses increased to approximately $783,000 for the three months ended September 30, 2012 from $476,000 during the corresponding period in 2011, an increase of approximately $307,000 or 64.5%. As a percentage of net sales, advertising and promotion expense was approximately 7.6% in the third quarter of 2012 compared to approximately 4.8% in the third quarter of 2011. The increase in advertising expenditures was designed to increase consumer awareness of Star Tron® products into new markets, including automotive, power sports, motorcycle, small engine and outdoor power equipment markets. We sponsored several television programs and purchased print advertisements in several national magazines targeted to automotive, boating and engine maintenance and repair enthusiasts, as well as in specific industry magazines. In addition, we increased expenditures for customer cooperative advertising allowances to promote our Star Tron and Star brite products in their sales promotion flyers. Selling and administrative expenses increased by approximately $65,000 or 5.2%, from approximately $1,241,000 during the three months ended September 30, 2011 to approximately $1,306,000 during the same period in 2012. The increase in expenses was directly attributable to the Company s selling activities, including travel and entertainment expenses and an increase in the allowance for doubtful accounts, reflecting increased accounts receivable balances. As a percentage of net sales, selling and administrative expenses were 12.7% and 12.6% for the third quarter of 2012 and 2011, respectively. Interest expense decreased by approximately $13,000 to approximately $22,000 during the three months ended September 30, 2012, compared to approximately $35,000 during the three months ended September 30, 2011. The decrease reflects the lower average borrowings as a result of decreased inventory levels. Operating income – As a result of the foregoing, operating income was approximately $1,175,000 in the third quarter of 2012 compared to approximately $1,628,000 in the 2011 period, a decrease of $453,000 or 27.8% predominately as a result of lower gross margins and higher advertising spending. Income taxes - We had income tax expense in the third quarter of 2012 of approximately $389,000, or 33.8% of pretax income, compared to approximately $479,000, or 29.8% of pretax income, during the corresponding period in 2011. The lower 2011 income tax rate reflects a one time benefit related to state income taxes. Net income and Net income attributable to Ocean Bio-Chem, Inc. - As a result of the items mentioned above, net income for the third quarter of 2012 decreased by approximately $367,000, or 32.6%, to $761,000 from approximately $1,128,000 in the third quarter of 2011. Net income attributable to Ocean Bio-Chem. Inc. decreased by approximately $367,000, or 32.3%, to $771,000 in the third quarter 2012, from approximately $1,138,000 in 2011. Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011 Net sales were approximately $24,148,000 for the nine months ended September 30, 2012 compared to approximately $24,834,000 during the corresponding period in 2011, a decrease of $686,000 or 2.8%. We believe the sales decrease principally reflects a determination by some of our largest customers to reduce their inventory levels in our sector. This decrease was partially offset by increased sales of winterizing products (antifreeze), as described above in the discussion of results for the three months ended September 30, 2012. Cost of goods sold and gross profit – Our gross profit percentage (gross profit as a percentage of net sales) decreased by 1.3% in the first nine months of 2012 as compared to the same period in 2011. The decrease reflects increased per unit cost of sales, as a result of our planned inventory reduction that is described in the discussion of results for the three months ended September 30, 2012, as well as lower sales volumes. In addition, the decrease reflects the higher mix of lower margin products (antifreeze). Advertising and promotion expenses increased to approximately $1,890,000 for the nine months ended September 30, 2012 from approximately $1,506,000 during the corresponding period in 2011, an increase of approximately $384,000 or 25.5%. As a percentage of net sales, advertising and promotion expense increased from 6.1% during the nine months of 2011 to 7.8% in the nine months of 2012. The significant year to date increase occurred in the third quarter and reflected the factors addressed above in the discussion of results for the quarter ended September 30, 2012. Selling and administrative expenses decreased by approximately $53,000 or 1.3%, from approximately $4,018,000 during the nine months ended September 30, 2011 to approximately $3,965,000 during the same period in 2012. The decrease is due to decreased non-cash stock-based compensation. As a percentage of net sales, selling and administrative expenses increased from 16.2% to 16.4% due to lower year to date sales.
Advertising and promotion expenses increased to approximately $783,000 for the three months ended September 30, 2012 from $476,000 during the corresponding period in 2011, an increase of approximately $307,000 or 64.5%. As a percentage of net sales, advertising and promotion expense was approximately 7.6% in the third quarter of 2012 compared to approximately 4.8% in the third quarter of 2011. The increase in advertising expenditures was designed to increase consumer awareness of Star Tron® products into new markets, including automotive, power sports, motorcycle, small engine and outdoor power equipment markets. We sponsored several television programs and purchased print advertisements in several national magazines targeted to automotive, boating and engine maintenance and repair enthusiasts, as well as in specific industry magazines. In addition, we increased expenditures for customer cooperative advertising allowances to promote our Star Tron and Star brite products in their sales promotion flyers. Selling and administrative expenses increased by approximately $65,000 or 5.2%, from approximately $1,241,000 during the three months ended September 30, 2011 to approximately $1,306,000 during the same period in 2012. The increase in expenses was directly attributable to the Company s selling activities, including travel and entertainment expenses and an increase in the allowance for doubtful accounts, reflecting increased accounts receivable balances. As a percentage of net sales, selling and administrative expenses were 12.7% and 12.6% for the third quarter of 2012 and 2011, respectively. Interest expense decreased by approximately $13,000 to approximately $22,000 during the three months ended September 30, 2012, compared to approximately $35,000 during the three months ended September 30, 2011. The decrease reflects the lower average borrowings as a result of decreased inventory levels. Operating income – As a result of the foregoing, operating income was approximately $1,175,000 in the third quarter of 2012 compared to approximately $1,628,000 in the 2011 period, a decrease of $453,000 or 27.8% predominately as a result of lower gross margins and higher advertising spending. Income taxes - We had income tax expense in the third quarter of 2012 of approximately $389,000, or 33.8% of pretax income, compared to approximately $479,000, or 29.8% of pretax income, during the corresponding period in 2011. The lower 2011 income tax rate reflects a one time benefit related to state income taxes. Net income and Net income attributable to Ocean Bio-Chem, Inc. - As a result of the items mentioned above, net income for the third quarter of 2012 decreased by approximately $367,000, or 32.6%, to $761,000 from approximately $1,128,000 in the third quarter of 2011. Net income attributable to Ocean Bio-Chem. Inc. decreased by approximately $367,000, or 32.3%, to $771,000 in the third quarter 2012, from approximately $1,138,000 in 2011. Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011 Net sales were approximately $24,148,000 for the nine months ended September 30, 2012 compared to approximately $24,834,000 during the corresponding period in 2011, a decrease of $686,000 or 2.8%. We believe the sales decrease principally reflects a determination by some of our largest customers to reduce their inventory levels in our sector. This decrease was partially offset by increased sales of winterizing products (antifreeze), as described above in the discussion of results for the three months ended September 30, 2012. Cost of goods sold and gross profit – Our gross profit percentage (gross profit as a percentage of net sales) decreased by 1.3% in the first nine months of 2012 as compared to the same period in 2011. The decrease reflects increased per unit cost of sales, as a result of our planned inventory reduction that is described in the discussion of results for the three months ended September 30, 2012, as well as lower sales volumes. In addition, the decrease reflects the higher mix of lower margin products (antifreeze). Advertising and promotion expenses increased to approximately $1,890,000 for the nine months ended September 30, 2012 from approximately $1,506,000 during the corresponding period in 2011, an increase of approximately $384,000 or 25.5%. As a percentage of net sales, advertising and promotion expense increased from 6.1% during the nine months of 2011 to 7.8% in the nine months of 2012. The significant year to date increase occurred in the third quarter and reflected the factors addressed above in the discussion of results for the quarter ended September 30, 2012. Selling and administrative expenses decreased by approximately $53,000 or 1.3%, from approximately $4,018,000 during the nine months ended September 30, 2011 to approximately $3,965,000 during the same period in 2012. The decrease is due to decreased non-cash stock-based compensation. As a percentage of net sales, selling and administrative expenses increased from 16.2% to 16.4% due to lower year to date sales.
Interest expense decreased by approximately $32,000 to $76,000 during the nine months ended September 30, 2012, compared to approximately $108,000 during the nine months ended September 30, 2011. The decrease reflects the impact of the July 2011 refinancing of both our short term borrowing and long term debt at lower interest rates, as well as lower average borrowings as a result of lower average monthly inventory levels. Operating income – As a result of the foregoing, operating income was approximately $2,416,000 in the first nine months of 2012 compared to approximately $3,309,000 in the 2011 period, a decrease of $893,000 or 27.0%. Income taxes - The Company had income tax expense in the first nine months of 2012 of approximately $871,000, or 37.2% of pretax income, compared to approximately $1,107,000, or 34.2% of pretax income, during the corresponding period in 2011. The lower 2011 income tax rate reflects a one time benefit related to state income taxes. Net income and Net income attributable to Ocean Bio-Chem, Inc. - As a result of the items mentioned above, net income for the first nine months of 2012 decreased by approximately $664,000, or 31.1%, to $1,469,000 from approximately $2,133,000 during the corresponding period in 2011. Net income attributable to Ocean Bio-Chem. Inc. decreased by approximately $677,000, or 31.1%, to $1,498,000 in the first nine months of 2012, from approximately $2,175,000 in 2011. Liquidity and capital resources: Our cash balance was approximately $775,000 at September 30, 2012 compared to approximately $585,000 at December 31, 2011. At September 30, 2012, we had $1,700,000 in short-term borrowings outstanding under our revolving line of credit compared to $850,000 outstanding at December 31, 2011. Net cash used in operating activities during the nine months ended September 30, 2012 was approximately $63,000 compared to net cash used in operating activities of approximately $1,903,000 for the nine months ended September 30, 2011. The improvement reflects our inventory management efforts. During the nine months ended September 30, 2011, we increased inventory by approximately $2,967,000 in anticipation of higher petroleum prices, and higher seasonal sales of winterizing products. During the nine months ended September 30, 2012, we determined to modestly reduce inventory levels, particularly due to decreased purchases by some of our largest customers which, as noted above, are engaged in inventory reduction programs. We reduced inventory levels by approximately $83,000 during the nine months ending September 30, 2012, and by approximately $1,125,000 as compared to September 30, 2011. These cash flow improvements were partially offset by lower net income and lower non-cash charges. Net cash used in investing activities was approximately $374,000 for the nine months ended September 30, 2012 compared to approximately $276,000 for the nine months ended September 30, 2011. We continue to invest in our manufacturing facilities as we deem appropriate. Net cash provided by financing activities was approximately $627,000 for the nine months ended September 30, 2012 compared to net cash provided of approximately $2,376,000 during the nine months ended September 30, 2011. During the nine months ended September 30, 2012, we borrowed $850,000 under our revolving line of credit, and received approximately $78,000 from the exercise of stock options, which was partially offset by approximately $301,000 used for scheduled payments of principal on our long-term debt. During the first nine months of 2011 we borrowed $3,400,000 on our revolving line of credit. Under the credit agreement among us, our subsidiary, Kinpak, Inc. and Regions Bank (and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation (“REFCO”)), we have borrowings under a term loan, which is payable, together with interest at the fixed rate of 3.54% per annum, in 72 consecutive monthly payments of $37,511, with the final payment on July 6, 2017. At September 30, 2012, the remaining principal balance on the term loan was $1,996,968. In addition, the credit agreement provides for a revolving line of credit, under which we may borrow up to the lesser of (i) $6 million and (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 our debt service coverage ratio (net profit plus taxes, interest, depreciation, amortization and rent expense divided by debt service plus interest and lease/rent expense) falls below 2.0 to 1, in which case interest will be payable at the 30 day LIBOR rate plus 2.75% per annum). In no event will the interest rate be less than 2.0% per annum. Outstanding amounts under the revolving line of credit are payable on demand. If no demand is made, we may repay and reborrow funds from time to time.
Under the credit agreement among us, our subsidiary, Kinpak, Inc. and Regions Bank (and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation (“REFCO”)), we have borrowings under a term loan, which is payable, together with interest at the fixed rate of 3.54% per annum, in 72 consecutive monthly payments of $37,511, with the final payment on July 6, 2017. At September 30, 2012, the remaining principal balance on the term loan was $1,996,968. In addition, the credit agreement provides for a revolving line of credit, under which we may borrow up to the lesser of (i) $6 million and (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 our debt service coverage ratio (net profit plus taxes, interest, depreciation, amortization and rent expense divided by debt service plus interest and lease/rent expense) falls below 2.0 to 1, in which case interest will be payable at the 30 day LIBOR rate plus 2.75% per annum). In no event will the interest rate be less than 2.0% per annum. Outstanding amounts under the revolving line of credit are payable on demand. If no demand is made, we may repay and reborrow funds from time to time.
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