OCEAN BIO-CHEM, INC.
Annual Report
2011
WWW.OCEANBIOCHEM.COM
OVERVIEW
During 2011, the Company recorded another year of
record revenues as a result of continued growth in the
core marine market as well as expansion into other
marketplaces, including automotive, power sports, outdoor
power equipment and home care. This growth is the result
of continued adherence to a plan in which the Company
not only identifi es new customers, but also identifi es additional products for existing customers in order to maximize
on previously-established relationships. In order to capitalize on this momentum on a going forward basis, the
Company continues to develop new, innovative products as well as creating new variants of current products.
Examples of new versions of existing products include Star Tron® Enzyme Fuel Treatment. The Company has
leveraged the success and popularity of this fl agship product in the marine and power sports markets by introducing
new versions of Star Tron® to the mainstream automotive and home care market by means of new relationships with
major US retailers. The new versions were created to appeal to specifi c user niches, such as owners of motorcycles,
scooters, personal watercraft, ATVs, cars and gas-powered home care equipment. Wide-reaching marketing
campaigns have been implemented in order to support the presence of Star Tron® at new retail outlets outside the
traditional marine marketplace. Print, television and social media are all being utilized to spread the Star Tron®
message to a new and receptive audience. The company continues to align its brands with the most well-regarded
and highest-rated enthusiast television programs, including Speed Channels’ Truck U. and Two Guys Garage, NBC
Sport’s George Poveromo’s World of Saltwater Fishing, plus, ShipShape TV and Addictive Fishing.
Examples of new products geared to existing core customers include the Star brite® “Guard” and “Reggae” family
of marine detailing products. Designed to complement the core marine cleaning and appearance items, these new
products allow consumers to maintain their boats in the minimum time between full applications of traditional boat
washes or polishes, thus reinforcing brand loyalty and consumer satisfaction.
The Company has also capitalized on strong consumer demand for existing products by offering signifi cantly improved
versions for both core markets as well as for new markets. The MDG Mildew Odor Control System that had been the
industry standard for maintaining air quality in boats, homes and RVs in long-term or seasonal storage was replaced
in 2010 by the technologically-superior NosGUARD® line of products. Now manufactured in the Company’s Kinpak
facility, these products are being aggressively marketed to consumers beyond the core marine segment.
4041 SW 47th Avenue • Fort Lauderdale, Florida 33314 • Tel:(954) 587-6280 • (800) 327-8583 • Fax:(954) 587-2813
WWW.OCEANBIOCHEM.COM • WWW.STARBRITE.COM • WWW.STARTRON.COM
PRESIDENT’S LETTER
Fellow Shareholders:
March 30, 2012
Your Company had another very successful year reporting record net sales, net profi ts and both record diluted and
basic earnings per share for the third consecutive year. The record net sales, translates to an annual compounded
growth rate of approximately 14%. This real growth rate has been accomplished while the general economy has
been growing in the range of 1-2%. This growth of sales has been accomplished with broadening the markets
that the Company sells products into. During 2011 we increased the Company as a manufacturer/supplier of
performance products into the automotive chain stores, “big box” hardware stores. We also increased our presence
in the outdoor power equipment, recreational sports, and motorsports markets. We have also established strong
relationships with distributors in each of these markets to support our current and future sales growth. As we
establish our presence in each one of these newer markets we are planning increased advertising to support both
brand awareness of our Star brite® and Star Tron® brands.
For the year, net sales for 2011 were approximately $31.7 million, a 16% increase compared to 2010’s sales. As a
result of the Company’s strong operating performance we reported record net income of $2.4 million, a growth of
approximately 19% over 2010 results.
A fi nancial measure of the success of a Company is cash fl ow from operations or EBITDA (earnings before taxes
interest, depreciation and amortization) plus other non cash items including non cash stock compensation expenses
and deferred taxes. For 2011, the cash fl ow increased to approximately $5.1 million from $4.3 million in 2010.
This increase in cash fl ow is refl ected on the continued strengthening of the Company’s Balance Sheet. The current
assets increased to approximately $13.8 million from approximately $11.0 million. At the same time total current
liabilities decreased $300 thousand. As a result, the current ratio increased to 3.8: 1 from 2.8: 1 in the prior year.
Also, long term debt decreased by approximately $600 thousand to $1.9 million. The Return on Equity for 2011 was
approximately 17%.
We are continuing to improve and enhance our Kinpak manufacturing facility. During the year we completely repainted
the exterior of the Montgomery facility, added additional capacity for our bottle blow molding capability, purchased
additional equipment to further automate specifi c operations and completely refurbished the administrative facilities
of our Montgomery operations. In total, we invested approximately $500 thousand in capital expenditures in Kinpak.
We plan to continue the upgrading of equipment and facilities in 2012 and have estabilished a capital budget
at approximately the same level spent in 2011. Our manufacturing operations are continuing to improve both in
effi ciencies as well as cost improvement programs, which have also contributed to the Company’s higher gross margin
percentages in the year.
Although we are off to a slower start in 2012 than we would have liked, we are excited about the prospects for 2012.
We have continued to gain new customers in the early part of the year and anticipate this trend to continue as the year
progresses. As we gain customers in our newer markets we will continue to introduce specifi c new products to these
markets which will increase sales and profi ts.
It is too early to measure the impact on the Company that the current high fuel prices will have. The Company is
impacted in two ways from increased petroleum prices. A large portion of products that we purchase are petroleum/
petro chemical based, which directly impacts the purchase price of raw materials we buy. Also, higher fuel prices could
affect the recreational use of water crafts. So far, at current pricing of petroleum, we have not seen a slowdown in our
customers’ purchasing of our products due to higher fuel prices. You may have noticed our higher inventory levels. We
have strategically increased inventories of petroleum based products, to help mitigate product cost increases.
As we look forward in 2012, we are cautiously optimistic that 2012 will be another successful year for the Company.
Finally, I would like to express my appreciation to all of Ocean-Bio Chem. Inc. employees for their dedication in achieving
our 2011 fi nancial results. We are also grateful for the support of all our customers, suppliers and shareholders.
Peter G. Dornau
President and Chief Executive Offi cer
____________________________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
Commission File Number 000-11102
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in its charter)
Florida
(State Or Other Jurisdiction Of Incorporation Or
Organization)
59-1564329
(I.R.S. Employer Identification No.)
4041 SW 47 AVENUE
FORT LAUDERDALE, FLORIDA 33314
(Address of principal executive offices)
954-587-6280
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Name of each exchange on which registered
The NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
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 No
Indicate by check mark whether registrant has submitted electronically and posted on its corporate Website, if any Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 (or for such shorter period that the
registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
At March 30, 2012, 8,106,886 shares of the registrant’s voting Common Stock were outstanding. The aggregate market value of the
Common Stock held by non-affiliates of the registrant at June 30, 2011, the last business day of the Registrant’s most recently completed
second fiscal quarter was $10,631,417, based on the closing sale price of the Common Stock as reported by NASDAQ Capital Market on
such date. For purposes of making this computation only, all executive officers, directors and beneficial owners of more than five percent
of the registrant's Common Stock are deemed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement, which will be filed not later than April 29, 2012, are incorporated by reference in
Part III of this report.
4 ANNUAL REPORT — 2011
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer
Purchases Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other information
Executive Officers and Directors of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
Certain Relationships and Related Transactions
Principal Accounting Fees and Services
Exhibits, Financial Statements Schedules and Reports Filed on Form 8K
Signatures
Page
7-9
9-10
10
10
10
10
11
11
11-15
15
15
15
15-16
16
16
16
16
16
16
16-17
18
ANNUAL REPORT — 2011 5
Forward-looking Statements:
Certain statements contained in this Annual Report on Form 10-K, 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 "believe," "may," "will," "expect," "anticipate," "intend," or "could," including the negative or 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 to be materially different from those expressed or implied by
such forward-looking statements. Factors that may affect these results include, but are not limited to, the highly competitive
nature of our industry, reliance on certain key customers, changes in consumer demand for marine, recreational vehicle and
automotive products, advertising and promotional efforts, exposure to market risks relating to changes in interest rates and foreign
exchange rates, and other factors.
6 ANNUAL REPORT — 2011
Item 1. Business
General:
PART I
We are principally engaged in the manufacturing, marketing and distribution of 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. Unless, the context indicates
otherwise, we sometimes refer to Ocean Bio-Chem, Inc. and its consolidated subsidiaries as “the Company," "we" or "our.”
Ocean Bio-Chem, Inc. was organized in 1973 under the laws of the state of Florida.
In 1981, we purchased, from Peter G. Dornau and Arthur Spector, the co-founders of the Company, rights to the Star brite®
trademark and related products for the United States and Canada. Mr. Dornau, our Chairman, President and Chief Executive
Officer, has retained rights to these assets with respect to all other geographic areas. Accordingly, products that we manufacture
that are sold outside of the United States and Canada are purchased from us and distributed by two companies owned by
Mr. Dornau. Net Sales to the two companies in 2011 totaled approximately $1,764,000, or 5.6% of our net sales. See Note 8 to
the consolidated financial statements included in this report for additional information.
On May 10, 2010, the Company announced the formation of OdorStar Technology LLC (“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 as part of its financial statements.
Products:
The products that we manufacture and market include the following:
Marine: Our marine line consists of polishes, cleaners, protectants and waxes under the Star brite® brand name, enzyme fuel
treatment under the Star Tron® brand name, and private label products. The Marine line also includes motor oils, boat washes,
vinyl cleaners, protectants, teak cleaners, teak oils, bilge cleaners, hull cleaners, silicone sealants, polyurethane sealants,
polysulfide sealants, gasket materials, lubricants, antifouling additives and anti-freeze coolants. In addition, we manufacture a
line of brushes, poles, tie-downs and other related marine accessories.
Automotive: We manufacture a line of automotive products under the Star brite® and Star Tron® brand names The automotive
line includes gas treatments for both gas and diesel engines, motor oils, greases and related items. In addition, we produce anti-
freeze and windshield washes under the Star brite® brand and under private labels for customers. We also produce automotive
polishes, cleaners and other appearance items.
Recreational Vehicle/Power Sports: We also market Star Tron® fuel treatment to the recreational vehicle market, including snow
mobiles, all terrain vehicles and motorcycles. Power Sports enthusiasts have found Star Tron® a viable solution to a number of
problems associated with E-10 fuel, which contains ethanol. Other recreational vehicle products include cleaners, polishes,
detergents, fabric cleaners and protectors, silicone sealants, water proofers, gasket materials, degreasers, vinyl cleaners and
protectors, toilet treatment fluids and anti-freeze coolants.
Outdoor Power Equipment/ Lawn & Garden: This traditional business channel is supplied in the U.S. and Canada by a group of
wholesalers that distribute equipment such as Briggs & Stratton®, Kohler®, Honda®, Husqvarna®, Kubota®, Gravely®,
MTD®/Cub Cadet®, etc. StarTron® is also sold into this market as a viable solution to help rectify a number of operating engine
problems associated with using E-10 fuel, which is fuel containing 10% ethanol.
Contract Filling and Blow Molded Bottles: We blend and package a variety of chemical formulations to our customers’
specifications. In addition, we manufacture for sale to various customers assorted styles of both PVC and HDPE blow molded
bottles.
Mold/Mildew Odor Control: We manufacture a variety of products that help prevent and eliminate all types of mold, mildew, and
other unpleasant odors, through OdorStar’s patented delivery system. Our odor control products are effective for homes,
automobiles, boats and recreational vehicles.
ANNUAL REPORT — 2011 7
Although our products are utilized for different types of vehicles, boats, and home care, we believe our operations constitute one
industry segment.
Manufacturing: We produce the majority of our products at the manufacturing facilities of our subsidiary, Kinpak, Inc.
("Kinpak"), in Montgomery, Alabama. In addition, we contract with various unaffiliated companies located in the northeastern
and mid-western areas of the country to manufacture our other products, which are manufactured to our specifications using our
provided formulas. Each third party packager enters into a confidentiality agreement with us.
We purchase raw materials from a wide variety of suppliers; all raw materials used in manufacturing are readily available from
alternative sources. We design our own packaging and supply our outside manufacturers with the appropriate design or
packaging. We believe that our internal manufacturing capacity and our arrangements with our current outside manufacturers are
adequate for our present needs.
In the event that arrangements with any third-party manufacturer are discontinued, we believe that we will be able to locate
substitute manufacturing facilities without a substantial adverse effect on our manufacturing and distribution.
Marketing: Our products are sold through national retailers such as Wal-Mart, West Marine and Bass Pro Shops. We also sell to
national and regional distributors that sell our products to specialized retail outlets. Currently we have two customers to whom
sales exceeded 10% of consolidated net revenues for the year ended December 31, 2011. Sales to these two customers
represented approximately 40% of consolidated net sales. Sales to our five largest unaffiliated customers for the year ended
December 31, 2011, amounted to approximately 51% of our consolidated net sales, and at December 31, 2011, outstanding
accounts receivable balances from our five largest unaffiliated customers aggregated approximately 40% of our consolidated
accounts receivable.
We market our products through internal salesmen and approximately 125 sales representatives who work on an independent
contractor commission basis. Our personnel also participate in sales presentations and trade shows. In addition, we market our
brands and products through advertising campaigns in national magazines, television, newspapers and product catalogs. Our
products are distributed primarily from Kinpak’s manufacturing and distribution facility in Montgomery, Alabama. Since 2008,
we have participated in a vendor managed inventory program with one major customer.
Backlog, seasonality, and selling terms: We had no significant backlog of orders at December 31, 2011. We do not give
customers the absolute right to return product. The majority of our products is non-seasonal and is sold throughout the
year. Normal trade terms offered to credit customers range from 30 to 60 days. However, at times we offer extended payment
terms or discount arrangements as purchasing incentives to customers. These initiatives do not materially affect customary
margins.
Competition:
Competition with respect to our principal product lines is described below: The principal elements of competition affecting all of
our products lines are brand recognition, price, service and the ability to deliver products on a timely basis.
Marine: We have several national and regional competitors in the marine marketplace. We do not believe that any competitor or
small group of competitors hold a dominant market share. We believe that we can increase or maintain our market share through
our present methods of advertising and distribution.
Automotive: There are a large number of companies, both national and regional, that compete with us. Many are more
established and have greater financial resources than we do. While our market share is small, the total market size is
substantial. We believe that we have established a reasonable market share through our present methods of advertising and
distribution, considering the large size of this market.
Recreational Vehicle/Power Sports: We compete with national and regional competitors. We do not believe that any competitor
or small group of competitors hold a dominant market share. We believe that we can increase or maintain our market share by
utilizing similar methods to those we use in the marine market.
Outdoor Power Equipment/Lawn & Garden: We compete with several established national and regional competitors. We do not
believe that any competitor or small group of competitors hold a dominant market share. We have attempted to make inroads in
this market by emphasizing Star Tron®’s unique formulation and by increasing our advertising and attendance at trade shows.
Trademarks: We have obtained registered trademarks for Star brite®, Star Tron® and other trade names used on our
products. We view our trademarks as significant assets because they provide product recognition. We believe that our intellectual
property is significantly protected, but we cannot assure that these rights can be successfully asserted in the future or will not be
invalidated, circumvented or challenged.
8 ANNUAL REPORT — 2011
Patents: In 2010, the Company acquired an interest in patents held by OdorStar. The patents relate to a 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 unpleasant odors. The patents expire in 2022.
New Product Development: We continue to develop specialized products for the marine, automotive, recreational vehicle/power
sports and outdoor power equipment/lawn and garden markets. Expenditures for new product development have not been
significant and are charged to operations in the year incurred.
Environmental Costs: We endeavor to comply with applicable regulatory mandates on environmental issues. As previously
reported, under a consent agreement and final order filed with the U.S. Environmental Protection Agency that became effective on
January 19, 2011, Kinpak agreed to resolve alleged reporting violations by payment of a civil penalty of $110,000, which was paid
in installments during 2011. This expense was recognized in 2010. The proceeding related solely to filing violations. The
Company is now current with all EPA administrative filing requirements.
Personnel: At December 31, 2011, we had 107 full-time employees. The following table provides information regarding
personnel working for the Company and its subsidiaries at December 31, 2011:
Location
Fort Lauderdale, Florida
Montgomery, Alabama
Description
Administrative
Manufacturing and distribution
Manufacturing and distribution
Full-time Employees
28
7
72
107
Item 1A. Risk Factors
If we do not compete effectively, our business will suffer.
We confront aggressive competition in the sale of our products. In each of the markets in which we sell our products, we compete
with a number of national and regional competitors. Competition in the automotive market is particularly intense, with many
national and regional companies marketing competitive products. Many of our competitors in the automotive market are more
established and have greater financial resources than we do. Our inability to successfully compete in our principal markets would
harm our business.
Economic conditions can adversely affect our business.
We are subject to risks arising from adverse changes in general domestic and global economic conditions, including recession or
economic slowdown and disruption of credit markets, which may impair the ability of our customers to satisfy obligations due to
us. In addition, adverse economic conditions in recent years have adversely affected discretionary spending, which can have an
indirect adverse affect on our product lines, particularly those directed to the marine and recreational vehicle markets. While our
net sales increased in 2011, a decline in economic conditions could have an adverse affect on our net sales and results of operations.
Failure to effectively utilize or successfully assert intellectual property rights could materially adversely affect our
competitiveness.
We rely on trademarks and trade names in connection with our products, the most significant of which are Star brite® and
Star Tron®. OdorStar also owns patents we consider important to our business. We rely on trademark, trade secret, patent and
copyright laws to protect our intellectual property rights. We cannot assure that these intellectual property rights will be effectively
utilized or, if necessary, successfully asserted. There is a risk that we will not be able to obtain and perfect our own intellectual
property rights, or, where appropriate, license from others intellectual property rights necessary to support new product
introductions. Even if we obtain these rights, they may be invalidated, circumvented or challenged in the future. Our failure to
perfect or successfully assert intellectual property rights could make us less competitive and could have a material adverse affect on
our business, operating results and financial condition.
Environmental matters may cause potential liability risks.
We must comply with various environmental laws and regulations in connection with our operations, including those relating to the
handling and disposal of hazardous wastes and the remediation of contamination associated with the use and disposal of hazardous
substances. A release of such substances due to accident or intentional act could result in substantial liability to governmental
authorities or to third parties. In addition, we are subject to reporting requirements with respect to certain materials we use in our
manufacturing operations. In January 2011, Kinpak, which owns our manufacturing facility in Montgomery, Alabama, became
subject to a consent agreement and final order with the United States Environmental Protection Agency relating to its alleged
failure to complete and submit certain required forms with respect to toxic and hazardous chemicals used at its
ANNUAL REPORT — 2011 9
facilities. Under the consent agreement and final order, Kinpak agreed to pay a civil penalty of $110,000. It is possible that we
could become subject to additional environmental liabilities in the future that could have a material adverse affect on our results
of operations or financial condition.
Our variable rate indebtedness exposes us to risks related to interest rate fluctuation.
The Company has a revolving line of credit with a variable interest rate. 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, as defined in the credit agreement,
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. If interest rates were to increase significantly, our cash flow and results of operations would be adversely
affected.
Our Chairman, President and Chief Executive Officer is a majority shareholder who controls us, and his interest may
conflict with or differ from the Company's interests.
Peter G. Dornau, our Chairman, President and Chief Executive Officer, owns approximately 57% of our Common Stock. As a
result, Mr. Dornau has the power to elect all of our directors and effectively has the ability to prevent any transaction that requires
the approval of our Board of Directors and our shareholders. In addition, Mr. Dornau owns two companies that do business with
the Company. Transactions with these affiliated companies made in the ordinary course of business 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. We have entered into other transactions with entities owned by Mr. Dornau. See Note 8 to the consolidated financial
statements included in this report for additional information.
Trading in our Common Stock has been limited, and our stock price could potentially be subject to substantial
fluctuations.
Our common stock is listed on the NASDAQ Capital Market, but trading in our stock has been limited. Our stock price could be
affected substantially by a relatively modest volume of transactions.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our executive offices and one of our manufacturing facilities is located in Fort Lauderdale, Florida and are held under a lease
with an entity controlled by our Chairman, President and Chief Executive Officer. The lease covers approximately 12,700 square
feet of office, manufacturing, and warehouse space. See Note 9 to the consolidated financial statements included in this report for
additional information.
We own Kinpak’s Alabama facility, which currently contains approximately 300,000 square feet of office, plant and warehouse
space on 20 acres of land. We also lease a 1.5 acre docking facility on the Alabama River, located approximately eleven miles
from these facilities.
Item 3. Legal Proceedings
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
10 ANNUAL REPORT — 2011
PART II
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
Our common stock is traded on the NASDAQ Capital Market under the symbol OBCI. A summary of the high and low bid
prices during each quarter of 2011 and 2010 is presented below.
Market Range of Common Stock Bid:
1st Qtr.
2nd Qtr.
3rd Qtr.
4th Qtr.
2011
2010
High
Low
High
Low
$ 3.11
$ 1.81
$ 1.73
$ 0.90
$ 3.38
$ 2.19
$ 2.57
$ 1.64
$ 4.22
$ 2.00
$ 2.29
$ 1.64
$ 2.30
$ 1.91
$ 2.20
$ 1.70
We had approximately 150 record holders of our Common Stock at December 31, 2011. We believe that there are approximately
900 additional beneficial holders of our Common Stock, based on information obtained from our transfer agent and from broker-
dealers that hold shares on behalf of their clients.
The Company has not paid any cash dividends since its incorporation. The Company does not currently intend to pay any cash
dividends, but instead will utilize available cash to fund operations.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements contained herein as Item 8.
Overview:
We are principally engaged in the manufacturing, marketing and distribution of 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:
The preparation of consolidated financial statements in accordance 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.
We have identified the following as critical accounting estimates, which are defined as those that are reflective of significant
judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of
operations and could potentially result in materially different results under different assumptions and conditions.
Revenue recognition and collectability of accounts receivable
Revenue from product sales is recognized when persuasive evidence of a contract exists, the sales price is fixed and determinable,
the title of goods pass to the customer, and collectability of the related receivable is probable. With respect to a customer for
whom the Company manages the inventory at the customer's location, revenue is recognized when the products are sold to a third
party. In the ordinary course of business, we grant non-interest bearing trade credit to our customers on normal credit terms. In
an effort to reduce our credit risk, we perform ongoing credit evaluations of our customers and adjust credit limits based upon
payment history and customers’ creditworthiness, as determined by our review of their current credit information. We monitor
ANNUAL REPORT — 2011 11
collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical
experience, specific customer collection issues and reviews of agings of trade receivables based on contractual terms. We
generally do not require collateral on trade accounts receivable. We maintain an allowance for doubtful accounts based on our
historical collection experience and expected collectability of the accounts receivable, considering the period an account is
outstanding, the financial position of the customer and information provided by credit rating services. The adequacy of this
allowance is reviewed each reporting period and adjusted as necessary. Our allowance for doubtful accounts was approximately
$75,000 at December 31, 2011 and approximately $63,600 at December 31, 2010, which was approximately 2.8% and 2.7%,
respectively, of gross accounts receivable. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, or if unexpected events or significant future changes in trends were to occur,
additional allowances may be required or bad debt expense may increase.
Inventories
Inventories primarily are composed of raw materials and finished goods and are stated at the lower of cost or market, using the
first-in, first-out method. Accordingly, we maintain a reserve for slow moving and obsolete inventory to reduce the carrying
value of our inventories to reflect the diminution of value resulting from product obsolescence, damage or other issues affecting
marketability by an amount equal to the difference between the cost of the inventory and its estimated market value. The
adequacy of this reserve is reviewed each reporting period and adjusted as necessary. We regularly compare inventory quantities
on hand against historical usage or forecasts related to specific items in order to evaluate obsolescence and excessive
quantities. In assessing historical usage, we also qualitatively assess business trends to evaluate the reasonableness of using
historical information as an estimate of future usage. A complete physical count of the inventory is conducted annually.
Our slow moving and obsolete inventory reserve was $276,703 and $329,626 at December 31, 2011 and December 31, 2010,
respectively.
Income taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized to reflect the future tax consequences attributable to the differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the differences are expected to be recovered or settled. The
temporary differences are attributable to differing methods of financial statement and income tax depreciation and reserves for
trade accounts receivable and inventories.
The likelihood of a material change in the Company's expected realization of deferred tax assets is dependent on, among other
factors, future taxable income and settlements with tax authorities. While management believes that its judgments and
interpretations regarding income taxes are appropriate, significant differences in actual experience may require future adjustments
to our tax assets and liabilities, which could be material.
We are also required to assess the realizability of our deferred tax assets. We evaluate positive and negative evidence and use
judgments regarding past and future events, including operating results and available tax planning strategies that could be
implemented to realize the deferred tax assets. Based on this assessment, we determine when it is more likely than not that all or
some portion of our deferred tax assets may not be realized, in which case we would be required to apply a valuation allowance to
offset our deferred tax assets in an amount equal to future tax benefits that may not be realized. We currently do not apply a
valuation allowance to our deferred tax assets. However, if facts and circumstances change in the future, valuation allowances
may be required.
Significant judgment is required in determining income tax provisions and in evaluating tax positions. We establish additional
provisions for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do
not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination
by the applicable taxing authority. In the normal course of business, we and our subsidiaries are examined by various federal and
state tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the
current or prior years in determining the adequacy of our provision for income taxes. We adjust the income tax provision, the
current tax liability and deferred taxes in any period in which facts that give rise to an adjustment become known. The ultimate
outcomes of the examinations of our income tax returns could result in increases or decreases to our recorded tax liabilities, which
could affect our financial results.
12 ANNUAL REPORT — 2011
Trademarks, trade names and patents - We acquired the rights to the Star brite® trademark and related products for the
United States and Canada in conjunction with our original public offering during March 1981 for $880,000. The cost of these
intangible assets was amortized on a straight-line basis over an estimated useful life of 40 years through December 31,
2001. Effective January 1, 2002 and pursuant to Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" (now codified in Financial Accounting Standards Board Accounting Standards Codification Topic 350,
"Intangibles - Goodwill and Other"), we determined that these intangible assets have indefinite lives and therefore, we no longer
recognize amortization expense. In addition, our 50% owned joint venture, OdorStar Technology, LLC, owns patents we use in
our business. The Company amortizes these patents over their remaining life on a straight line basis. We review the carrying
values of the trademarks and patents periodically for possible impairment. Our impairment review is based on a discounted cash
flow approach that requires significant judgment with respect to unit volume, revenue and expense growth rates, and the selection
of an appropriate discount rate. Management uses estimates based on expected trends in making these assumptions. All
impairment charges would be recorded for the difference between the carrying value and the net present value of estimated future
cash flows, which represents the estimated fair value of the asset. Management uses its judgment in assessing whether assets may
have become impaired between annual valuations. Indicators such as unexpected adverse economic factors, unanticipated
technological change, distribution losses, or competitive activities and acts by governments and courts may indicate that an asset
has become impaired.
Results of Operations:
Net sales increased to approximately $31,681,000 in 2011 from $27,404,000 in 2010, an increase of $4,227,000 or 15.6%. The
increase is a result of increased sales to new and existing customers of both our enzyme based fuel treatment products and
recently introduced chlorine dioxide based products, as well as other products.
Cost of goods sold and gross profit – Cost of goods sold during 2011 increased approximately $2,975,000 or 16.5%, to
approximately $20,997,000 from approximately $18,022,000 in 2010. The increase was principally due to the increase in sales.
The Company’s gross profit percentage (gross profit as a percentage of net sales) decreased approximately .5% in 2011 from
34.2% to 33.7%. This small decrease primarily was a result of a higher mix of lower margin antifreeze product sales. The
increase in net sales volume resulted in an approximately $1,303,000 increase in gross profit.
Advertising & promotion expense was approximately $1,980,000 in 2011, an increase of approximately $345,000 or 21.1%
from approximately $1,635,000 in 2010. The increase is due to a radio advertising campaign in 2011 and increased magazine and
newspaper advertising.
Selling & administrative expenses increased by about $493,000 or 11%, from approximately $4,497,000 in 2010 to
approximately$4,990,000 in 2011. The increase is principally due to an increase in variable selling expenses, including sales
commissions and sales-related expenses. In addition, administrative expenses in 2010 reflected the recovery of $135,000 of bad
debt expense previously written off in 2009 and 2008. As a percentage of net sales, selling and administrative expenses decreased
from 16.4% in 2010 to 15.8% in 2011.
Interest expense increased approximately $34,000 to $150,000 in 2011, compared to $116,000 in 2010. The increase is a result
of increased use of our line of credit to support higher levels of inventory.
Operating income – As a result of the foregoing, operating income increased to approximately $3,714,000 in 2011, compared to
approximately $3,249,000 in 2010, an increase of $465,000 or 14.3%.
Income taxes – The Company had a tax expense of approximately $1,280,000 in 2011 or 35.4% of pretax income, compared to
$1,247,000 in 2010 or 39.1% of pretax income. The reduction in the income tax rate was principally due to adjustments of prior
year taxes. For additional information, see Note 7 to the consolidated financial statements.
Net Income and Net income attributable to Ocean Bio-Chem, Inc. As a result of the items mentioned above, net income
increased approximately 20.3% or approximately $394,000 to $2,335,000 from $1,941,000 in 2010. Net income attributable to
Ocean Bio-Chem, Inc. (excluding the loss attributable to non-controlling interests) was approximately $2,393,000 in 2011, an
increase of approximately $375,000 or 18.6% from approximately $2,018,000 in 2010.
Liquidity and Capital Resources:
Our cash balance was approximately $585,000 at December 31, 2011 compared to approximately $615,000 at December 31,
2010. At December 31, 2011 there was $850,000 outstanding under the Company’s revolving line of credit compared to no short-
term borrowings under the Company’s revolving line of credit at December 31, 2010.
Cash provided by operating activities for the year ended December 31, 2011 was approximately $621,000 compared to about
$2,152,000 for the year ended December 31, 2010. The decrease in cash provided from operations was due to an increase in
inventory and payments to reduce current liabilities, other than liabilities under our revolving line of credit.
ANNUAL REPORT — 2011 13
Cash used in investing activities for the year ended December 31, 2011 was approximately $435,000 compared to $907,000 in
2010. The decrease is due to reduced purchases of manufacturing equipment. In addition, in 2011, we did not make any
contributions to OdorStar. In 2010, OdorStar’s initial year of operations, we contributed $177,036.
Cash used in financing activities for the year ended December 31, 2011 was approximately $215,000 compared to $1,125,000
for the year ended December 31, 2010. The decrease in cash used in financing activities in 2011 is mostly due to net borrowings
on our line of credit of $850,000 in 2011 compared to net repayments of $250,000 in 2010, and $902,000 used in 2010 to redeem
warrants held by our Chairman, President and Chief Executive Officer. See Note 8 to the consolidated financial statements
included in this report for further information. These items were partially offset by the net reduction of approximately $658,000
in long-term debt in 2011 compared to approximately $452,000 in 2010. In addition, in 2011 we paid the entire balance of
approximately $472,000 on a related party note held by our Chairman, President and Chief Executive Officer, as described in
Note 8 to the consolidated financial statements included in this report. The Company also received approximately $65,000 from
the exercise of stock options in 2011 compared to approximately $7,000 in 2010.
During the year ended December 31, 2011, we continued to focus on programs to effectively manage trade accounts
receivable. Net trade accounts receivable aggregated approximately $2,563,000 at December 31, 2011 and $2,267,000 at
December 31, 2010, an increase of 13.1%. This increase reflects the 15.6% increase in net sales. In addition, we believe the
relatively lower percentage increase in accounts receivable as compared to the percentage increase in net sales is due to
collection efforts designed to limit our financial exposure.
Inventory was approximately $9,628,000 and $7,726,000 at December 31, 2011 and 2010, respectively, representing an increase
of approximately $1,902,000 or 24.6% in 2011. The higher levels of inventory reflect management's determination to increase
inventory levels of petroleum based products in anticipation of rising oil prices, as well as an increase in private label inventory
levels.
On July 6, 2011, the Company, together with its subsidiary, Kinpak Inc. (“Kinpak”), entered into a Credit Agreement with
Regions Bank (and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance
Corporation (“REFCO”)) under which (a) the Company’s revolving line of credit with Regions Bank was renewed, and (b)
REFCO provided a new term loan in the amount of $2,430,000, the proceeds of which were used to pay the Kinpak’s remaining
lease obligations in connection with the 2002 Series of Industrial Development Revenue Bonds issued by the City of
Montgomery, Alabama (the “2002 Bonds”). The 2002 Bonds were used to fund the expansion of Kinpak’s facilities and
acquisition of related equipment.
Under the new term loan, the Company will pay the $2,430,000 principal, together with interest, at the fixed rate of 3.54% per
annum, in 72 consecutive monthly payments of $37,511 over the six year period beginning on August 6, 2011, with the final
payment on July 6, 2017. In the event the Company’s debt service coverage ratio falls below 2.0 to 1, interest on the term loan
will increase by 1.01% per annum. For the year ended December 31, 2011, the Company’s debt service coverage ratio exceeded
7.0 to 1.
The Credit Agreement defines “debt service coverage ratio“ as meaning net profit plus taxes, interest, depreciation, amortization
and rent expense divided by debt service plus interest and lease/rent expense. The Credit Agreement contains various covenants,
including financial covenants requiring a minimum debt coverage ratio of 1.75 to 1.00, tested on a rolling four-quarter basis, 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, tested
quarterly. At December 31, 2011, the Company was in compliance with these covenants.
Under the renewed revolving line of credit, the Company 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 the Company’s debt service coverage ratio 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.
Outstanding amounts under the revolving line of credit are payable on demand. If no demand is made, the Company may repay
and reborrow funds from time to time. Interest payments are made in monthly installments on outstanding average balances
with all outstanding principal and interest payable on July 6, 2014.
The Company’s obligations under the Credit Agreement are secured by the Company’s accounts receivable and inventory, as
well as real property and equipment at the Kinpak’s Montgomery, Alabama facility.
In addition to the revolving line of credit and term loan, the Company has obtained financing through capital leases for both
manufacturing and office equipment, totaling approximately $62,400 and $93,112 at December 31, 2011 and December 31,
2010, respectively.
We make sales in the Canadian market and are subject to currency fluctuations relating to the Canadian dollar. We do not
engage in currency hedging and address currency risk as a pricing issue. In the year ended December 31, 2011, we recorded
approximately $4,000 in foreign currency translation adjustments (increasing shareholders equity by $4,000).
14 ANNUAL REPORT — 2011
During the past few years, we have introduced a number of new products. At times, new product introductions have required us
to increase our overall inventory and have resulted in lower inventory turnover rates. The effects of reduced inventory turnover
have not been material to our overall operations. We believe that all required capital to maintain such increases will continue to
be provided by operations and our current financing arrangements.
Many of the raw materials that we use in the manufacturing process are petroleum or chemical based and commodity chemicals
that are subject to fluctuating prices. The nature of our business does not enable us to pass through the price increases to our
national retailers and distributors, as promptly as we experience increases in raw material costs. This may, at times, adversely
affect our margins.
At December 31, 2011 and through the date of this report, we did not and do not have any material commitments for capital
expenditures, nor do we have any other present commitment that is likely to result in our liquidity increasing or decreasing in any
material way.
We believe that funds provided through operations and our existing sources of financing will be sufficient to satisfy our cash
requirements over at least the next twelve months.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The audited financial statements of the Company required pursuant to this Item 8 are included in a separate section commencing
on page F-1 and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures:
Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") at the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report are
effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the
Exchange Act are (i) recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms, and (ii) accumulated and communicated to the Company’s management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the disclosure.
Change in Internal Controls over Financial Reporting. No change in internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) occurred during the Company’s most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Management of Ocean Bio-Chem, Inc. is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ANNUAL REPORT — 2011 15
Management evaluated the Company’s internal control over financial reporting as of December 31, 2011. In making this
assessment, management used the framework established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). As a result of this assessment and based on the criteria in the
COSO framework, management has concluded that, as of December 31, 2011, the Company’s internal control over financial
reporting was effective.
Item 9B. Other Information
Not applicable.
Item 10. Executive Officers and Directors of the Registrant
PART III
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed
with the Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 11. Executive Compensation
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed
with the Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed
with the Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed
with the Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 14. Principal Accounting Fees and Services
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed
with the Commission no later than 120 days after the close of the fiscal year covered by this report.
PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports Filed on Form 8K
(a)
Financial Statements – See the Index to Consolidated Financial Statements on page F-1.
(b)
Exhibits:
Exhibit
No.
3.1
3.2
†10.1
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).
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on
Form 8-K, filed with the Securities and Exchange Commission on December 5, 2011).
Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the
Company’s Registration Statement on Form S-8 (file no. 333-174659), filed with the Securities and Exchange
Commission on June 2, 2011).
16 ANNUAL REPORT — 2011
10.2
10.3
10.4
10.5
†10.6
†10.7
†10.8
†10.9
Credit Agreement, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Bank (the “Credit Agreement”)
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2011).
Equipment Finance Addendum, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Equipment
Finance Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2011).
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 with the Securities and Exchange Commission on July 12, 2011).
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 with the Securities and Exchange Commission on July 12, 2011).
Ocean Bio-Chem, Inc. 2002 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.2
to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on
August 12, 2011).
Ocean Bio-Chem, Inc. 2007 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 99.3 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12,
2011).
Ocean Bio-Chem, Inc. 2008 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 99.4 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12,
2011).
Ocean Bio-Chem, Inc. 2008 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.5
to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on
August 12, 2011).
†10.10
Ocean Bio-Chem, Inc. Form of Stock Option granted to Peter G. Dornau (incorporated by reference to Exhibit 99.6 to
the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August
12, 2011).
10.11
10.12
10.13
Net Lease dated May 1, 1998 between Star Brite Distributing, Inc. and PEJE, Inc (incorporated by reference to
Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004).
Renewal of Lease dated May 1, 2008 between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference
to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
OdorStar Technology, LLC Operating Agreement dated May 4, 2010 (incorporated by reference to Exhibit 10.17 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
21.
List of Subsidiaries *
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
32.2
101
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C.
Section 1350. *
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C.
Section 1350. *
The following materials from Ocean Bio-Chem Inc.’s Annual Report on Form 10-K for the year ended December 31,
2011, formatted in XBLR (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at
December 31, 2011 and December 31, 2010; (ii) Consolidated Statements of Operations for the years ended
December 31, 2011 and 2010; (iii) Consolidated Statements of Comprehensive Income for the years ended
December 31, 2011 and 2010; (iv) Consolidated Statements of Changes in Shareholders Equity for the years ended
December 31, 2011 and 2010, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2011 and
2010 and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text.
* Filed herewith.
† Constitutes management contract or compensatory plan or arrangement required to be filed as in exhibit to this report.
ANNUAL REPORT — 2011 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Registrant
Date: March 30, 2012
By:
/s/ Peter G. Dornau
PETER G. DORNAU
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Capacity
Date
/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)
/s/ Gregor M. Dornau
Gregor M. Dornau
/s/ William W. Dudman
William W. Dudman
/s/ James M. Kolisch
James M. Kolisch
/s/ John B. Turner
John B. Turner
/s/ Sonia B. Beard
Sonia B. Beard
Director
Director
Director
Director
Director
/s/ Diana Mazuelos Conard
Diana Mazuelos Conard
Director
March 30, 2012
March 30, 2012
March 30, 2012
March 30, 2012
March 30, 2012
March 30, 2012
March 30, 2012
March 30, 2012
18 ANNUAL REPORT — 2011
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
20
21
22
23
24
25
26-35
ANNUAL REPORT — 2011 19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Ocean Bio-Chem, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Ocean Bio-Chem, Inc. and Subsidiaries as of December 31,
2011 and 2010 and the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and
cash flows for each of the years in the two-year period ended December 31, 2011. Ocean Bio-Chem, Inc.'s management is
responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Ocean Bio-Chem, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the results of its operations
and its cash flows for each of the years in the two-year period ended December 31, 2011, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Goldstein Schechter Koch P.A.
Certified Public Accountants
Hollywood, Florida
March 30, 2012
20 ANNUAL REPORT — 2011
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
December
31, 2011
December
31, 2010
ASSETS
Current Assets:
Cash
Trade accounts receivable net of allowance for doubtful accounts of approximately $75,000 and
$
585,357 $
615,044
$63,600 at December 31, 2011 and 2010, respectively
Receivables due from affiliated companies
Inventories, net
Prepaid expenses and other current assets
Deferred tax asset
Total Current Assets
495,130
2,563,089 2,266,695
-
9,627,798 7,725,580
289,930
127,676
13,761,339 11,024,925
424,168
65,797
Property, plant and equipment, net
5,213,333 5,421,787
Other Assets:
Trademarks, trade names and patents, net
Due from affiliated companies, net
Other assets
Total Other Assets
Total Assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable – trade
Revolving line of credit
Notes payable related party
Current portion of long-term debt
Income taxes payable
Accrued expenses payable
Total Current Liabilities
Deferred tax liability
Long-term debt, less current portion
Total Liabilities
Commitments and contingencies
Shareholders' Equity:
Common stock - $.01 par value, 10,000,000 shares authorized; 8,458,389 and 8,205,116 shares
issued at December 31, 2011 and 2010, respectively
Additional paid in capital
Less cost of common stock in treasury, 351,503 shares at December 31, 2011 and 2010,
respectively
Foreign currency translation adjustment
Retained earnings
Total Shareholders' Equity of Ocean Bio-Chem, Inc.
Noncontrolling interest
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
The accompanying notes are an integral part of these consolidated financial statements.
870,642
-
33,442
947,814
212,736
75,036
904,084 1,235,586
$ 19,878,756 $ 17,682,298
$ 1,162,143 $ 1,417,959
-
471,950
490,127
539,628
993,010
3,655,625 3,912,674
850,000
-
400,430
353,608
889,444
250,191
81,030
1,939,362 2,507,985
5,845,178 6,501,689
84,584
82,051
8,163,864 7,689,183
(288,013 )
(268,084 )
(288,013 )
(271,939 )
6,058,848 3,666,211
13,751,199 10,877,493
282,379
303,116
14,033,578 11,180,609
$ 19,878,756 $ 17,682,298
ANNUAL REPORT — 2011 21
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2011 AND 2010
Gross sales
Less: discounts, returns, and allowances
Net sales
Cost of goods sold
Gross profit
Operating Expenses:
Advertising and promotion
Selling and administrative
Total operating expenses
Operating income
Other income (expense)
Interest (expense)
Other income
Income before income taxes
Provision for income taxes
Net income
Loss attributable to noncontrolling interests
Net income attributable to Ocean-Bio Chem, Inc.
Income per common share – basic
Income per common share – diluted
Weighted average shares – basic
Weighted average shares – diluted
The accompanying notes are an integral part of these consolidated financial statements.
2011
2010
$ 33,648,366 $ 29,221,396
1,967,303 1,817,663
31,681,063 27,403,733
20,996,824 18,022,215
10,684,239 9,381,518
1,979,800 1,635,163
4,989,846 4,497,059
6,969,646 6,132,222
3,714,593 3,249,296
(150,142 )
50,499
(115,592 )
54,879
3,614,950 3,188,583
1,279,892 1,247,420
2,335,058 1,941,163
57,579
76,961
$ 2,392,637 $ 2,018,124
$
$
0.30 $
0.26
0.28 $
0.24
7,953,329 7,789,699
8,395,347 8,443,797
22 ANNUAL REPORT — 2011
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2011 AND 2010
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2011 AND 2010
Net Income
Foreign currency translation adjustment
Comprehensive income
2011
2010
$ 2,335,058 $ 1,941,163
3,855
5,086
2,338,913 1,946,249
Comprehensive loss attributable to noncontrolling interests
57,579
76,961
Comprehensive income attributable to Ocean-Bio Chem, Inc.
$ 2,396,492 $ 2,023,210
The accompanying notes are an integral part of these consolidated financial statements.
Less: discounts, returns, and allowances
Gross sales
Net sales
Cost of goods sold
Gross profit
Operating Expenses:
Advertising and promotion
Selling and administrative
Total operating expenses
Operating income
Other income (expense)
Interest (expense)
Other income
Income before income taxes
Provision for income taxes
Net income
Loss attributable to noncontrolling interests
Net income attributable to Ocean-Bio Chem, Inc.
Income per common share – basic
Income per common share – diluted
Weighted average shares – basic
Weighted average shares – diluted
The accompanying notes are an integral part of these consolidated financial statements.
2011
2010
$ 33,648,366 $ 29,221,396
1,967,303 1,817,663
31,681,063 27,403,733
20,996,824 18,022,215
10,684,239 9,381,518
1,979,800 1,635,163
4,989,846 4,497,059
6,969,646 6,132,222
3,714,593 3,249,296
(150,142 )
(115,592 )
50,499
54,879
3,614,950 3,188,583
1,279,892 1,247,420
2,335,058 1,941,163
57,579
76,961
$ 2,392,637 $ 2,018,124
$
$
0.30 $
0.26
0.28 $
0.24
7,953,329 7,789,699
8,395,347 8,443,797
ANNUAL REPORT — 2011 23
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2011 AND 2010
Common
Stock
Shares
Amount
Additional
Paid In
Capital
Foreign
Currency
Adjustment
Retained
Earnings
Treasury
Stock
Non
Controlling
Interest
Total
January 1, 2010
8,053,816
$ 80,538
$ 8,194,917
$ (277,025)
$ 1,648,087
$ (288,013)
$ -
$ 9,358,504
Net Income (loss)
2,018,124
(76,961)
1,941,163
Contribution from noncontrolling partner
380,077
380,077
Options exercised
6,800
68
7,017
Stock based compensation -
grants
144,500
1,445
256,990
Stock based compensation - options
Redemption of
Warrants
Foreign currency
translation adjustment
132,209
(901,950)
5,086
7,085
258,435
132,209
(901,950)
5,086
December 31, 2010
8,205,116
$ 82,051
$ 7,689,183
$ (271,939)
$ 3,666,211
$ (288,013)
$ 303,116 $ 11,180,609
Net Income (loss)
2,392,637
(57,579)
2,335,058
Contribution from noncontrolling partner
36,842
36,842
Options exercised
114,273
1,143
63,982
Stock based compensation -
grants
139,000
1,390
331,793
Stock based compensation - options
78,906
Foreign currency
translation adjustment
3,855
65,125
333,183
78,906
3,855
December 31, 2011
8,458,389
$ 84,584
$ 8,163,864
$ (268,084)
$ 6,058,848
$ (288,013)
$ 282,379 $ 14,033,578
24 ANNUAL REPORT — 2011
January 1, 2010
8,053,816
$ 80,538
$ 8,194,917
$ (277,025)
$ 1,648,087
$ (288,013)
$ -
$ 9,358,504
Net Income (loss)
2,018,124
(76,961)
1,941,163
Contribution from noncontrolling partner
380,077
380,077
Options exercised
6,800
68
7,017
Stock based compensation -
grants
144,500
1,445
256,990
Stock based compensation - options
132,209
(901,950)
Redemption of
Warrants
Foreign currency
translation adjustment
Options exercised
114,273
1,143
63,982
Stock based compensation -
grants
139,000
1,390
331,793
Stock based compensation - options
78,906
Foreign currency
translation adjustment
5,086
3,855
December 31, 2010
8,205,116
$ 82,051
$ 7,689,183
$ (271,939)
$ 3,666,211
$ (288,013)
$ 303,116 $ 11,180,609
Net Income (loss)
2,392,637
(57,579)
2,335,058
Contribution from noncontrolling partner
36,842
36,842
7,085
258,435
132,209
(901,950)
5,086
65,125
333,183
78,906
3,855
December 31, 2011
8,458,389
$ 84,584
$ 8,163,864
$ (268,084)
$ 6,058,848
$ (288,013)
$ 282,379 $ 14,033,578
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2011 AND 2010
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2011 AND 2010
Common
Stock
Shares
Amount
Additional
Paid In
Capital
Retained
Earnings
Treasury
Stock
Non
Controlling
Interest
Total
Foreign
Currency
Adjustment
Cash flows from operating activities:
Net income
Adjustment to reconcile net income to net cash provided by operations:
Depreciation and amortization
Deferred income taxes
Stock based compensation
Other operating noncash items
Changes in assets and liabilities:
Accounts receivable
Inventories
Other assets
Prepaid expenses and other current assets
Receivables due from affiliated companies
Accounts payable and other accrued expenses
2011
2010
$ 2,335,058 $ 1,941,163
754,854
231,040
395,100
(17,989 )
689,379
(92,500 )
378,845
93,035
(307,365 )
(124,255 )
(1,849,295 ) (1,113,687 )
78,188
214,454
24,436
63,155
41,594
(134,238 )
(282,394 )
(545,402 )
Net cash provided by operating activities
620,963 2,152,213
Cash flows from investing activities:
Purchases of property, plant and equipment
Trademarks, trade names and patents, net
Contributions from (to) joint venture from non-controlling partner
Net cash used in investing activities
Cash flows from financing activities:
Net borrowings (repayments) under revolving line of credit
Proceeds from notes payable related party
Repayments of notes payable related party
Proceeds from long-term debt
Payments on long-term debt
Redemption of warrants
Proceeds from exercise of stock options
Net cash used in financing activities
Change in cash prior to effect of exchange rate on cash
Effect of exchange rate on cash
Net (decrease) increase in cash
Cash at beginning of period
Cash at end of period
Supplemental disclosure of cash transactions:
Cash paid for interest during period
Cash paid for income taxes during period
Supplemental disclosure of non-cash transactions:
Assets contributed to consolidated joint venture by noncontrolling partner
Patents
Inventory
Equipment
Total assets contributed to consolidated joint venture by noncontrolling partner.
The accompanying notes are an integral part of these consolidated financial statements.
(472,005 )
-
36,842
(435,163 )
(632,110 )
(177,036 )
(97,927 )
(907,073 )
2,430,000
(3,088,320 )
-
65,125
(471,950 )
850,000
-
(250,000 )
471,950
-
-
(452,147 )
(901,950 )
7,085
(215,145 ) (1,125,062 )
120,078
(7 )
120,071
494,973
615,044
(29,345 )
(342 )
(29,687 )
615,044
585,357 $
$
163,716 $
$
$ 1,335,141 $
103,662
737,383
$440,339
22,965
14,700
$478,004
ANNUAL REPORT — 2011 25
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
Note 1 – Organization and summary of significant accounting policies:
Organization – The Company was incorporated in November 1973 under the laws of the state of Florida and operates as
a manufacturer and distributor of products principally under the Star brite® brand to the marine, automotive, recreational
vehicle, and outdoor power equipment aftermarkets.
Basis of presentation – The consolidated financial statements include the accounts of the Company, its wholly owned
subsidiaries, and a joint venture in which the Company has a controlling interest. All significant inter-company accounts
and transactions have been eliminated in consolidation. Certain prior-period data have been reclassified to conform to the
current period presentation.
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.
Collectability of accounts receivable – Trade accounts receivable at December 31, 2011 and 2010 are net of allowances
for doubtful accounts aggregating approximately $75,000 and $63,600, respectively. Such amounts are based on
management's estimates of the creditworthiness of its customers, current economic conditions and other historical
information. For the year ended December 31, 2011 the Company had no net bad debt expense, compared to a net bad
debt recovery of approximately $135,000 for the year ended December 31, 2010.
Inventories – Inventories are primarily composed of raw materials and finished goods and are stated at the lower of cost,
using the first-in, first-out method, or market.
Shipping and handling costs – All shipping and handling costs incurred by us are included in cost of goods sold in the
consolidated statements of operations. Shipping and handling costs totaled approximately $1,174,000 and $1,086,000 for
the years ended December 31, 2011 and 2010, respectively.
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 totaled approximately $1,980,000
and $1,635,000 in 2011 and 2010, respectively. The Company capitalizes the direct cost of producing and distributing 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 December 31, 2011 and 2010, the carrying value of capitalized catalog costs was
not material.
Property, plant and equipment – Property, plant and equipment is stated at cost, net of depreciation. Depreciation is
provided over the estimated useful lives of the related assets using the straight-line method.
Research and Development Costs – Research and development costs are expensed as incurred and recorded in selling
and administrative expenses in the consolidated statements of operations. The Company incurred approximately $58,000
and $56,000 of research and development costs for the years ended December 31, 2011 and 2010 respectively.
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, we recognize an expense for the fair value of our
outstanding stock options and grants as they vest, whether held by employees or others.
Use of estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting
principles 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.
Concentration of credit risk; dependence on major customers – Financial instruments that potentially subject the
Company to concentration of credit risk consist primarily of accounts receivable. The Company’s five largest
unaffiliated customers represented approximately 51% and 58% of consolidated net revenues for the years ended
December 31, 2011 and 2010, and 40% and 40% of consolidated accounts receivable at December 31, 2011 and 2010,
respectively. The Company has a longstanding relationship with each of these entities and previously has collected all
open receivable balances. The loss of any of these customers could have an adverse impact on the Company’s operations
(see Note 11).
26 ANNUAL REPORT — 2011
Concentration of cash – At various times during the year and at December 31, 2011, the Company had a concentration of
cash in one bank in excess of prevailing insurance offered through the Federal Deposit Insurance Corporation at such
institution. Management does not consider the excess deposits to be a significant risk.
Fair value of financial instruments –The Company adopted ASC topic 820, “Fair Value Measurements and Disclosures”
(ASC 820), formerly SFAS No. 157 “Fair Value Measurements,” effective January 1, 2009. ASC 820 defines “fair
value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. There was no impact relating to the adoption of ASC 820 to the Company’s financial statements.
ASC 820 also describes three levels of inputs that may be used to measure fair value:
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active
markets.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed
methodologies that result in management’s best estimate of fair value.
The carrying amounts of the Company’s short-term financial instruments, including accounts receivable, accounts
payable, certain accrued expenses, revolving line of credit, and notes payable to related parties, approximate their fair
value due to the relatively short period to maturity for these instruments. The fair value of long-term debt is based on
current rates at which the Company could borrow funds with similar remaining maturities, and the carrying amount of
the long-term debt approximates fair value.
Impairment of long-lived assets – Potential impairments of long-lived assets are reviewed annually or when events and
circumstances warrant an earlier review. In accordance with FASB ASC Subtopic 360-10, "Property, Plant and
Equipment – Overall," impairment is determined when estimated future undiscounted cash flows associated with an asset
are less than the asset’s carrying value.
Income Taxes – The Company follows the guidance under FASB ASC Topic 740, "Income Taxes" for the recognition of
current and deferred income taxes. Under the asset and liability method of FASB ASC Topic 740, deferred tax assets
and liabilities are recognized for the future tax consequences attributed to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-
forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
In determining whether the realization of deferred tax assets may be impaired, we evaluate both positive and negative
evidence as required in accordance with FASB ASC Subtopic 740-10. At December 31, 2011 and December 31, 2010,
we concluded that it is more likely than not that our deferred tax assets will be realized. Therefore, we have not recorded
a valuation allowance with respect to any deferred tax assets.
Under FASB ASC Subtopic 740-10, we recognize liabilities for uncertain tax positions based on a two-step process. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained on audit, including resolution of any related appeals or
litigation. The second step requires us to estimate and recognize the tax benefit based on management’s estimate of the
largest amount that is more likely than not to be realized upon ultimate settlement with the taxing authorities. We
reevaluate uncertain tax positions on a quarterly basis, based on factors including, but not limited to, changes in facts or
circumstances, changes in tax law, effectively settled issues under audit, new audit activity and lapses in the statutes of
limitations on assessment. Such a change in recognition or measurement would result in the recognition of a tax benefit
or an additional charge to the tax provision in the period in which such event occurs and can have a significant effect on
our consolidated financial statements.
In accordance with FASB ASC Subtopic 740-10, the Company recognizes any penalties related to unrecognized tax
positions as income tax expense, which is included in selling, general and administrative expenses. The Company has
been audited by the Internal Revenue Service through the year ended December 31, 2009.
ANNUAL REPORT — 2011 27
Trademarks, trade names and patents – The Company purchased the Star brite® trade name and trademark in 1980 for
$880,000. The cost of the trade mark and trade name initially were amortized on a straight-line basis over an estimated
useful life of 40 years. Effective January 1, 2002 and in accordance with FASB ASC Topic 350, "Intangibles – Goodwill
and Other," the Company determined that these intangible assets have indefinite lives and therefore, the Company no
longer recognizes amortization expense. The Company evaluates intangible assets for impairment every year and at
other times when an event occurs or circumstances change such that it is reasonably possible that an impairment may
exist. In addition, the Company’s 50% owned joint venture, OdorStar Technology, LLC, owns patents for a delivery
system that enables the precise control of release rates of chlorine dioxide (ClO2) products to safely help prevent and
eliminate odors caused by mold, mildew and other sources of unpleasant odors. The Company amortizes these patents
over their remaining life on a straight line basis. The company amortized approximately $77,000 and $0 for the years
ended December 31, 2011 and 2010 respectively.
Foreign currency – Translation adjustments result from translating foreign subsidiaries’ financial statements into U.S.
dollars. The Company has a Canadian subsidiary whose functional currency is the Canadian dollar. Balance sheet
accounts are translated at exchange rates in effect at the balance sheet date. Income statement accounts are translated at
average exchange rates during the year. Resulting translation adjustments are included in Shareholders’ Equity and as a
component of comprehensive income.
Earnings Per Share – The Company computes earnings per share in accordance with the provisions of FASB ASC Topic
260, "Earnings Per Share," which specifies the computation, presentation and disclosure requirements for earnings (loss)
per share for entities with publicly held common stock. Basic earnings per share are computed by dividing net earnings
available to common shareholders by the weighted average number of common shares outstanding during the
period. Diluted earnings per share are computed assuming the exercise of dilutive stock options under the treasury stock
method and the related income tax effects. See Note 12 - Earnings per share.
Note 2 – Inventories:
The composition of inventories at December 31, 2011 and 2010 are as follows:
Raw materials
Finished goods
Inventories, gross
Inventory reserves
Inventories, net
$
2011
4,431,651 $
5,472,850
9,904,501
2010
4,116,577
3,938,629
8,055,206
(276,703 )
(329,626 )
$
9,627,798 $
7,725,580
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 $570,000 and $352,000 at December 31, 2011 and 2010, respectively.
Note 3 – Property, plant and equipment:
The Company’s property, plant and equipment consisted of the following:
Land
Building and Improvements
Manufacturing and warehouse equipment
Office equipment and furniture
Construction in process
Leasehold improvements
Property, plant and equipment, gross
Less accumulated depreciation
Property, plant and equipment, net
Estimated
Useful Life
30 years
6-20 years
3-5 years
10-15 years
2011
2010
278,325 $ 278,325
$
4,445,924 4,402,275
7,632,398 7,481,644
552,306
76,499
122,644
13,180,125 12,913,693
668,046
32,788
122,644
7,966,792 7,491,906
$ 5,213,333 $ 5,421,787
Depreciation expense for the years ended December 31, 2011 and 2010 amounted to approximately $678,000
and $689,000, respectively.
28 ANNUAL REPORT — 2011
Note 4 – Revolving Line of Credit:
On July 6, 2011, the Company, together with its subsidiary, Kinpak Inc. (“Kinpak”), entered into a 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. The terms of the revolving line of credit, as renewed, provide that 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 taxes, interest, depreciation, amortization and rent expense
divided by debt service plus interest) falls below 2.0 to 1, in which case the interest is 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, the Company may repay and reborrow funds
from time to time. 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 discussed in footnote 6 below are cross-
collateralized. Interest on amounts borrowed under the revolving line of credit is payable in monthly installments on
outstanding average balances, with all outstanding principal and interest payable on July 6, 2014. The Credit
Agreement includes financial covenants requiring a minimum debt service coverage ratio of 1.75 to 1.00, tested on a
rolling four-quarter basis, 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, tested quarterly. At December 31, 2011, the Company was in compliance with these
covenants. The Company’s principal obligation under the revolving line of credit at December 31, 2011 was $850,000
and the interest rate was 2.01% per annum.
Note 5 – Accrued expenses payable
Accrued expenses payable at December 31, 2011 and 2010 consisted of the following:
Accrued customer promotions
Accrued payroll, commissions, and benefits
EPA civil penalty
Other
Total accrued expenses payable
2011
2010
$ 485,730 $ 502,278
169,103 176,767
- 110,000
234,611 203,965
$ 889,444 $ 993,010
On January 28, 2010, the Company received notice from the U.S. Environmental Protection Agency (the "EPA") that it
was not in compliance with certain reporting requirements under the Emergency Planning and Community Right-To-
Know Act. Under a consent agreement and final order signed by the Company on December 23, 2010 and effective on
January 19, 2011, the Company resolved the alleged violations and agreed to pay a civil penalty of $110,000. The civil
penalty was not related to any discharges of hazardous materials. The Company's liability under the consent agreement
was paid during 2011. The Company is now in compliance with its EPA filing requirements.
Note 6 – Long-term debt:
On July 6, 2011, under the Equipment Finance Addendum to the Credit Agreement, REFCO provided to the Company a
$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 relating to the Series 2002 Bonds described in the
following paragraph. At December 31, 2011 the Company had approximately $2,277,000 of the term loan outstanding.
At December 31, 2010, the Company had outstanding rent obligations under the two lease agreements between Kinpak
and the Industrial Development Board of the City of Montgomery, Alabama. Payments under the lease agreements were
used to pay debt service on two series of industrial revenue bonds issued in 1997 (the “Series 1997 Bonds”) and 2002
(the “Series 2002 Bonds”), respectively. On March 1, 2011, the Series 1997 Bonds were paid in full, and on July 6,
2011, the Series 2002 Bonds were paid in full. As a result, Kinpak acquired the facilities and equipment subject to the
lease agreement.
At December 31, 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 $62,400 and $93,112 at
December 31, 2011 and December 31, 2010, respectively, have varying maturities through 2015 and carry interest rates
ranging from 7% to 14%.
ANNUAL REPORT — 2011 29
The following table provides information regarding the Company’s long-term debt at December 31, 2011 and 2010:
Current Portion
2011
2010
Long-term Portion
2011
2010
Lease Agreement -Industrial Development
Bonds
Term loan
Capitalized equipment leases
$
- $
375,562
24,868
460,000 $
- 1,901,830
37,532
30,127
- $ 2,445,000
-
62,985
Total long-term debt
$
400,430 $
490,127 $ 1,939,362 $ 2,507,985
Required principal payments under these obligations are set forth below:
Year ending December 31,
2012
2013
2014
2015
2016
Thereafter
Total
$
$
400,430
407,096
414,505
425,657
432,601
259,503
2,339,792
Note 7 – Income taxes:
The components of the Company’s consolidated provision for income taxes are as follows:
Federal – current
Federal – deferred
State – current
State – deferred
Total provision for income taxes
2011
2010
$ 1,036,816 $ 1,183,501
(60,321)
134,886-
(10,646)
$ 1,279,892 $ 1,247,420
204,041 )
12,036
26,999 )
The reconciliation of the provision for income taxes at the statutory rate to the reported provision for income taxes is as
follows:
Income Tax computed at statutory rate
State tax, net of federal benefit
Loss attributable to noncontrolling interest
Share based compensation
EPA civil penalty
Temporary adjustments
Other, permanent adjustments
Tax credits and prior year tax adj.
2011
$ 1,229,083
23,793
19,577
112,862
-
184,205
(105,805 )
(183,823 )
%
34%
.5%
.5%
3%
0%
5%
-3%
-5%
2010
$ 1,084,118
89,025
26,167
128,807
37,400
17,768
(111,545 )
(24,320 )
%
34%
3%
1%
4%
1%
1%
-4%
-1%
Provision for income taxes
$ 1,279,892
35%
$ 1,247,420
39%
The Company’s deferred tax asset and liability accounts consisted of the following at December 31, 2011 and 2010:
Deferred taxes – current
Reserves for bad debts, inventories, and other accruals
Depreciation of property and equipment
Total deferred tax asset current
Deferred taxes - non-current
Depreciation of property and equipment
Total deferred tax liability non-current
2011
2010
$
$
123,000
(57,203)
65,797
$
$
155,306
(27,630 )
127,676
(250,191 )
(250,191 )
$
(81,030 )
(81,030 )
$
30 ANNUAL REPORT — 2011
Note 8 – Related party transactions:
During 2011, as in previous years, the Company sold products to companies affiliated with its Chairman, President and
Chief Executive Officer. The affiliated companies distribute the products outside of the United States and Canada. The
Company also provides administrative services to these companies. Sales to the affiliated companies aggregated
approximately $1,764,000 and $1,812,000 during the years ended December 31, 2011 and 2010, respectively, and
administrative fees aggregated approximately $332,000 and $336,000 during the years ended December 31, 2011 and
2010, respectively. The Company had accounts receivable from the affiliated companies in connection with the product
sales and management services aggregating approximately $495,000 and $213,000 at December 31, 2011 and 2010,
respectively. 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.
A subsidiary of the Company currently uses the services of an entity that is owned by the Chairman, President and Chief
Executive Officer of the Company to conduct product research and development. The Company paid the entity $42,000
and $39,000 during the years ended December 31, 2011 and 2010, respectively, under this relationship.
The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its
Chairman, President and Chief Executive Officer. The Company believes that the rental payments are below market
rates. See Note 9 for a description of the lease terms.
On November 2, 2010, the Company redeemed a warrant held by its Chairman, President and Chief Executive Officer to
purchase 500,000 shares of its Common Stock at an exercise price of $1.13 per share. The warrant initially was issued to
him in connection with financing he provided to the Company in October 2005. The aggregate redemption price of the
warrant was $430,000, which was based on the difference between the closing bid price of the Company's Common
Stock on October 15, 2010, the date the Chairman, President and Chief Executive Officer initially provided notice of his
intention to exercise the warrant. The redemption, which was approved by the independent directors of the Board of
Directors, was effected in order to prevent the dilutive effect of the exercise of the warrant.
On December 6, 2010, the Company redeemed a warrant held by its Chairman, President and Chief Executive Officer to
purchase 500,000 shares of its Common Stock at an exercise price of $0.836 per share. The warrants initially were
issued to him in connection with financing he provided to the Company in December 2005. The aggregate redemption
price of the warrant was $471,950, which was based on the difference between the closing price of the Company's
Common Stock on December 6, 2010 and the exercise price of the warrant. The Company issued a note to the Chairman,
President and Chief Executive Officer in an amount equal to the redemption price, which bore interest at the rate of 3%
per annum. On January 5, 2011, the Company paid all outstanding principal and interest on the note. The redemption,
which was approved by the independent directors of the Board of Directors, was effected in order to prevent the dilutive
effect of the exercise of the warrant..
A director of the Company is Regional Executive Vice President of an entity from which the Company sources most of
its insurance needs at an arm’s length competitive basis.. During 2011 and 2010, the Company paid in aggregate of
approximately $600,000 and $500,000, respectively in insurance premiums on policies obtained through the entity.
Note 9 – Commitments
The Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled
by its President and Chief Executive Officer. On May 1, 2008, the Company renewed the lease for a term of ten years.
The lease requires minimum base rent of $94,800 and provides for a maximum annual 2% increase in subsequent years,
although the entity has not raised the minimum rent since the Company entered into the lease agreement in 1998.
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 during each of the years ended December 31, 2011 and 2010
was approximately $96,000.
The Company leases from the Alabama State Port Authority a 1.5 acre docking facility on the Alabama River, located
approximately eleven miles from the Company’s Alabama manufacturing facility. The lease expires on September 30,
2014, and requires the Company to pay rent and additional expenses totaling approximately $7,800 annually.
ANNUAL REPORT — 2011 31
The following is a schedule of minimum future rentals on the Company’s non-cancelable operating leases.
12 month period ending December 31,
2012
2013
2014
2015
2016
Thereafter
Note 10 - Stock options and awards:
$
103,864
105,785
105,795
101,944
103,983
141,649
663,020
On June 3, 2011, the Company’s shareholders approved the Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan
(the “Plan”). The Plan is designed (i) to meet the Nasdaq listing requirements, (ii) to enable compensation attributable to
grants under the Plan to qualify for an exemption from the deduction limit under section 162(m) of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder (the “Code”) and (iii) to enable incentive stock
options to meet the requirements of the Code.
As a result of the adoption of the Plan, no further stock option grants will be made under the Company’s 2002 Non-
Qualified Stock Option Plan, 2002 Incentive Stock Option Plan, 2007 Incentive Stock Option Plan, 2008 Non-Qualified
Stock Option Plan and 2008 Incentive Stock Option Plan.
The Plan authorizes 750,000 shares of the Company’s common stock for issuance, subject to antidilution adjustments
upon the occurrence of certain events affecting the common stock. On June 3, 2011, the Company issued stock awards
under the Plan to officers, key employees and a consultant totaling 139,000 shares of common stock. As a result,
611,000 shares remained available for future issuance under the Plan. Compensation expense related to the stock awards
was $321,000.
On May 4, 2011, stock options with respect to 5,000 shares were exercised.
On November 9, 2011, stock options with respect to 153,500 shares were exercised. Following the surrender of 44,227
shares in connection with a net exercise feature of the options, the Company issued an aggregate of 109,273 shares.
The following tables provide information at December 31, 2011 and 2010 regarding outstanding options under the
Company’s stock option plans as well as a grant made outside of the Company’s stock option plans. As used in the table
below, “2002 ISO” refers to the Company’s 2002 Incentive Stock Option Plan, “2007 ISO” refers to the Company’s
2007 Incentive Stock Option Plan, “2008 ISO” refers to the Company’s 2008 Incentive Stock Option Plan, “2002 NQ”
refers to the Company’s 2002 Non-Qualified Stock Option Plan and “2008 NQ” refers to the Company’s 2008 Non-
Qualified Stock Option Plan.
December 31, 2011
Date
Options
Exercisable Exercise
Expiration Average
Weighted
Plan
Non Plan
2007 ISO
2007 ISO
2007 ISO
2008 ISO
2002 NQ
2002 NQ
2002 NQ
2002 NQ
2002 NQ
2008 NQ
2008 NQ
granted
outstanding
options
Price
3/25/09
5/17/07
10/8/07
12/17/07
8/25/08
10/22/02
6/20/03
5/25/04
4/3/06
12/17/07
1/11/09
4/26/10
115,000
136,500
2,500
142,600
144,100
30,000
30,000
30,000
40,000
50,000
50,000
25,000
795,700
115,000
106,000
2,000
111,300
81,500
30,000
30,000
30,000
40,000
50,000
50,000
25,000
670,800
$ 0.55
1.66
1.87
1.32
0.97
1.26
1.03
1.46
1.08
1.32
0.69
2.07
$ 1.17
32 ANNUAL REPORT — 2011
date
3/24/14
5/16/12
10/07/12
12/16/12
8/21/13
10/21/12
6/19/13
5/24/14
4/2/16
12/16/17
1/10/19
4/25/20
Remaining
life
2.3
.4
.8
1.0
1.7
.8
1.5
2.4
4.3
6.0
7.1
8.4
2.4
December 31, 2010
Date
Options
Exercisable Exercise
Expiration Average
Weighted
Plan
Non Plan
2002 ISO
2007 ISO
2007 ISO
2007 ISO
2008 ISO
2002 NQ
2002 NQ
2002 NQ
2002 NQ
2002 NQ
2008 NQ
2008 NQ
granted
outstanding
options
price
3/25/09
11/6/06
5/17/07
10/8/07
12/17/07
8/25/08
10/22/02
6/20/03
5/25/04
4/3/06
12/17/07
1/11/09
4/26/10
115,000
113,500
167,500
2,500
154,600
156,100
35,000
30,000
30,000
40,000
50,000
50,000
25,000
969,200
115,000
90,800
100,500
1,500
92,760
62,440
35,000
30,000
30,000
40,000
50,000
50,000
25,000
723,000
$ 0.55
0.93
1.66
1.87
1.32
0.97
1.26
1.03
1.46
1.08
1.32
0.69
2.07
$ 1.16
date
3/24/14
11/5/11
5/16/12
10/07/12
12/16/12
8/21/13
10/21/12
6/19/13
5/24/14
4/2/16
12/16/17
1/10/19
4/25/20
Remaining
life
3.3
0.9
1.4
1.8
2.0
2.7
1.8
2.5
3.4
5.3
7.1
8.1
9.5
3.0
The following table shows the number of options outstanding under each stock option plan at December 31, 2011:
Plan
Non Plan
2007 ISO
2008 ISO
2002 NQ
2008 NQ
Totals
Options
Outstanding
115,000
281,600
144,100
180,000
75,000
795,700
The following table provides information relating to stock option transactions during the years ended December 31, 2011
and 2010:
Options outstanding beginning of the year
854,200
$1.24
2011
Weighted
Average
Exercise
Price
Shares
2010
Weighted
Average
Exercise
Price
839,000 $ 1.21
Shares
Options granted
Options exercised
Options forfeited or expired
Options outstanding end of the year
Non plan options
Totals
-
(158,500 )
(15,000 )
680,700
115,000
795,700
-
1.05
1.66
1.27
0.55
$1.17
25,000 2.07
(6,800) 1.04
(3,000 ) .97
854,200 1.24
115,000 0.55
969,200 $ 1.16
Stock options may be awarded as part of compensation to executives, employees, directors and others, pursuant to the
terms of the Company’s Omnibus Equity Compensation Plan, but no options were awarded under the plan in 2011.
Grants of stock options or other equity awards are made at the discretion of the Equity Grant Committee of the Board of
Directors. Options previously were granted under the Company’s other stock option plans. Qualified options previously
granted typically have a five-year term with vesting in equal 20% increments on each anniversary of the date of
grant. Non-qualified options previously granted to outside directors have a 10-year term and are immediately
exercisable. The last tranche of non-qualified options previously granted terminate on January 10, 2019. Compensation
cost recognized during the year ended December 31, 2011 and 2010 attributable to stock options amounted to
approximately $74,000 and $132,000, respectively.
At December 31, 2011 and 2010, there was approximately $68,000 and $163,000 of unrecognized compensation cost
related to unvested share based compensation arrangements, which will be charged against operations as the options vest
through the year ending December 31, 2013.
ANNUAL REPORT — 2011 33
Note 11 – Major customers:
The Company has two major customers, with sales in excess of 10% of consolidated net revenues for the year ended
December 31, 2011. Sales to these customers represented approximately 40% of consolidated net revenues. In 2010,
one customer also had sales that represented approximately 35% of net revenues.
The Company’s top five unaffiliated customers represented approximately 51% and 58%, of consolidated net revenues
for the years ended December 31, 2011 and 2010, respectively, and 40% and 40% of consolidated trade receivables at
the balance sheet dates December 31, 2011 and 2010, respectively. The Company enjoys good relations with these
customers. However, the loss of any of these customers could have an adverse impact on the Company’s operations.
Note 12 – 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.
Year Ended
December 31 ,
2011
2010
Earnings per common share –Basic
Net income attributable to OBCI
$ 2,392,637 $ 2,018,124
Weighted average number of common shares outstanding
7,953,329 7,789,699
Earnings per common share – Basic
Earnings per common share – Diluted
$
0.30 $
0.26
Net income attributable to OBCI
$ 2,392,637 $ 2,018,124
Weighted average number of common shares outstanding
7,953,329 7,789,699
Effect of employee stock-based awards
442,018 654,098
Weighted average number of common shares outstanding -
assuming dilution
8,395,347 8,443,797
Earnings per common share - Diluted
$
0.28 $
0.24
The Company had 0 and 27,500 stock options outstanding at December 31, 2011 and 2010, respectively, that were anti-
dilutive and therefore not included in the diluted earnings per common share calculation because their effect would be
anti-dilutive.
Note 13 – Shareholders’ equity:
During the years ended December 31, 2011 and 2010, the Company granted stock awards of 139,000 and 144,500 shares
of common stock, respectively, to certain executives, key employees and a consultant. Compensation expense recorded
in connection with the stock awards for the years ended December 31, 2011 and 2010 aggregated approximately
$321,000 and $247,000, respectively.
During 2011, certain employees of the Company and a consultant were issued 114,273 shares of the Company’s
common stock as a result of exercising stock options. The total cash received by the Company from the stock option
exercises was approximately $65,100 and is reflected as paid in capital on the consolidated balance sheet.
During 2010, the Company redeemed warrants to purchase 1,000,000 shares held by its Chief Executive Officer. See
Note 8 for further information.
Note 14 – Subsequent Events:
These consolidated financial statements include a discussion of material events, if any, which have occurred subsequent
to December 31, 2011 (referred to as “subsequent events”) through the issuance of these consolidated financial
statements.
34 ANNUAL REPORT — 2011
Note -15 – Recent Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) has recently issued several new accounting pronouncements
which may apply to the Company.
In May 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820):
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and
International Financial Reporting Standards (“IFRSs”).” The guidance under ASU 2011-04 amends certain accounting
and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S.
GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same. This
guidance contains certain updates to the measurement guidance as well as enhanced disclosure requirements. The most
significant change in disclosures is an expansion of the information required for “Level 3” measurements including
enhanced disclosure for: (1) the valuation processes used by the reporting entity and (2) the sensitivity of the fair value
measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any.
This guidance is effective for interim and annual periods beginning on or after December 15, 2011, with early adoption
prohibited.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” which revises the manner
in which companies present comprehensive income. Under ASU No. 2011-05, companies may present comprehensive
income, which is net income adjusted for the components of other comprehensive income, either in a single continuous
statement of comprehensive income or by using two separate but consecutive statements. Regardless of the alternative
chosen, companies must display adjustments for items reclassified from other comprehensive income into net income
within the presentation of both net income and other comprehensive income. ASU 2011-05 is effective for interim and
annual periods beginning after December 15, 2011, on a retrospective basis. In December 2011, the FASB issued ASU
No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of
Accumulated Other Comprehensive Income in ASU 2011-05.”ASU 2011-12 defers the requirement that companies
present reclassification adjustments for each component of accumulated other comprehensive income in both net income
and other comprehensive income on the face of the financial statements. Reclassifications out of accumulated other
comprehensive income are to be presented either on the face of the financial statement in which other comprehensive
income is presented or disclosed in the notes to the financial statements. Reclassification adjustments into net income
need not be presented during the deferral period. This action does not affect the requirement to present items of net
income, other comprehensive income and total comprehensive income in a single continuous or two consecutive
statements.
In September 2011, the FASB issued ASU No. 2011-08, “Testing Goodwill for Impairment (the revised standard)”.
Under ASU No. 2011-08 companies have the option to perform a qualitative assessment that may allow them to skip the
annual two-step test and reduce costs. The guidance is effective for fiscal years beginning after December 15, 2011 and
earlier adoption is permitted.
In December 2011, the FASB issued ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities”. Under
ASU 2011-11 disclosures are required to provide information to help reconcile differences in the offsetting requirements
under U.S. GAAP and IFRS. The new disclosure requirements mandate that entities disclose both gross and net
information about instruments and transactions eligible for offset in the statement of financial position as well as
instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, the ASU
requires disclosure of collateral received and posted in connection with master netting agreements or similar
arrangements. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after
January 1, 2013.
We do not believe that the adoption of these new pronouncements listed above will have a material impact on our
consolidated results of operation and financial condition at the dates that the new guidance will become effective.
.
ANNUAL REPORT — 2011 35
EXHIBIT INDEX
Exhibit
No.
3.1
3.2
10.1
10.2
10.3
10.4
10.5
†10.6
†10.7
†10.8
†10.9
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).
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on
Form 8-K, filed with the Securities and Exchange Commission on December 5, 2011).
Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the
Company’s Registration Statement on Form S-8 (file no. 333-174659), filed with the Securities and Exchange
Commission on June 2, 2011).
Credit Agreement, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Bank (the “Credit Agreement”)
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2011).
Equipment Finance Addendum, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Equipment
Finance Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2011).
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 with the Securities and Exchange Commission on July 12, 2011).
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 with the Securities and Exchange Commission on July 12, 2011).
Ocean Bio-Chem, Inc. 2002 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.2
to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on
August 12, 2011).
Ocean Bio-Chem, Inc. 2007 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 99.3 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12,
2011).
Ocean Bio-Chem, Inc. 2008 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 99.4 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12,
2011).
Ocean Bio-Chem, Inc. 2008 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.5
to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on
August 12, 2011).
†10.10
Ocean Bio-Chem, Inc. Form of Stock Option granted to Peter G. Dornau (incorporated by reference to Exhibit 99.6 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12,
2011).
10.11
10.12
10.13
Net Lease dated May 1, 1998 between Star Brite Distributing, Inc. and PEJE, Inc (incorporated by reference to
Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004).
Renewal of Lease dated May 1, 2008 between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference to
Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). [
OdorStar Technology, LLC Operating Agreement dated May 4, 2010 (incorporated by reference to Exhibit 10.17 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
21.
List of Subsidiaries *
36 ANNUAL REPORT — 2011
Exhibit
No.
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
32.2
101
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C.
Section 1350. *
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C.
Section 1350. *
The following materials from Ocean Bio-Chem Inc.’s Annual Report on Form 10-K for the year ended December 31,
2011, formatted in XBLR (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at
December 31, 2011 and December 31, 2010; (ii) Consolidated Statements of Operations for the years ended
December 31, 2011 and 2010; (iii) Consolidated Statements of Comprehensive Income for the years ended
December 31, 2011 and 2010; (iv) Consolidated Statements of Changes in Shareholders Equity for the years ended
December 31, 2011 and 2010, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2011 and
2010 and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text.
* Filed herewith.
†Constitutes management contract or compensatory plan or arrangement required to be filed as in exhibit to this report
ANNUAL REPORT — 2011 37
EXHIBIT 21
The following is a list of the Registrant’s subsidiaries:
Name
Star brite Distributing, Inc.
Star brite Distributing Canada, Inc.
D & S Advertising Services, Inc.
Star brite StaPut, Inc.
Star brite Service Centers, Inc.
Star brite Automotive, Inc.
Kinpak Inc.
OdorStar Technology, LLC
Jurisdiction
of Organization
Florida
Florida
Florida
Florida
Florida
Florida
Alabama
Florida
Ownership %
100
100
100
100
100
100
100
50
CERTIFICATION
EXHIBIT 31.1
I, Peter G. Dornau, certify that:
1.
2.
I have reviewed this Annual Report on Form 10-K of Ocean Bio-Chem, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing
the equivalent function):
information; and
Dated: March 30, 2012
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
38 ANNUAL REPORT — 2011
The following is a list of the Registrant’s subsidiaries:
I, Peter G. Dornau, certify that:
EXHIBIT 21
CERTIFICATION
EXHIBIT 31.1
Name
Star brite Distributing, Inc.
Star brite Distributing Canada, Inc.
D & S Advertising Services, Inc.
Star brite StaPut, Inc.
Star brite Service Centers, Inc.
Star brite Automotive, Inc.
Kinpak Inc.
OdorStar Technology, LLC
Jurisdiction
of Organization
Ownership %
Florida
Florida
Florida
Florida
Florida
Florida
Alabama
Florida
100
100
100
100
100
100
100
50
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Ocean Bio-Chem, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing
the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: March 30, 2012
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
ANNUAL REPORT — 2011 39
I, Jeffrey S. Barocas, certify that:
CERTIFICATION
EXHIBIT 31.2
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Ocean Bio-Chem, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing
the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: March 30, 2012
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
40 ANNUAL REPORT — 2011
EXHIBIT 31.2
EXHIBIT 32.1
CERTIFICATION PURSUANT TO RULE 13a-14(b)
UNDER THE SECURITIES EXCHANGE ACT AND 18 U.S.C. 1350
I, Peter G. Dornau, Chief Executive Officer of Ocean Bio-Chem, Inc. (the "Company"), hereby certify that, based on my
knowledge:
1.
2.
The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the
"Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial
condition and result 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)
Dated: March 30, 2012
I, Jeffrey S. Barocas, certify that:
CERTIFICATION
1.
I have reviewed this Annual Report on Form 10-K of Ocean Bio-Chem, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing
the equivalent function):
information; and
Dated: March 30, 2012
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
ANNUAL REPORT — 2011 41
CERTIFICATION PURSUANT TO RULE 13a-14(b)
UNDER THE SECURITIES EXCHANGE ACT AND 18 U.S.C. 1350
EXHIBIT 32.2
I, Jeffrey S. Barocas, Chief Financial Officer of Ocean Bio-Chem, Inc. (the "Company"), hereby certify that, based on my
knowledge:
1.
2.
The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the
"Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company.
Dated: March 30, 2012
By:
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
42 ANNUAL REPORT — 2011
CERTIFICATION PURSUANT TO RULE 13a-14(b)
UNDER THE SECURITIES EXCHANGE ACT AND 18 U.S.C. 1350
I, Jeffrey S. Barocas, Chief Financial Officer of Ocean Bio-Chem, Inc. (the "Company"), hereby certify that, based on my
knowledge:
1.
The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 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 result of operations of the Company.
Dated: March 30, 2012
By:
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT 32.2
INVESTOR INFORMATION
NASDAQ STOck SyMbOl ObcI
Stock Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
General Counsel
Berger Singerman, LLP
350 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Auditors
Goldstein Schechter Koch, P.A.
4000 Hollywood Blvd., Suite 215 South
Hollywood, FL 33021
Reports and Publications
A free copy of the Company’s 2011
Form 10-K filed with the Securites
and Exchange Commission can be
obtained upon written request to:
Corporate Relations Department
4041 SW 47th Avenue
Fort Lauderdale, Florida 33314
cOMMON STOck
MARkET INFORMATION
The following table sets forth high and low
bid prices of the Common Stock of Company
as reported on the NASDAQ Capital Market
for each calendar quarter in 2011 and 2010:
2011
High
Low
2010
High Low
$3.11 $1.81 $1.73 $0.90
First Quarter
Second Quarter 3.38 2.19
4.22 2.00
Third Quarter
2.30 1.91
Fourth Quarter
2.57 1.64
2.29 1.64
2.20 1.70
OcEAN bIO-cHEM, INc.
bOARD OF DIREcTORS
Peter G. Dornau
Chairman, President and
Chief Executive Officer
Jeffrey S. Barocas
Sonia B. Beard*
Gregor M. Dornau
William W. Dudman
James M. Kolisch
Diana Mazuelos Conard*
John B. Turner*
* A member of audit committee
OFFIcERS OF
OcEAN bIO-cHEM, INc.
Peter G. Dornau
President and CEO
Jeffrey S. Barocas
Vice President of Finance and CFO
Gregor M. Dornau
Executive Vice President of Sales and Marketing
William W. Dudman
Corporate Secretary
OFFIcERS OF
STAR bRITE DISTRIbuTINg, INc.
Peter G. Dornau
President and CEO
Jeffrey S. Barocas
Chief Financial Officer
Gregor M. Dornau
Executive Vice President of Sales and Marketing
William W. Dudman
Vice President of Operations
Marc A. Emmi
Senior Vice President of Sales
Natalie S. Fino
Vice President of Customer Service
George W. Lindsey, Jr.
Vice President of Marketing
Dennis Torok
Vice President of Sales
4041 SW 47th Avenue • Fort Lauderdale, Florida 33314
Tel:(954) 587-6280 • (800) 327-8583 • Fax:(954) 587-2813
www.oceanbiochem.com • www.starbrite.com • www.startron.com
OCEAN BIO-CHEM, INC. MANUFACTURING CAPABILITIES
Ocean Bio-Chem, Inc.’s main
manufacturing and distribution
facility is its wholly owned
subsidiary, Kinpak, Inc.,
located on a 20 acre site in
Montgomery, Alabama. In
addition to Star brite® products,
Kinpak also manufactures
numerous items under private
label programs for major oil
companies and consumer goods
retailers. The facility’s 300,000
s.f. manufacturing, blending,
packing, and distribution center
features a 500,000 gallon tank
farm plus an additional 1.2
million gallon tank farm on the
Alabama River, as well as a
fully-equipped R&D laboratory
and a quality control center that
performs quality audits for each
phase of the production process.
The plant has 300,000 gallons of
blending capacity plus multiple
blow-molding machines that
produce custom PVC and HDPE
bottles in various colors and
shapes. There are ten fully-
automated high-speed liquid fi lling
lines, pail lines, drum fi lling line,
bulk load fi lling lines, plus grease
fi lling lines capable of fi lling
containers from 1 ounce to 55
gallons in size at speeds up to 120
gallons per minute.
Finished goods are secured by
automatic case packers, case
sealers and palletizers. In
addition to a line of truck loading
docks, the facility has a rail spur
capable of handling 20 railcars.
Kinpak’s off-site facility is a fi ve
acre marine terminal on the
Alabama River for accepting
shipments of raw materials by
barge and rail.
Star brite® products are available
at marine, automotive, power
sports, outdoor power equipment
and hardware stores, as well as at
sporting goods stores, agriculture
and RV stores worldwide.
WWW.STARBRITE.COM
WWW.STARTRON.COM
WWW.OCEANBIOCHEM.COM
QUALITY CONTROL
BLENDING
FILLING
DISTRIBUTION
1
1
0
2
-
R
A