-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H7NpIXBXfSlnaK140xaeOev0qUxcXmDbbcHoLvu0PaOjlBSfOZR7kGonl3jEJMQV rwDg8DXrNsDkL2DJcdXehg== 0000948830-98-000323.txt : 19981116 0000948830-98-000323.hdr.sgml : 19981116 ACCESSION NUMBER: 0000948830-98-000323 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METEOR INDUSTRIES INC CENTRAL INDEX KEY: 0000912875 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 841236619 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12401 FILM NUMBER: 98745742 BUSINESS ADDRESS: STREET 1: 216 16TH ST STE 730 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3035721135 MAIL ADDRESS: STREET 1: 216 16TH ST STREET 2: STE 730 CITY: DENVER STATE: CO ZIP: 80202 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 Commission File Number: 1-12401 METEOR INDUSTRIES, INC. -------------------------------------------------- (Exact Name of Issuer as Specified in its Charter) COLORADO 84-1236619 - ------------------------------- --------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification Incorporation or Organization) Number) 216 SIXTEENTH STREET, SUITE 730 DENVER, COLORADO 80202 ---------------------------------------- (Address of Principal Executive Offices) (303) 572-1137 ------------------------------- (Registrant's Telephone Number, Including Area Code) Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ There were 3,548,473 shares of the Registrant's $.001 par value common stock outstanding as of September 30, 1998. METEOR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) September 30, December 31, 1998 1997 ------------- ------------ ASSETS Current assets Cash and cash equivalents $ 724,546 $ 225,694 Restricted cash 1,940,730 1,150,266 Accounts receivable-trade, net of allowance of $310,752 and $455,067, respectively 9,094,678 9,745,318 Accounts receivable, related party 167,694 91,919 Notes receivable 125,366 106,031 Inventory 3,582,843 3,818,332 Deferred tax asset 306,787 404,970 Other current assets 160,629 283,604 ----------- ----------- Total current assets 16,103,273 15,826,134 Property, plant and equipment, net 17,666,584 13,939,783 Other assets Notes receivable 266,773 179,110 Investments in closely held businesses 1,511,412 1,395,045 Other assets 2,100,356 601,279 ----------- ----------- Total other assets 3,878,541 2,175,434 ----------- ----------- TOTAL ASSETS $37,648,398 $31,941,351 =========== =========== Continued on next page 2 METEOR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) September 30, December 31, 1998 1997 ------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable, trade $ 6,724,408 $ 5,655,272 Accounts payable, related party 20,539 26,407 Bank overdraft 1,872,623 327,734 Current portion, long-term debt 1,123,169 592,195 Accrued expenses 1,223,619 826,875 Taxes payable 689,194 1,672,586 Revolving credit facility 3,192,103 3,833,572 ----------- ----------- Total current liabilities 14,845,655 12,934,641 Long-term debt 6,252,376 2,912,183 Deferred tax liability 3,869,319 2,288,349 Minority interest in subsidiaries 4,845,952 4,515,010 ----------- ----------- Total liabilities 29,813,302 22,650,183 Commitments and contingencies Shareholders' equity Common stock, $.001 par value; authorized 10,000,000 shares, 3,548,473 and 4,130,228 shares issued and 3,478,473 and 4,111,728 outstanding, respectively 3,548 4,130 Paid-in capital 4,107,974 6,319,071 Treasury stock, at cost, 70,000 and 18,500 shares held, respectively (287,564) (88,694) Retained earnings 4,011,138 3,056,661 ----------- ----------- Total shareholders' equity 7,835,096 9,291,168 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $37,648,398 $31,941,351 =========== =========== The accompanying notes are an integral part of the financial statements. 3 METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended September 30, 1998 and 1997 (UNAUDITED) September 30, September 30, 1998 1997 ------------- ------------- Net sales $31,467,235 $27,280,844 Cost of sales 25,922,646 23,452,139 ----------- ----------- Gross profit 5,544,589 3,828,705 Selling, general and adminis- trative expenses 4,346,683 3,106,910 Depreciation and amortization 354,274 336,862 ----------- ----------- Total expenses 4,700,957 3,443,772 Income from operations 843,632 384,933 Other income and (expense) Interest income 40,125 158,276 Interest expense (239,543) (138,627) Other income (expense) 153,529 (16,483) Gain (loss) on sale of assets (7,335) 27,625 ----------- ----------- Total other (expenses) income (53,224) 30,791 Income before income taxes and minority interest 790,408 415,724 Income tax expense 290,870 162,132 Income before minority interest 499,538 253,592 Minority interest 110,976 98,255 ----------- ----------- Net income $ 388,562 $ 155,337 Other comprehensive income, net of tax $ - $ - Earnings per common share and equivalent Basic - Net Income $ .11 $ .04 Diluted - Net Income $ .11 $ .04 Weighted average common share and common share equivalents: Basic 3,530,573 4,130,228 Diluted 3,555,172 4,168,262 The accompanying notes are an integral part of the financial statements. 4 METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) September 30, September 30, 1998 1997 ------------- ------------- Net sales $87,866,932 $55,441,108 Cost of sales 72,835,752 47,058,161 ----------- ----------- Gross profit 15,031,180 8,382,947 Selling, general and adminis- trative expenses 11,691,467 7,108,197 Depreciation and amortization 1,002,680 775,893 ----------- ----------- Total expenses 12,694,147 7,884,090 ----------- ----------- Income from operations 2,337,033 498,857 Other income and (expense) Interest income 123,810 389,008 Interest expense (572,004) (341,254) Other Income 153,529 480,807 Gain (loss) on sale of assets (5,335) 72,975 ----------- ----------- Total other (expense) income (300,000) 601,536 ----------- ----------- Income before income taxes and minority interest 2,037,033 1,100,393 Income tax expense 749,628 429,153 Income before minority interest 1,287,405 671,240 Minority interest 332,928 299,115 ----------- ----------- Net income $ 954,477 $ 372,125 =========== =========== Other comprehensive income, net of tax $ - $ - Earnings per common share and equivalent Basic - Net Income $ .24 $ .10 Diluted - Net Income $ .24 $ .10 Weighted average common share and common share equivalents: Basic 3,912,399 3,718,006 Diluted 3,936,998 3,756,040 The accompanying notes are an integral part of the financial statements. 5 METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Additional Common Stock Paid-In Retained Treasury Shares Amount Capital Earnings Stock Total --------- ------ ---------- ---------- ---------- ---------- Balance Decem- ber 31, 1997 4,130,228 $4,130 $6,319,071 $3,056,661 $ (88,694) $9,291,168 Stock issued for 401(k) 2,845 3 12,088 12,091 Treasury Stock Acquisitions (2,422,640) (2,422,640) Treasury Stock Retired (584,600) (585) (2,223,185) 2,223,770 0 Net income 954,477 954,477 --------- ------ ---------- ---------- ---------- ---------- Balance Sep- tember 30, 1998 3,548,473 $3,548 $4,107,974 $4,011,138 $ (287,564) $7,835,096
The accompanying notes are an integral part of the financial statements. 6 METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUIDITED) September 30, September 30, 1998 1997 ------------- ------------- Cash flows from operating activities Net income $ 954,477 $ 372,125 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,002,680 775,893 (Gain) loss on disposal of property & equipment 5,335 (72,975) Deferred income taxes 46,412 540,784 Minority interest 332,928 299,115 Changes in working capital, net of acquired business (Increase) decrease in accounts receivable 1,061,816 806,894 (Increase)decrease in inventories 566,550 (288,420) (Increase) decrease in other current assets 161,809 132,956 (Increase) decrease in other assets 5,652 147,345 Increase (decrease)in accounts payable 630,214 (2,577,945) Increase (decrease) in accrued liabilities 390,112 553,179 Increase (decrease) in taxes payable (1,017,714) 536,834 ----------- ----------- Net cash provided by operating activities 4,140,271 1,225,785 Cash flows from investing activities Cash proceeds from sale of property 4,582 364,962 Purchases of property and equipment (1,209,252) (2,626,746) Investment in closely held business 26,072 88,066 Notes receivable (loan) payments (106,998) 1,273,575 Purchase of Tri-Valley, net of cash acquired (2,850,558) - Purchase of Fleischli, net of cash acquired - (3,960,792) ----------- ----------- Net cash provided (used) by investing activities (4,136,154) (4,860,935) Cash flows from financing activities Payments on revolving credit facilities (641,469) (60,518) Increase (decrease) in bank overdraft 1,544,889 (170,308) Payments on long-term debt - (878,024) Borrowings 2,792,328 847,129 Restricted cash (790,464) 357,587 Sale of Stock 12,091 3,692,246 Purchase of treasury stock (2,422,640) - ----------- ----------- Net cash provided by financing activities 494,735 3,788,112 ----------- ----------- Net increase in cash and equivalents 498,852 152,962 Cash and equivalents, beginning of period 225,694 151,992 ----------- ----------- Cash and equivalents, end of period $ 724,546 $ 304,954 =========== =========== The accompanying notes are an integral part of the financial statements. 7 METEOR INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (UNAUDITED) NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Meteor Industries, Inc.("Meteor" or "Company") was incorporated on December 22, 1992, as a Colorado based holding company. Graves Oil & Butane Co., Inc. ("Graves"), which was acquired effective September 1, 1993, is a wholesale distributor of petroleum products primarily in New Mexico, Colorado, Arizona and Utah. El Boracho, Inc., which was acquired September 1, 1993, holds a liquor license for use by an Albuquerque, New Mexico convenience store. Hillger Oil Company ("Hillger"), which was acquired effective April 1, 1995, is a retail distributor of petroleum products through retail gasoline and convenience stores primarily in Colorado and New Mexico in its own account and through limited liability companies. Capco Resources, Inc. ("CRI"), is a holding Company involved in the development of a power project in Pakistan. The acquisition of CRI was accounted for as a reverse acquisition with CRI treated as the acquirer. In 1996 the Company transferred its ownership of CRI to Meteor Holdings LLC ("MHL"). Innovative Solutions and Technologies, Inc. ("IST") is involved in providing environmental consulting. Fleischli Oil Company, Inc. ("Fleischli"), which was acquired effective August 1, 1997, is a wholesale distributor of petroleum products primarily in Wyoming, Colorado, Utah and Nebraska. Tri-Valley Gas Co. ("Tri-Valley"), which was acquired on May 29, 1998, is a wholesale distributor of petroleum products in Colorado. PRINCIPLES OF CONSOLIDATION AND ORGANIZATION - The consolidated financial statements include the accounts of Meteor Industries, Inc., and its wholly owned subsidiaries, Graves, including its wholly owned subsidiary, El Boracho, Inc., its wholly owned subsidiary Bloomfield Pyramid L.L.C., Hillger, including its 75% owned subsidiary Hatch Pyramid LLC and its wholly owned subsidiary Socorro Pyramid L.L.C., Fleischli and its 100% owned subsidiary Tri-Valley, and IST and Meteor's 73% owned subsidiary, Meteor Holdings LLC. All significant intercompany transactions and balances have been eliminated in consolidation. EARNINGS PER SHARE - Basic earnings per common share is computed by dividing the net income by the weighted average number of common shares outstanding. Diluted earnings per common share is computed by taking into account the dilutive effect of common stock options and warrants and convertible securities. A reconciliation of the denominator used in the calculation of basic and diluted earnings per share is presented below. Antidilutive stock options and warrants of 1,116,000 and 959,800 for the nine months ended September 30, 1998, and 1997, respectively, are omitted from the denominator. The numerator is unchanged. The shares available upon exchange of a subsidiary's preferred stock of 1,012,546 and 982,114 for the nine months ended September 30, 1998, and 1997, respectively, are omitted as they are antidilutive. Three Months Ended Nine Months Ended September 30, September 30, --------------------- ---------------------- 1998 1997 1998 1997 ---------- --------- ---------- ---------- Denominator: Average common shares outstanding 3,530,573 4,130,228 3,912,339 3,718,006 Average dilutive stock options and warrants 24,599 38,034 24,599 38,034 Diluted shares 3,555,172 4,168,262 3,936,938 3,756,040 8 INTERIM FINANCIAL INFORMATION - These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, such interim statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented. The results of operations for these interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended December 31, 1997, filed with the Company's Form 10-K. NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in the first quarter of 1998. The Company has no other comprehensive income. The Company is required to adopt SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," in the fourth quarter of 1998. SFAS No. 131 will supersede the business segment disclosure requirements currently in effect under SFAS No. 14. SFAS No. 131, among other things, establishes standards regarding the information a company is required to disclose about its operating segments and provides guidance regarding what constitutes a reportable operating segment. The Company currently believes the segment disclosures pursuant to SFAS No. 131 will not be materially different from the current disclosures pursuant to SFAS No. 14. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, effective for all fiscal quarters of fiscal years beginning after June 15, 1999, establishes accounting and reporting standard for derivative instruments and for hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. At this time, the Company cannot determine the effects, if any, adopting this statement will have on its financial condition, liquidity or results of operations. NOTE 3 - ACQUISITIONS On May 29, 1998 the Company closed on the acquisition of Tri-Valley Gas Co. The acquisition was recorded using purchase accounting rules. The purchase price was $3,000,000 for 100% of the outstanding stock of Tri-Valley. NOTE 4 - RELATED PARTY TRANSACTION In June 1998 the Company acquired 533,000 shares of its common stock from its major shareholder for $2,000,000. $1,250,000 was paid in cash on signing the agreement, $250,000 was paid in cash in August and a note for $500,000 was executed which calls for 18 equal monthly payments with interest at 10% beginning on October 1, 1998. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR METEOR INDUSTRIES, INC. This Report contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Act of 1995. Such state-ments are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. The Company is engaged in the distribution and marketing of refined petroleum products including gasoline, diesel fuel, propane and lubricants. The Company's growth, since its inception in 1992, has been primarily through the acquisition of businesses in the petroleum marketing industry. The Company's strategy is to continue to pursue acquisitions in the fragmented petroleum marketing industry. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1998, the Company had working capital of $1,257,618 compared to working capital of $2,891,493 at December 31, 1997. The decrease in the working capital is due primarily to increases in current portion of long term debt and accounts payable. Net cash provided by operating activities totaled $4,140,271 for the nine months ended September 30, 1998, compared to $1,225,785 for the nine months ended September 30, 1997. The increase in cash provided in 1998 is primarily related to the improved collection of accounts receivable and additional cash flow generated by the operation of Fleischli and Tri-Valley. Net cash used by investing activities totaled $4,136,154 for the nine months ended September 30, 1998, compared to cash used of $4,860,935 for the nine months ended September 30, 1997. The decrease in cash used is primarily due to the investment of $2,850,558, net of cash acquired, in Tri-Valley and $1,209,252 in equipment purchases in 1998, compared to the investment of $3,960,792 net of cash acquired, in Fleischli and $2,626,746 in equipment purchases and offset by the receipt of $1,273,575 from a loan receivable in 1997. Net cash provided by financing activities totaled $494,735 for the nine months ended September 30, 1998, compared to a provision of $3,788,112 for the nine months ended September 30, 1997. The decrease in 1998 is primarily related to the purchase of 636,100 shares of treasury stock for $2,422,640. The Company renegotiated three revolving bank credit facilities with Norwest Business Credit, Inc. into one new credit facility with Norwest Bank Colorado, N.A. for $7,000,000. The credit lines are subject to the borrowing base of the Company's subsidiaries, as defined, and on September 30, $3,192,103 was borrowed against the facility which is recorded as a current liability. The Company has been in default on timely filing of information with the lender. The Company was also in default with net worth and net income requirements for one of the subsidiaries. The lender waived these defaults. The Company owns 50% of a limited liability company which in June 1996 acquired a convenience store for $610,000 using financing from Phillips 66. The balance of the loan at September 30, 1998, was $436,187. The Company is a co-signer on this loan which has a term of 10 years. The Company records its investment using the equity method, which reflects only the Company's share of the net worth of the LLC. 10 A subsidiary of the Company has preferred stock outstanding which requires no periodic payments but accrues an 8% dividend and must be redeemed for $3,543,000 plus accrued dividends at the holder's request any time after September 15, 2000, unless earlier converted into common stock pursuant to its terms. This preferred stock is treated as a minority interest on the balance sheet and recorded at its discounted value. The Company will probably raise capital or refinance its existing debt in order to pay its long term obligations as they become due. The Company is obligated to pay lease costs which are included in selling, general and administrative expenses of approximately $893,000 in 1998 for land, building, facilities and equipment. The Company utilizes underground tanks at various locations to store petroleum products and is therefore subject to various federal and state statutes concerning environmental protection. The various federal and state statutes are designed to identify environmental damage, identify hazardous material and/or operations, regulate operations engaged in hazardous activities, and establish procedures for remedial action as necessary. The states in which the Company operates have recognized the potential cleanup costs resulting from regulations and have included the establishment of corrective action funds. The purpose of the funds are to provide monetary assistance in both assessing site damage and correcting the damage. Assistance is not available to repair or replace underground tanks or equipment. The law specifies requirements which must have been met for an applicant to be eligible, including a provision that payments from the fund will be made in accordance with regulations and states that payment from the corrective action fund are limited to amounts in that fund. The Company maintains detailed inventory records and performs tank and line tightness tests on a regular basis on all underground storage tanks. Management has assessed the environmental contingencies and does not anticipate any potential liabilities that will have a material adverse effect on the consolidated financial position, results of operation, or liquidity of the Company. The Company is responsible for any contamination of land it owns or leases. However, the Company may have limitations on any potential contamination liabilities as well as claims for reimbursement from third parties. The Company has accrued for environmental remediation which management believes is required to cover known remediation problems. YEAR 2000 Meteor's company wide Year 2000 Project ("Project") is proceeding on schedule. The Project is addressing the issue of computer programs and embedded computer chips being unable to distinguish between the year 1900 and the year 2000. The Project covers information systems infrastructure (including hardware and software), operating systems and significant vendors and customers. Meteor and its subsidiaries have no proprietary software. The Company has checked with the manufacturers of their various software packages and has been informed that new versions addressing the Year 2000 problem will be available by the end of 1998. The Company is beginning to evaluate its embedded technology and at the present time has no indication of significant problems. Meteor does not expect to incur any significant costs related to the Year 2000 problem. 11 In 1997, in order to improve access to business information through common, integrated computing systems across the company, Meteor began a company wide systems replacement project with systems that use programs primarily from EDS, Inc. ("EDS"). The vendor has informed the Company that the new systems are Year 2000 compliant. The new systems, which are expected to make approximately ninety-five percent of the company's business information systems Year 2000 compliant are scheduled to be fully implemented by the end of the first quarter in 1999. Implementation of the EDS programs is on schedule and approximately eighty percent complete. Remaining business software programs are expected to be made Year 2000 compliant through the Project. Meteor relies on third party suppliers for raw materials, water, utilities and other key services. Interruption of supplier operations due to Year 2000 issues could effect Company operations. The Company has initiated efforts to evaluate the status of suppliers' efforts and to determine alternatives and contingency plan requirements. While approaches to reducing risks of interruption due to supplier failures will vary by business and facility, options include identification of alternative suppliers and accumulation of inventory to assure sales capacity where feasible and warranted. Meteor is also dependent upon their customers for sales and cash flow. Year 2000 interruptions in their customers' operations could result in reduced sales, increased inventory or receivable levels and cash flow reductions. While these events are possible, their customer base is broad enough to minimize the affects of a single occurrence. Meteor is, however, taking steps to monitor the status of their customers as a means for determining risks and alternatives. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third-party suppliers and customers, the Company is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition. The Project is expected to significantly reduce the Company's level of uncertainty about the Year 2000 problem and, in particular, about the Year 2000 compliance and readiness of its significant suppliers and customers. Meteor believes that, with the implementation of new information systems and completion of the Project as scheduled the possibility if significant interruptions of normal operations should be reduced. The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in the first quarter of 1998. The Company has no other comprehensive income. The Company is required to adopt SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," in the fourth quarter of 1998. SFAS No. 131 will supersede the business segment disclosure requirements currently in effect under SFAS No. 14. SFAS No. 131, among other things, establishes standards regarding the information a company is required to disclose about its operating segments and provides guidance regarding what constitutes a reportable operating segment. The Company currently believes the segment disclosures pursuant to SFAS No. 131 will not be materially different from the current disclosures pursuant to SFAS No. 14. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, effective for all fiscal quarters of 12 fiscal years beginning after June 15, 1999, establishes accounting and reporting standard for derivative instruments and for hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. At this time, the Company cannot determine the effects, if any, adopting this statement will have on its financial condition, liquidity or results of operations. RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998, TO SEPTEMBER 30, 1997 The Company is primarily engaged in the business of marketing and distributing refined petroleum and related products employing wholesale, convenience store operations and environmental services. The Company's sales for the three months ended September 30, 1998, were $31,467,235 compared to $27,280,844 for the comparable period ending September 30, 1997. The increase in revenue of $4,186,391 is primarily related to the Fleischli and Tri-Valley acquisitions offset by lower prices for the Company's products. The Company's cost of sales for the three months ended September 30, 1998, were $25,922,646 (82.4% of sales) compared to $23,452,139 (86.0% of sales) for the comparable period ended September 30, 1997. The increase of $2,470,507 in cost of sales is primarily due to the Fleischli and Tri-Valley acquisitions offset by lower prices for the Company's purchases of products. The Company's gross profit for the three months ended September 30, 1998, was $5,544,589 compared to $3,828,705 for the comparable period ended September 30, 1997. The increase of $1,715,884 is primarily related to the Fleischli and Tri-Valley acquisitions and an increase in fuel margins due primarily to lower prices on products sold at set per gallon prices over cost. Fuel margins are dictated by competition in a given area and the Company has limited control over such margins. The Company's selling, general and administrative expenses were $4,346,683 for the three months ended September 30, 1998, compared to $3,106,910 for the comparable period ended September 30, 1997. Even though the Company has cut expenses at the subsidiary levels, total expenses have increased due to the Fleischli and Tri-Valley acquisitions. The Company's depreciation and amortization for the three months ended September 30, 1998, was $354,274 compared to $336,862 for the comparable period ended September 30, 1997. The increase is primarily due to the Fleischli and Tri-Valley acquisitions. The Company's interest income for the three months ended September 30, 1998, was $40,125 compared to $158,276 for the comparable period ended September 30, 1997. The decrease is primarily related to a reduction in finance charges as a result of improved collections in accounts and notes receivable. The Company's interest expense for the three months ended September 30, 1998, was $239,543 compared to $138,627 for the comparable period ended September 30, 1997. The increase in interest expense in 1998 is primarily due to additional borrowing for the Fleischli and Tri-Valley acquisitions as well as the Company's purchase of its outstanding shares. 13 The Company's other income was $153,529 for the three months ended September 30, 1998, compared to expense of $16,483 for the comparable period ended September 30, 1997. Included in other income in 1998 is the release of $150,000 of previously escrowed funds. The Company's provision for income taxes for the three months ended September 30, 1998, was $290,870 compared to $162,132 for the comparable period ended September 30, 1997. This increase is due to more taxable income, with a lower effective tax rate due to the fact that there is no state income tax in Wyoming and the Company has higher earnings in Wyoming due to including a full year of Fleischli. The Company's net income for the three months ended September 30, 1998, was $388,562 compared to $155,337 in the prior period. The change in net income is due to the above described items. COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998, TO SEPTEMBER 30, 1997 The Company's sales for the nine months ended September 30, 1998, were $87,866,932 compared to $55,441,108 for the comparable period ending September 30, 1997. The increase in revenue of $32,425,824 is primarily related to the Fleischli and Tri-Valley acquisitions offset by lower prices for the Company's products. The Company's cost of sales for the nine months ended September 30, 1998, were $72,835,752 (82.9% of sales) compared to $47,058,161 (84.9% of sales) for the comparable period ended September 30, 1997. The increase of $25,777,591 in cost of sales is primarily due to the Fleischli and Tri-Valley acquisitions offset by lower prices for the Company's purchases of products. The Company's gross profit for the nine months ended September 30, 1998, was $15,031,180 compared to $8,382,947 for the comparable period ended September 30, 1997. The increase of $6,648,233 is primarily related to the Fleischli and Tri-Valley acquisitions and an increase in fuel margins due primarily to lower prices on products sold at set per gallon prices over cost. Fuel margins are dictated by competition in a given area and the Company has limited control over such margins. The Company's selling, general and administrative expenses were $11,691,467 for the nine months ended September 30, 1998, compared to $7,108,197 for the comparable period ended September 30, 1997. Even though the Company has cut expenses at the subsidiary levels, total expenses have increased due to the Fleischli and Tri-Valley acquisitions. The Company's depreciation and amortization for the nine months ended September 30, 1998, was $1,002,680 compared to $775,893 for the comparable period ended September 30, 1997. The increase is primarily due to the Fleischli and Tri-Valley acquisitions. The Company's interest income for the nine months ended September 30, 1998, was $123,810 compared to $389,008 for the comparable period ended September 30, 1997. The decrease is primarily related to a reduction in finance charges as a result of improved collections in accounts and notes receivable. In 1998, interest expense increased primarily due to additional debt being incurred in connection with the Fleischli and Tri-Valley acquisition and the Company's purchase of its outstanding common stock. 14 In 1998, other income primarily included the release of $150,000 in previously escrowed funds. In 1997, the Company had other income of approximately $480,000 related to a settlement of litigation. The Company's provision for income taxes for the nine months ended September 30, 1998, was $749,628 compared to $429,153 for the comparable period ended September 30, 1997. This increase is due to more taxable income, with a lower effective tax rate due to the fact that there is no state income tax in Wyoming and the Company has higher earnings in Wyoming due to including a full year of Fleischli. The Company's net income for the nine months ended September 30, 1998, was $954,477 compared to $372,125 for the comparable period ended September 30, 1997. The change in net income is due to the above described items. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 27 Financial Data Schedule Filed herewith electronically (b) Reports on Form 8-K. None. 15 SIGNATURES In accordance with the requirements of the Exchange Act, the Issuer caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. METEOR INDUSTRIES, INC. /signed/ Dennis R. Staal Dennis R. Staal, Treasurer(Chief Financial and Accounting Officer) Dated: November 11, 1998 16 EXHIBIT INDEX EXHIBIT METHOD OF FILING - ------- ----------------------------- 27. FINANCIAL DATA SCHEDULE Filed herewith electronically EX-27 2
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations found on pages 3, 4 and 5 of the Company's Form 10-Q for the year to date, and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 724,546 0 9,094,678 0 3,582,843 16,103,273 20,396,673 (2,730,088) 37,648,398 14,845,655 0 3,548 0 0 7,831,548 37,648,398 87,866,932 87,866,932 72,835,752 72,835,752 0 0 572,004 2,037,033 749,628 954,477 0 0 0 954,477 .24 .24
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