-----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, Ui14b2ua9z8/zgAN/vkXuXeVVrArMGZgYzozljx4RBGPuToi4ctbbm1h7XnvUpYz YCPGl6GQX6hiSBcDxk9tMg== 0000948830-99-000497.txt : 19991117 0000948830-99-000497.hdr.sgml : 19991117 ACCESSION NUMBER: 0000948830-99-000497 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99755313 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 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Quarterly Period ended September 30, 1999 Commission File Number: 0-27968 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 Number) Incorporation or Organization) 1401 BLAKE STREET, SUITE 200, DENVER, COLORADO 80202 -------------------------------------------------------- (Address of Principal Executive Offices) (303)572-1135 ---------------------------------------------------- (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 registrant 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 3,619,792 shares of the Registrant's $.001 par value common stock outstanding as of November 15, 1999. Item 1: FINANCIAL STATEMENTS METEOR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) September 30, December 31, 1999 1998 (Unaudited) CURRENT ASSETS Cash $ 512 $ 380 Restricted cash 1,156 1,222 Accounts receivable-trade, net of allowance of $142 and $201, respectively 13,699 9,447 Accounts receivable, related party 37 182 Notes receivable, net 159 106 Inventory 4,111 3,974 Deferred tax asset 283 283 Other current assets 331 502 Total current assets 20,288 16,096 Property, plant and equipment, net 20,192 19,235 Other assets Notes receivable, net 207 181 Notes receivable, related party 300 -- Investments in closely held businesses 1,730 1,444 Intangibles, net 2,371 2,068 Other assets 307 366 Total other assets 4,915 4,059 TOTAL ASSETS $ 45,395 $ 39,390 Continued on next page -2- METEOR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (Continued) LIABILITIES AND SHAREHOLDERS' EQUITY (Dollars in Thousands) September 30, December 31, 1999 1998 (Unaudited) CURRENT LIABILITIES Accounts payable, trade $ 9,297 $ 5,556 Accounts payable, related party 21 109 Book overdraft 1,274 1,453 Current portion, long-term debt 1,609 1,544 Accrued expenses 1,164 1,313 Taxes payable 797 837 Income taxes payable 141 527 Revolving credit facility 7,150 5,167 Total current liabilities 21,453 16,506 Long-term debt 5,981 6,390 Deferred tax liability 3,686 3,686 Minority interest in subsidiaries 5,373 4,952 Total liabilities 36,493 31,534 Commitments and contingencies SHAREHOLDERS' EQUITY Common stock, $.001 par value; authorized 10,000,000 shares, 3,619,792 and 3,555,792 shares issued and outstanding, respectively 4 4 Paid-in capital 4,356 4,116 Treasury stock, at cost, 132,098 and 132,098 shares held respectively (489) (489) Retained earnings 5,031 4,225 Total shareholders' equity 8,902 7,856 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 45,395 $ 39,390 The accompanying notes are an integral part of the financial statements. -3- METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Dollars in Thousands except per share information) September 30, September 30, 1999 1998 Net sales $ 44,659 $ 31,467 Cost of sales 37,748 25,922 Gross profit 6,911 5,545 Selling, general and administrative expenses 5,826 4,347 Depreciation and amortization 521 354 Total expenses 6,347 4,701 Income from operations 564 844 Other income and (expense) Interest income 39 40 Interest expense (251) (240) Gain (loss) on sale of assets 5 (7) Other 303 154 Total other income and (expense) 96 (53) Income before income taxes and minority interest 660 791 Income tax expense 243 291 Minority interest 123 111 Net Income $ 294 $ 389 Earnings per share: Basic $ .09 $ .11 Diluted $ .08 $ .11 Weighted average common share and common share equivalents: Basic 3,445,027 3,530,573 Diluted 3,491,960 3,555,172 The accompanying notes are an integral part of the financial statements. -4- METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Dollars in Thousands except per share information) September 30, September 30, 1999 1998 Net sales $ 108,774 $ 87,867 Cost of sales 90,520 72,836 Gross profit 18,254 15,031 Selling, general and administrative expenses 14,590 11,691 Depreciation and amortization 1,530 1,003 Total expenses 16,120 12,694 Income from operations 2,134 2,337 Other income and (expense) Interest income 130 124 Interest expense (859) (572) Gain (loss) on sale of assets 6 (5) Other 447 153 Total other income and (expense) (276) (300) Income before income taxes and minority interest 1,858 2,037 Income tax expense 684 750 Minority interest 368 333 Net Income $ 806 $ 954 Earnings per share: Basic $ .24 $ .24 Diluted $ .23 $ .24 Weighted average common share and common share equivalents: Basic 3,430,805 3,912,399 Diluted 3,477,738 3,936,998 The accompanying notes are an integral part of the financial statements. -5- METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) (Dollars in Thousands) Additional Common Stock Paid-In Retained Treasury Shares Amount Capital Earnings Stock Total Balance - December 31, 1998 3,555,792 $ 4 $4,116 $4,225 $(489) $7,856 Issued Common Stock 64,000 240 240 Net Income 806 806 Balance - September 30, 1999 3,619,792 $ 4 $4,356 $5,031 $(489) $8,902 The accompanying notes are an integral part of the financial statement -6- METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Dollars in Thousands) September 30, September 30, 1999 1998 Cash flows from operating activities: Net income $ 806 $ 954 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,530 1,003 (Gain)loss on disposal of property, plant & equipment (6) 5 Deferred income taxes -- 46 Minority interest 368 333 Change in assets and liabilities: Decrease (increase) in: Accounts receivable, net (4,107) 1,062 Inventories (137) 567 Other current assets 171 162 Other assets 59 6 Increase (decrease) in: Accounts payable 3,653 630 Accrued liabilities (149) 390 Taxes and income taxes payable (426) (1,018) Net cash provided by operating activities 1,762 4,140 Cash flows from investing activities: Cash proceeds from sale of property, plant and equipment 78 5 Purchases of property, plant and equipment (2,364) (1,209) Non-compete agreement (80) -- Investment in closely held business 5 26 Note receivable payments (loans), net (379) (107) Purchase of Tri-Valley, net of cash acquired -- (2,851) Net cash used in investing activities (2,740) (4,136) Continued on next page -7- METEOR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Dollars in Thousands) (Continued) September 30, September 30, 1999 1998 Cash flows from financing activities: Borrowings (payments) on revolving credit facilities, net $ 1,983 $ (641) Increase (decrease) in book overdraft (179) 1,545 Payments on long-term debt (1,187) -- Borrowings on long-term debt 427 2,792 Purchase of treasury stock -- (2,423) Restricted cash 66 (790) Sale of Stock -- 12 Net cash provided by financing activities 1,110 95 Net increase in cash 132 499 Cash, beginning of period 380 226 Cash, end of period $ 512 $ 725 The accompanying notes are an integral part of the financial statements. -8- METEOR INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 ORGANIZATION Meteor Industries, Inc. ("Meteor" or "Company") was incorporated on December 22, 1992, as a Colorado based holding company. In October 1995, Meteor formed Meteor Marketing, Inc. ("Meteor Marketing"), a Colorado corporation, as a wholly owned subsidiary to hold the stock of its petroleum marketing and distribution subsidiaries and to operate the companies. The significant subsidiaries included in Meteor Marketing are: Graves Oil & Butane Co., Inc. ("Graves"), Fleischli Oil Company, Inc. ("Fleischli"), and Tri-Valley Gas Co. ("Tri-Valley"). In addition, Meteor owns Meteor Stores, Inc. ("AMSI"), Meteor Holdings LLC ("MHL") and Innovative Solutions and Technologies, Inc. ("IST"). NOTE 2 - BASIS OF PRESENTATION 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, 1998, filed with the Company's Form 10-K. NOTE 3 - EARNINGS PER SHARE Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are calculated taking into account all potentially dilutive 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 1,309,266 and 1,116,000 for the nine months ended September 30, 1999 and 1998 respectively, are omitted from the denominator. The numerator is unchanged. The shares available upon exchange of a subsidiary's preferred stock of 1,016,664 and 1,012,546 for the nine months ended September 30, 1999 and 1998, respectively, are omitted as they are antidilutive. -9- Three Months Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 ---- ---- ---- ---- Denominator: Average common shares outstanding 3,445,027 3,530,573 3,430,805 3,912,399 Average dilutive stock options and warrants 46,933 24,599 46,933 24,599 --------- --------- --------- --------- Diluted shares 3,491,960 3,555,172 3,477,738 3,936,998 NOTE 4 - CONTINGENCIES The Company is subject to various federal, state and local environmental laws and regulations. Although Company environmental policies and practices are designed to ensure compliance with these laws and regulations, future developments and increasingly stringent regulations could require the Company to make additional unforeseen environmental expenditures. Environmental accruals are routinely reviewed on an interim basis as events and developments warrant. The Company is a co-signer on a note for its 50% owned equity investment in Coors Pyramid LLC. The amount payable on the note at September 30, 1999, is $393,713. The Company is an unlimited guarantor on a note for the purchase of an office/residential building in Denver, Colorado. The amount payable on the note at September 30, 1999, is $1,350,000. (See Note 7.) The Company is a party to certain litigation that has arisen in the normal course of its business and that of its subsidiaries. In the opinion of management, none of this litigation is likely to have a material effect on the Company's financial position or results of operation. NOTE 5 - BUSINESS SEGMENTS The Company operates in six business segments: gasoline, diesel, propane, grease and lubes, convenience store items and other products (anti-freeze, chemicals, food grade oils, services, hardware and miscellaneous items). Senior management evaluates and makes operating decisions about each of these operating segments based on a number of factors. Two of the most significant factors used in evaluating the operating performance are revenue and gross profit before depreciation and amortization as presented below: -10- Three months Nine months Ended September 30, Ended September 30, 1999 1998 1999 1998 Net sales Gasoline $12,197 $ 7,746 $ 27,848 $ 20,463 Diesel 23,639 15,084 54,937 42,537 Propane 722 581 3,116 2,440 Greases and lubes 4,242 4,861 14,023 14,131 Convenience store items 1,931 1,639 4,865 4,374 Other items 1,928 1,556 3,985 3,922 Total net sales $44,659 $31,467 $108,774 $ 87,867 Gross profit, before depreciation Gasoline $ 1,210 $ 1,085 $ 3,489 $ 3,191 Diesel 2,392 1,574 6,432 4,395 Propane 280 257 1,348 771 Greases and lubes 944 1,016 2,925 2,981 Convenience store items 514 398 1,236 1,088 Other items 1,571 1,215 2,824 2,605 Total gross profit $ 6,911 $ 5,545 $ 18,254 $ 15,031 Reconciliation to net income: Selling, general and administrative $ 5,826 $ 4,347 $ 14,590 $ 11,691 Depreciation and amortization 521 354 1,530 1,003 Income from operations 564 844 2,134 2,337 Other income (expense) 96 (53) (276) (300) Income tax expense 243 291 684 750 Minority interest 123 111 368 333 Net income $ 294 $ 389 $ 806 $ 954 The Company does not account for assets by business segment and, therefore, depreciation and amortization are not factors used in evaluating operating performance. NOTE 6 - ACQUISITION On April 30, 1999, the Company completed its acquisition of certain assets of privately held Carroll Oil Company for approximately $1.1 million in cash. As part of this transaction, the Company entered into a non-compete agreement with the owner of Carroll Oil Company that resulted in $475,000 of intangibles. The acquisition was financed through cash and short and long-term debt. -11- NOTE 7 - RELATED PARTY TRANSACTIONS On September 10, 1999, the Company agreed to sell the remaining 150,000 shares of a Canadian corporation currently held in escrow to Capco Acquisub, Inc. a wholly owned subsidiary of Capco Resources Ltd. which is a 31.7% shareholder of Meteor stock, for a purchase price of $300,000 payable pursuant to a promissory note over eighteen months with 8% interest, the first payment to be received February 1, 2000. On September 30, 1999, the Company acquired a 49.5% interest in Meteor Office LLC ("Meteor Office") in exchange for 64,000 shares of Meteor Industries, Inc. common shares. Certain officers and employees of the Company have an equity interest in Meteor Office. Meteor Office is a 50% partner in a joint venture that purchased and operates an office/residential building in lower downtown Denver, Colorado. The Company loaned $50,000, as a short-term bridge loan, to Meteor Office to close on the purchase of the building. The Company's corporate offices are located in the office/residential building and are leased from the joint venture. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Report contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Act of 1995. Such statements 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 following discussion of the Company's financial condition and results of operations should be read in conjunction with the historical financial statements and notes thereto of Meteor, included elsewhere in this document. INTRODUCTION 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. RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30,1999 TO SEPTEMBER 30, 1998 The Company's sales for the three months ended September 30,1999, were $44.7 million compared to $31.5 million for the comparable period ending September 30, 1998. The increase in revenue of $13.2 million (42%) is primarily attributable to the Company's acquisitions of R & R's operations in November 1998, Carroll Oil's operations in May 1999, additional new customers and higher sales volumes and selling prices. -12- Gross profit for the three months ended September 30, 1999 and 1998 was $6.9 million and $5.5 million, respectively, an increase of $1.4 million (25.5%). The increase is primarily attributable to acquisitions and an increase in diesel volumes and margins. Gasoline Segment Gasoline volumes increased to 18.8 million gallons for the three months ended September 30, 1999, from 11.9 million gallons for the same period in 1998, primarily due to acquisitions. Gasoline sales increased to $12.2 million in 1999 from $7.7 million in 1998 and gross profit increased to $1.2 million in 1999 from $1.1 million in 1998, due to higher sales volumes and selling prices. Gross profit per gallon of gasoline sold decreased to $.06 in 1999 from $.09 in 1998 principally originating from the addition of new wholesale customers obtained through acquisition which have lower gross margins. Diesel segment Diesel volumes increased to 30.8 million gallons for the three months ended September 30, 1999, from 25.5 million in 1998. Diesel sales increased to $23.6 million in 1999 from $15.1 million in 1998, primarily due to acquisitions and the addition of new customers. Gross profits increased to $2.4 million in 1999 from $1.6 million in 1998. Gross profit per gallon of diesel sold increased to $.08 in 1999 from $.06 in 1998. Propane Segment Propane volumes decreased to 1.2 million gallons for the three months ended September 30, 1999, from 1.8 million gallons in 1998, primarily due to warmer seasonal conditions. Propane sales increased to $.7 million for the three months ended September 30, 1999, from $.6 million in 1998 due to higher selling prices. Gross profits remained constant at $.3 million for the three months ended September 30, 1999 and 1998. Gross profit per gallon of propane sold increased to $.24 per gallon for the three months ended September 30, 1999, compared to $.14 per gallon in 1998 principally due to better margin management. Greases and Lubes Segment Grease and lube sales decreased to $4.2 million for the three months ended September 30, 1999, compared to $4.9 million in 1998, primarily due to nonrenewal of some mining business contracts. Gross profit remained constant at $.9 million for the three months ended September 30, 1999 and 1998. Convenience Store Items Segment Sales of convenience store items increased to $1.9 million for the three months ended September 30, 1999, compared to $1.6 million in 1998, primarily due to operating additional locations. Gross profit increased to $.5 million for the three months ended September 30, 1999, compared to $.4 million in 1998. -13- Other Items Segment Sales of other items, which consist of anti-freeze, chemicals, food grade oils, service labor, freight hauling revenues and miscellaneous items, increased to $1.9 million for the three months ended September 30, 1999, compared to $1.6 million in 1998. Gross profit increased to $1.6 million from $1.2 million in 1998. Expenses Selling, general, and administrative expenses were $5.8 million for the three months ended September 30, 1999, compared to $4.3 million in 1998, an increase of $1.5 million (35%). The increase is primarily related to additional operations from acquisitions (34%), building the infrastructure of core business components (33%), operating additional retail locations (13%) and other miscellaneous items (20%). Depreciation and amortization for the three months ended September 30, 1999, was $.5 million compared to $.4 million in 1998. The increase in depreciation and amortization is primarily due to acquisitions and additional property, plant and equipment purchases. Interest expense increased to $.3 million for the three months ended September 30, 1999, compared to $.2 million in 1998. This increase in interest expense is due to additional debt related to acquisitions. The Company recognized other income for the three months ended September 30, 1999, of $300,000 related to the sale of 150,000 shares in a Canadian corporation compared to other income of $150,000 in 1998 relating to the sale of 150,000 shares of the same corporation. Income Taxes The provision for income taxes for the three months ended September 30, 1999, was $.2 million compared to $.3 million in 1998. The decrease is due to lower income. Net Income Net income for the three months ended September 30, 1999, was $.3 million compared to $.4 million in 1998, due to the above described items. COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 TO SEPTEMBER 30, 1998 The Company's sales for the nine months ended September 30, 1999, were $108.8 million compared to $87.9 million for the nine months ended September 30, 1998, an increase of $20.9 million(23.8%). The increase is primarily attributable to the Company's acquisitions of R & R's operations in November 1998, Carroll Oil's operations in May 1999, additional new customers, and higher sales volumes and selling prices. Gross profit for the nine months ended September 30, 1999 and 1998 was $18.3 million and $15.0 million, respectively, an increase of $3.3 million (22%). The increase is primarily attributable to acquisitions and an increase in diesel and propane volumes and margins. -14- Gasoline Segment Gasoline volumes increased to 42.3 million gallons for the nine months ended September 30, 1999, from 32.4 million gallons for the same period in 1998, primarily due to acquisitions. Gasoline sales increased to $27.8 million in 1999 from $20.5 million in 1998 and gross profit increased to $3.5 million in 1999 from $3.2 million in 1998 due to higher prices and sales volumes. Gross profit per gallon of gasoline sold decreased to $.08 in 1999 from $.10 in 1998 originating from the addition of new wholesale customers obtained through acquisition which have lower gross margins. Diesel Segment Diesel volumes increased to 82.1 million gallons for the nine months ended September 30, 1999, from 69.6 million in 1998. Diesel sales increased to $54.9 million in 1999 from $42.5 million in 1998, primarily due to acquisitions and the addition of new customers. Gross profits increased to $6.4 million in 1999 from $4.4 million in 1998. Gross profit per gallon of diesel sold increased to $.08 in 1999 from $.06 in 1998. Propane Segment Propane volumes increased to 5.8 million gallons for the nine months ended September 30, 1999, from 5.4 million gallons in 1998, primarily due to the acquisition of Tri-Valley. Propane sales increased to $3.1 million for the nine months ended September 30, 1999, from $2.4 million in 1998. Gross profits increased to $1.3 million for the nine months ended September 30, 1999, from $.8 million in 1998. Gross profit per gallon of propane sold increased to $.22 for the nine months ended September 30, 1999, compared to $.15 in 1998, primarily due to the addition of the Tri-Valley operations and better margin management. Greases and Lubes Segment Grease and lube sales decreased to $14.0 million for the nine months ended September 30, 1999, compared to $14.1 million in 1998, primarily due to acquisitions and increased sales to mining companies offset by nonrenewal of some mining business contracts in the third quarter of 1999. Gross profit remained constant at $3.0 million for the nine months ended September 30, 1999 and 1998. Convenience Store Items Segment Sales of convenience store items increased to $4.9 million for the nine months ended September 30, 1999, from $4.4 million in 1998, primarily due to operating additional locations. Gross profit increased to $1.2 million in 1999, as compared to $ 1.1 million in 1998. Other Items Segment Sales of other items, which consist of anti-freeze, chemicals, food grade oils and miscellaneous items, increased to $4.0 million for the nine months ended September 30, 1999, from $3.9 million in 1998. Gross profit increased to $2.7 million in 1999 from $2.6 million in 1998. -15- Expenses Selling, general, and administrative expenses were $14.6 million for the nine months ended September 30, 1999, compared to $11.7 million in 1998, an increase of $2.9 million (25%). The increase is primarily related to additional operations from acquisitions (34%) building the infrastructure of core business components (34%), operating additional retail locations (17) and other miscellaneous items (15%). Depreciation and amortization for the nine months ended September 30, 1999, was $1.5 million compared to $1.0 million in 1998. The increase in depreciation and amortization is primarily due to acquisitions and additional property, plant and equipment purchases. Interest expense increased to $.9 million for the nine months ended September 30, 1999, compared to $.6 million in 1998. This increase in interest expense is due to additional debt related to acquisitions. The Company recognized other income for the nine months ended September 30, 1999, of $440,000 related to the sale of 250,000 shares in a Canadian corporation compared to other income of $150,000 in 1998 relating to the sale of 150,000 shares of the same corporation. Income Taxes The provision for income taxes for the nine months ended September 30, 1999, was $.7 million compared to $.8 million in 1998. The decrease is due to lower income. Net Income Net income for the nine months ended September 30, 1999, was $.8 million compared to $1.0 million in 1998, due to the above described items. LIQUIDITY AND CAPITAL RESOURCES The Company has a revolving credit facility for $10 million. The credit line is subject to the borrowing base of the Company's subsidiaries, as defined. At September 30, 1999, the borrowing base was approximately $9.8 million and $7.2 million was borrowed against the facility which is recorded as a current liability. The Company was in default during the year on timely filing of financial information with the lender. The lender has waived the default. At September 30, 1999, the Company had a net working capital deficit of $.9 million, including cash and restricted cash totaling $1.7 million. At December 31, 1998, cash and restricted cash totaled $1.6 million. Net cash provided by operating activities totaled $1.8 million for the nine months ended September 30, 1999, compared to $4.1 million for the nine months ended September 30, 1998. This decrease in cash provided by operating activities is principally related to changes in working capital items. -16- Net cash used by investing activities totaled $2.7 million for the nine months ended September 30, 1999, compared to cash used of $4.1 million for the nine months ended September 30, 1998. The decrease in cash used by investing activities is principally related to the purchase of Tri-Valley in 1998 offset by higher purchases of property, plant and equipment in 1999. Net cash provided by financing activities totaled $1.1 million for the nine months ended September 30, 1999, compared to cash provided of $.5 million for the nine months ended September 30, 1998. The increase is due to borrowings and repayments on debt facilities in both years, the purchasing of treasury stock in 1998, offset by restricted cash decreases in 1999 as a result of timing differences. The Company has various loans with banks, suppliers and individuals which require principal payments of $1.6 million in 1999 of which approximately $1.2 million has been paid as of September 30, 1999. The Company is obligated to pay lease costs of approximately $1.1 million in 1999 for land, building, facilities and equipment of which approximately $.8 million has been paid as of September 30, 1999. A subsidiary of the Company has preferred stock outstanding which requires no periodic payments but accrues an 8% dividend and must be redeemed for $3.5 million 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 plus accrued dividends. The dividend accretion appears as Minority Interest Expense on the Statement of Operations. 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. For the nine months ended September 30, 1999 and 1998, the Company expended $140,825 and $108,335, respectively, for site assessment and related cleanup costs. The Company has accrued $116,600 for environmental remediation which management believes is adequate to cover known remediation requirements. YEAR 2000 COMPLIANCE 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 been evaluating its embedded technology and at the present time has no indication of significant problems. Meteor does not expect to incur any significant costs updating its systems to become Year 2000 compliant. 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 Advanced Digital Data, Inc. ("ADD"). The vendor has informed the Company that the new systems are Year 2000 compliant. -17- The new systems, which are expected to make approximately ninety-five percent of the company's business information systems Year 2000 compliant are fully implemented. 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 affect 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 customers for sales and cash flow. Year 2000 interruptions in customers' operations could result in reduced sales, increased inventory or receivable levels and cash flow reductions. While these events are possible, Meteor's customer base is broad enough to minimize the effects of a single occurrence. Meteor is, however, taking steps to monitor the status of 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 it's significant suppliers and customers. Meteor believes that, with the implementation of new information systems and completion of the Project as scheduled, the possibility of significant interruptions of normal operations should be reduced. The Company's Y2K readiness program is an ongoing process; the estimated completion dates and costs of the Y2K readiness program are subject to change. -18- 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. 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. By: /s/ Richard E. Kisser Richard E. Kisser, Chief Financial and Accounting Officer Dated: November 12, 1999 -19- 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-31-1999 SEP-30-1999 1,668 0 13,841 (142) 4,111 20,588 24,778 (4,586) 45,395 21,453 0 4 0 0 8,898 45,395 108,774 108,774 90,520 90,520 276 0 859 1,858 684 806 0 0 0 806 .24 .23
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