<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 11, 1997
-----------------------------------------------
Date of Report (date of earliest event reported
METEOR INDUSTRIES, INC.
------------------------------------------------
Exact Name of Issuer as Specified in its Charter
COLORADO 0-27968 84-1236619
- ------------------------ --------------- ---------------------
State or Other Juris- Commission File I.R.S. Employer Iden-
diction of Incorporation Number tification Number
216 SIXTEENTH STREET, SUITE 730
DENVER, COLORADO 80202
--------------------------------------
Address of Principal Executive Offices
(303) 572-1137
------------------------------
Registrant's Telephone Number,
Including Area Code
<PAGE>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
INDEX TO FINANCIAL INFORMATION (UNAUDITED)
Page
Balance Sheets at February 28, 1997 and February 29, 1996 F-1-2
Statement of Income for the Year Ending February 28, 1997
and the Six Months Ended February 29, 1996 F-3
Statement of Stock Holders Equity for the Year Ending
February 28, 1997 and the Six Months Ended February 29, 1996 F-4
Statement of Cash Flows for the Year Ending February 28, 1997
and the Six Months Ended February 29, 1996 F-5-6
Notes to Financial Statements F-7-12
Balance Sheets at February 29, 1996 and August 31, 1995 F-13-14
Statement of Income for the Six Months Ending February 29, 1996
and August 31, 1995 F-15
Statement of Stock Holders Equity for the Six Months Ending
February 29, 1996 and August 31, 1995 F-16
Statement of Cash Flows for the Six Months Ending February 29,
1996 and August 31, 1995 F-17-18
Notes to Financial Statements F-19-23
Balance Sheets at for the Years Ended August 31, 1995 and 1994 F-24-25
Statement of Income for the Years Ended August 31, 1995
and 1994 F-26
Statement of Stock Holders Equity for the Years Ended
August 31, 1995 and 1994 F-27
Statement of Cash Flows for the Years Ended August 31,
1995 and 1994 F-28-29
Notes to Financial Statements F-30-33
Audited historical financial statements will be submitted on or before October
25, 1997.
(b) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The accompanying pro forma information combines the activities of Meteor
Industries, Inc. and Fleischli Oil Company for the periods described. The pro
forma combined statement of operations for the twelve months ended December
31, 1996 includes the statement of operations of Meteor Industries, Inc. for
the year ended December 31, 1996, and the operations of Fleischli Oil Company
for the year ended February 28, 1997. The pro forma combined statement of
operations for the six months ended June 30, 1997, includes the operations of
Meteor and Fleischli for the six months ended June 30, 1997. The operations
of Fleischli for the two months ended February 28, 1997, are included in both
periods. The revenues and net loss of Fleischli for the two month period are
$12,516,797 and $(73,400), respectively.
The pro forma combined statements of operations are presented as if the
acquisition had occurred on January 1, 1996. The pro forma combined balance
sheet as of June 30, 1997, is presented as if the acquisition had occurred on
June 30, 1997.
These pro forma financial statements are not necessarily indicative of future
operations or the actual results that would have occurred had the acquisition
been consummated at the beginning of the year.
-2-
<PAGE>
The pro forma combined balance sheet and statements of operations should be
read in conjunction with the unaudited historical financial statements and
notes thereto of Fleischli Oil Company, included elsewhere in this document
and of Meteor Industries, Inc. filed as part of its Form 10-K for the year
ended December 31, 1996, and Form 10-Q for the six months ended June 30, 1997.
On August 11, 1997, Meteor Industries, Inc. closed on its acquisition of all
of the outstanding common stock of Fleischli Oil Company. The purchase price
for the common stock was $4,752,000 paid in the form of cash to the sellers.
Also on August 11, 1997, Norwest Business Credit, Inc. provided Fleischli Oil
Company with a revolving line of credit of up to $5,000,000, subject to the
borrowing base of Fleischli Oil Company, as defined, which on August 11, 1997,
was approximately $4,000,000. $2,200,000 was borrowed at closing to refinance
certain Fleischli Oil Company borrowings.
<TABLE>
<CAPTION>
METEOR INDUSTRIES, INC.
PRO FORMA COMBINED
BALANCE SHEET
JUNE 30, 1997
Meteor Fleischli Pro Forma
Industries Oil Co. Adjustments Pro Forma
ASSETS ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,142,036 $ 154,201 $(2,295,237)(a) $ 1,000
Restricted cash 650,003 -- (385,248)(a) 264,755
Accounts receivable-trade,
net of allowance 5,363,699 5,476,164 -- 10,839,863
Accounts receivable,
related party 61,994 -- -- 61,994
Notes receivable,
related party 971,368 -- -- 971,368
Inventory 1,187,041 2,137,279 -- 3,324,320
Other current assets 164,630 -- -- 164,630
Total current assets 10,540,771 7,767,644 (2,680,485) 15,627,930
Property, plant and
equipment 14,269,557 8,043,256 912,000(b) 23,224,813
Accumulated depreciation (6,026,178) (4,254,156) -- (10,280,334)
Total property 8,243,379 3,789,100 912,000 12,944,479
OTHER ASSETS
Notes receivable,
related party 1,071,515 -- (1,071,515)(a) --
Investments in closely
held business 1,267,047 -- -- 1,267,047
Other assets 594,300 167,030 -- 761,330
Total other assets 2,932,862 167,030 (1,071,515) 2,028,377
TOTAL ASSETS $21,717,012 $11,723,774 $(2,840,000) $30,600,786
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
METEOR INDUSTRIES, INC.
PRO FORMA COMBINED
BALANCE SHEET
JUNE 30, 1997
Meteor Fleischli Pro Forma
Industries Oil Co. Adjustments Pro Forma
----------- ----------- --------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 2,942,767 $ 5,184,204 $ -- $ 8,126,971
Bank overdraft -- -- -- --
Current portion,
long-term debt 1,987,014 -- -- 1,987,014
Accrued expenses 211,639 27,729 -- 239,368
Taxes payable 1,017,915 112,166 -- 1,130,081
Revolving credit facility -- 700,000 1,000,000(a) 1,700,000
Total current liabilities 6,159,335 6,024,099 1,000,000 13,183,434
Long-term debt 309,771 1,871,437 -- 2,181,208
Deferred tax liability 1,716,670 (11,762) -- 1,704,908
Minority interest in
subsidiaries 4,502,311 -- -- 4,502,311
STOCKHOLDERS' EQUITY
Common stock 4,130 517,755 (517,755)(c) 4,130
Paid-in capital 6,352,399 (712,633) 712,633 (c) 6,352,399
Retained earnings 2,672,396 4,034,878 (4,034,878)(c) 2,672,396
Total stockholders' equity 9,028,925 3,840,000 (3,840,000) 9,028,925
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $21,717,012 $11,723,774 $(2,840,000) $30,600,786
</TABLE>
Pro Forma Adjustments
(a) Entry to reflect acquisition for $4,752,000. Purchase Price was paid
with cash on hand, collection of note receivable and borrowings on revolving
credit facility. Cash proceeds from a recent offering of public stock had
temporarily been used to reduce the revolving credit facility.
(b) Entry to reflect step up in basis of assets to reflect purchase price.
(c) Entry to reflect elimination of Fleischli equity.
-4-
<PAGE>
METEOR INDUSTRIES, INC.
PRO FORMA COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Meteor Fleischli Pro Forma
Industries Oil Co. Adjustments Pro Forma
REVENUES ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Sales $28,160,264 $40,291,837 $ -- $68,452,101
Cost of Sales 23,606,022 35,591,099 (42,500)(1) 59,154,621
Gross Profit 4,554,242 4,700,738 42,500 9,297,480
EXPENSES
Selling, General and
Administrative 4,001,287 4,274,055 (321,366)(2) 7,953,976
Amortization 27,697 -- -- 27,697
Depreciation 411,334 286,170 30,500 (3) 728,004
Total expenses 4,440,318 4,560,225 (290,866) 8,709,677
Income from operations 113,924 140,513 333,366 587,803
OTHER INCOME AND (EXPENSES)
Interest income 230,732 -- -- 230,732
Interest expense (202,627) (144,038) -- (346,665)
Other 497,290 3,525 -- 500,815
Gain on sale of assets 45,350 -- -- 45,350
Total other income 570,745 (140,513) -- 430,232
Income before taxes 684,669 -- 333,366 1,018,035
Provision for income taxes 267,021 -- 130,033(4) 397,054
Income before minority interest 417,648 -- 203,333 620,981
Minority Interest 200,860 -- -- 200,860
Net Income $ 216,788 $ -- $ 203,333 $ 420,121
Net income per share $ 0.06 $ -- $ 0.12
Weighted average shares 3,511,895 27,860 3,511,895
Pro forma adjustments:
(1) Reduction in cost of sales due to combined volume discount $ 42,500
(2) Bonus and salary to previous owners which will not be continued $ 321,366
(3) Additional depreciation to reflect step up in basis $ 30,500
(4) Tax effect of the above entries $ 130,033
</TABLE>
-5-
<PAGE>
METEOR INDUSTRIES, INC.
PRO FORMA COMBINED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
Meteor Fleischli Pro Forma
Industries Oil Co. Adjustments Pro Forma
REVENUES ----------- ----------- -------------- ------------
Sales $59,984,499 $86,808,604 $ -- $146,793,103
Cost of Sales 49,644,010 77,567,549 (85,000)(1) 127,126,559
Gross Profit 10,340,489 9,241,055 85,000 19,666,544
EXPENSES
Selling, General and
Administrative 8,269,292 8,371,524 (545,000)(2) 16,095,816
Amortization 85,956 -- -- 85,956
Depreciation 763,651 557,485 61,000 (3) 1,382,136
Total expenses 9,118,899 8,929,009 (484,000) 17,563,908
Income from operations 1,221,590 312,046 569,000 2,102,636
OTHER INCOME AND (EXPENSES)
Interest income 361,271 85,941 -- 447,212
Interest expense (474,136) (223,209) -- (697,345)
Other 34,323 -- -- 34,323
Total other income (78,542) (137,268) -- (215,810)
Income before taxes 1,143,048 174,778 569,000 1,886,826
Provision for income taxes 394,745 44,685 221,000(4) 660,430
Income before minority
interest 748,303 130,093 348,000 1,226,396
Minority interest 286,505 -- -- 286,505
Net Income $ 461,798 $ 130,093 $ 348,000 $ 939,891
Net income per share $ 0.15 $ 4.67 -- $ 0.30
Weighted average shares 3,184,397 27,860 -- 3,184,397
Pro forma adjustments:
(1) Reduction in cost of sales due to combined volume discount $ 85,000
(2) Bonus and salary to previous owners which will not be continued $545,000
(3) Additional depreciation to reflect step up in basis $ 61,000
(4) Tax effect of the above entries $221,000
-6-
<PAGE>
(c) Exhibits.
Exhibit 10* Stock purchase agreement, dated
July 31, 1997, by and among Meteor
Industries, Inc., Pyramid Stores,
Inc., Fleischli Oil Company, Inc.,
Gus Fleischli, Jerry Loghry and
Robert Jensen
*Previously filed.
-7-
<PAGE>
Fleischli Oil Company, Inc.
Balance Sheets
February 28, 1997 and February 29, 1996
ASSETS
1997 1996
(Unaudited) (Unaudited)
---------- ----------
Current Assets
Cash (Note 12) $ 718,711 $ 288,073
Receivables:
Trade, less allowance for doubtful
accounts 1997 $267,654,1996 $337,901
(Notes 3,5, and 9) 4,301,193 4,855,865
Inventories (Notes 2, 3, and 5) 2,387,659 2,365,293
Prepaid Expenses -- 19,498
Deferred Income Taxes (Note 11) 260,866 209,859
Income Taxes Receivable -- 164,392
Total Current Assets 7,668,429 7,902,980
Investment and Long Term Receivable:
Note receivable, less current portion 61,002 --
Investment, Cash Surrender Value of
Officers life insurance 103,042 94,246
164,044 94,246
Property and Equipment (Notes 3, 4 and 5)
Land 436,379 452,369
Buildings and Improvements 1,742,244 1,734,548
Equipment 4,596,987 4,096,517
Leasehold interest in equipment 761,105 1,097,594
7,536,715 7,381,028
Less: Accumulated depreciation, including
amounts applicable to assets being acquired
under capital leases 1997 $329,835; 1995
$518,131 4,122,258 3,715,661
3,414,457 3,665,367
$11,246,930 $11,662,593
See notes to financial statements.
F-1
<PAGE>
Fleischli Oil Company, Inc.
Balance Sheets (Continued)
February 29, 1997 and February 28, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
(Unaudited) (Unaudited)
---------- ----------
CURRENT LIABILITIES
Notes Payable, shareholders (note 3) $ 200,000 $ 200,000
Current maturities of long-term
debt (note 5) 221,923 175,752
Current obligations under capital
leases (note 4) 199,634 199,634
Accounts payable (Note 9) 4,213,053 4,426,922
Accrued Expenses 1,035,231 282,744
Income Taxes Payable 26,895 --
Total current liabilities 5,896,736 5,285,052
Long-term debt
Notes payable, less current
maturities (Note 5) 1,040,944 863,406
Obligation under capital leases, less
current maturities (Note 4) 219,653 376,831
Notes payable (Notes 3 and 5) -- 900,000
1,260,597 2,140,237
Deferred Income taxes (Note 11) 249,104 191,086
Commitments (Notes 7 and 8)
Stockholders' Equity (Note 8)
Common Stock, no par value, authorized
200,000 shares, issued 27,860 shares;
outstanding 1997 22,743; 1996 24,430 716,120 716,120
Retained earnings 4,034,887 3,904,794
4,751,007 4,620,914
Less cost of treasury stock 1997
5,117 shares; 1996 3,430 shares 910,514 574,696
3,840,493 4,046,218
$11,246,930 $11,662,593
See notes to financial statements.
F-2
<PAGE>
Fleischli Oil Company, Inc.
Statements of Income
For the year ended February 29, 1997 and the six months
ended February 29, 1996
1997 1996
(Unaudited) (Unaudited)
Net Sales (Note 9) $86,485,484 $39,779,541
Cost of Goods Sold (Note 9) 77,567,549 35,732,950
Gross Profit 8,917,935 4,046,591
Other Operating Revenue 323,120 324,487
OPERATING EXPENSES:
Warehouse and delivery 4,492,385 2,445,546
Selling 217,344 99,156
General and Administrative 4,219,280 1,671,893
8,929,009 4,216,595
Operating Income 312,046 154,483
Financial income (Expenses):
Interest income 85,941 43,759
Interest (Expense) (223,209) (107,756)
(137,268) (63,997)
Income before income taxes 174,778 90,486
Federal and state income taxes (credits):
Current 37,674 13,398
Deferred 7,011 14,703
44,685 28,101
Net income $ 130,093 $ 62,385
Net income per share $ 4.67 $ 2.24
See Notes to Financial Statements.
F-3
<PAGE>
Fleischli Oil Company, Inc.
Statements of Stockholders' Equity
For the Year Ended February 28, 1997 and the six months Ended
February 29,1996
(Unaudited)
Common Retained Treasury
Stock Earnings Stock
Balance, August 31, 1995 $ 609,320 $3,842,409 $ 544,056
Net income -- 62,385 --
Purchase of 810 shares of common
stock for treasury -- -- 194,490
Sale of 1,130 shares of treasury
stock 106,800 -- (163,850)
Balance, February 29, 1996 716,120 3,904,794 574,696
Net income -- 130,093 --
Purchase of 1,958 shares of common
stock for treasury -- -- 335,818
Balance, February 29, 1997 $716,120 $4,034,887 $ 910,514
See Notes to Financial Statements.
F-4
<PAGE>
Fleischli Oil Company, Inc.
Statements of Cash Flows
For the Year Ended February 28, 1997 and the six months ended
February, 1996
1997 1996
(Unaudited) (Unaudited)
Cash Flows from Operating Activities
Net income $ 130,093 $ 62,385
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation 542,030 305,537
Amortization 15,455 7,728
Provision for doubtful accounts 36,000 18,000
(Gain) on sale of property and equipment
and other asset (13,403) (25,357)
Deferred income taxes 7,011 14,703
Change in assets and liabilities:
(Increase) decrease in:
Trade receivables 520,953 (108,993)
Inventories (22,366) (110,603)
Prepaid expenses 19,498 8,622
Income taxes receivable 164,392 (164,392)
Increase (decrease) in:
Accounts payable and accrued expenses 538,618 (454,081)
Income taxes payable 26,895 (468,147)
Net cash provided by (used in)operating
activities 1,965,176 (914,598)
Cash Flows from Investing Activities
Disbursement on note receivable (65,000) --
Payments received on note receivable 1,717 --
Proceeds from sale of property and equipment
and other assets 93,288 26,250
Purchase of property and equipment (386,460) (294,911)
Increase in cash surrender value of
officers' life insurance (8,796) (9,680)
Net cash (used in) investing activities (365,251) (278,341)
Cash Flows from Financing Activities
Principal payments on borrowings, including
capital lease obligations (5,933,469) (2,251,779)
Proceeds from borrowings 5,100,000 3,000,000
Purchase of common stock for the treasury (335,818) (194,490)
Proceeds from sale of treasury stock -- 270,650
Net cash provided by (used in) financing
activities (1,169,287) 824,381
Net increase (decrease) in cash $ 430,638 $ (368,558)
Cash:
Beginning 288,073 656,631
Ending $ 718,711 $ 288,073
F-5
<PAGE>
Fleischli Oil Company, Inc.
Statements of Cash Flows
For the year ended February 29, 1997 and the six months
ended February 29, 1996
(Continued)
1997 1996
(Unaudited) (Unaudited)
Supplemental Disclosures of Cash Flow
Information:
Cash payments (receipts) for:
Interest $ 216,248 $ 103,143
Income taxes (153,613) 645,937
Supplemental Schedule of Noncash Investing
and Financing Activities
Capital lease obligation incurred
for use of equipment -- 100,928
See Notes to Financial Statements.
F-6
<PAGE>
Fleischli Oil Company, Inc.
Notes to Financial Statements
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: The Company's operations are principally in the
distribution of petroleum products to entities operating in the construction
and extractive industries in Wyoming, Colorado, Utah and Nevada.
A summary of the Company's significant accounting policies follows:
Fiscal year: Beginning February 29, 1996, the Company adopted a fiscal year
ending on the last day of February. Previously, the Company's fiscal year
ended on the last day of August.
Inventories: The inventories are stated at the lower of cost (last-in,
first-out method) or market. The use of the last-in, first-out method of
determining the cost of inventories, which was adopted for the year ended
August 31, 1979, had the effect of decreasing the inventories by $251,666 and
$237,085 at February 28, 1997 and February 29, 1996, respectively, and
decreasing net income by $14,613 for the year ended February 28, 1997 and
$31,540 for the six months ended February 29, 1996, as compared to what they
would have been under the first-in, first-out method.
Property and equipment: Property and equipment is stated at cost and
depreciated over estimated service lives primarily by the straight-line
method.
Maintenance and repairs are charged to operations and major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts and any gain or loss is included in operations.
The depreciation expense on assets being acquired under capital leases is
included with the depreciation expense on owned assets.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
Estimates: The preparation of financial statements in conformity with
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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. INVENTORIES
The reduction of inventory quantities during the year ended February 28, 1997
resulted in liquidations of LIFO inventory quantities carried at costs
F-7
<PAGE>
prevailing in prior years which were lower than current costs. The effect of
this reduction was to increase net income by approximately $8,745 for the year
ended February 28, 1997.
NOTE 3. NOTES PAYABLE
The Company has a $2,500,000 line of credit with a bank secured by inventory,
accounts receivable, equipment, general intangibles and the personal
guarantees of the Company's major shareholders, bearing interest at New York
Citibank prime (8.25% at February 28, 1997) plus .5%, maturing July 31, 1997.
The available credit at February 28, 1997 was $2,500,000. The line-of-credit
advances are subject to borrowing base limitations as follows: accounts
receivable - 75% with receivables greater than 60 days excluded, and inventory
- - 50%. See Note 5 for discussion of loan covenants.
The Company also has unsecured notes payable to the spouse of a major
stockholder in the amount of $200,000. The notes bear interest at New York
Citibank prime (8.25% at February 28, 1997) plus .5% and is due on demand.
Interest expense was $17,441 and $9,048 for the year ended February 28, 1997
and the six months ended February 29, 1996, respectively.
NOTE 4. CAPITAL LEASES
The Company leases nine units of mobile equipment and computer equipment under
noncancelable capital lease agreements. The leases expire through November,
1999. The equipment and the related liability under the capital leases were
recorded at the present value or the future payments due under the leases, as
determined using various interest rates ranging from 3.75% to 10.96% Seven
units of the mobile equipment are leased from related parties.
The following is a schedule by years of the future minimum lease payments due
under the capital leases, together with the net present value of the minimum
lease payments as of February 28, 1997:
1998 $199,634
1999 191,270
2000 78,927
Total minimum lease payments 469,831
Less amount representing interest 50,544
Net present value of minimum lease payments $419,287
Interest expense applicable to the related-party leases was $33,003 and
$20,287 for the year ended February 28, 1997 and the six months ended February
29, 1996.
NOTE 5. LONG-TERM DEBT
Long-term debt at February 28, 1997 consists of the following:
Note payable to bank, due in monthly installments
of $15,695 plus interest at the New York Citibank
prime, currently 8.25%, plus .75%, through January,
2000, collateralized by inventory, accounts receivable,
equipment, and rolling stock and the personal guarantees
of the Company's major shareholders $ 479,457
F-8
<PAGE>
Note payable to bank, due in monthly installments
of $6,259, including interest at the Wall Street
Journal prime, currently 8.25%, plus .5%, through
November, 2002, collateralized by real estate and
the personal guarantees of the Company's
major shareholders $ 386,241
Uncollateralized note payable to a major supplier,
due in monthly installments of $4,853 plus interest
at prime, currently 6.5%, plus 1.5%, through December,
2006 397,169
1,262,867
Less current maturities 221,923
Long-term portion $1,040,944
In connection with the bank notes payable (see Note 3) and long-term debt, the
Company has agreed, among other things, to: (1) maintain a ratio of total
liabilities to tangible net worth of less than 2.5 to 1; (2) maintain a ratio
of current assets to current liabilities of 1.2 to 1; and (3) maintain a
minimum global debt service coverage (as defined in the loan agreement) of 1.5
to 1.
Aggregate maturities required on long-term notes payable (see Note 3) and debt
at February 28, 1997 are as follows:
1998 $ 221,923
1999 242,327
2000 246,168
2001 90,910
2002 98,573
Later years 362,966
$1,262,867
NOTE 6. DISCRETIONARY BONUSES
The Company pays discretionary bonuses to their officers and key employees.
The amounts of these bonuses charged to general and administrative expenses
were $647,884 and none for the periods ended February 28, 1997 and February
29, 1996, respectively.
NOTE 7. LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE
The Company leases a commercial office building from a related party under an
operating lease agreement expiring July 1, 2005, with the option to renew for
an additional five years. The agreement requires the Company to pay all
property taxes, repairs and maintenance and insurance on the property. The
Company has the option at any time during the lease term, including any
subsequent extension of the lease, to purchase the property at the appraised
value at the date the option is exercised, less 25% of the lease payments made
from the inception of the lease.
The total minimum rental commitment at February 28, 1997 under the lease is
due as follows:
F-9
<PAGE>
During the next five years $ 171,500
During the remaining term of the lease 131,200
$ 302,700
Additionally, the Company has leased various trucks and autos under operating
leases which expire through September, 1999 and require various minimum
monthly rentals. The total minimum rental commitment at February 28, 1997
under the agreements of $148,301 is due as follows:
1998 $ 57,407
1999 57,407
2000 33,487
$ 148,301
The Company also leases various equipment under separate, short-term lease
agreements.
The total rental expense included in the income statements for the year ended
February 28, 1997 and the six months ended February 29, 1996 is $273,220 and
$144,118, respectively, with $32,400 and $28,458 being with related parties.
NOTE 8. STOCK REPURCHASE AGREEMENT
The Company and its stockholders have entered into stock repurchase agreements
under which, upon the death of the stockholder or their desire to dispose of
their stock, the Company must purchase the shares of its common stock owned by
the stockholder. There are 11,676 outstanding shares subject to the agreement
at February 28, 1997.
The Company has entered into repurchase agreements with employee stockholders
which require the Company to repurchase stock upon termination of employment.
The per share repurchase price as determined by the formula contained in the
agreements, utilizing the February 28, 1997 financial statements, is $196.
There are 11,066 outstanding shares subject to these agreements at February
28, 1997.
NOTE 9. MAJOR CUSTOMERS AND SUPPLIERS
Net sales for the year ended February 28, 1997 and the six months ended
February 29, 1996 included sales to the following major customers:
Sales for the period ending: February 28, February 29
1997 1996
Customer A $17,709,679 $10,796,617
Customer B* 8,615,978 7,518,913
$26,325,657 $18,315,530
F-10
<PAGE>
Trade receivable balance:
February 28, February 29
1997 1996
Customer A $ 662,171 $ 722,838
Customer B* 85,819 646,938
$ 747,990 $ 1,369,776
* This customer did not renew its contract with the Company during the year
ended February 28, 1997.
Cost of goods sold for the year ended February 28, 1997 and the six months
ended February 29, 1996, included purchases from two major suppliers of
$62,095,299 and $28,613,095, respectively. Accounts payable for these
suppliers at February 28, 1997 and February 29, 1996 were $1,904,734 and
$807,763, respectively.
The Company has entered into a long-term fuel purchase and supply contract
expiring December 31, 2004. The contract requires the Company to purchase an
estimated 21,575,000 gallons of fuel per year from one of its major suppliers
to be delivered to the Company's major customer (that the Company has been
doing business with for the past nine years). The estimated contract value,
based on the estimated quantities and unit rates as detailed in the contract,
is $180,000,000.
NOTE 10. ENVIRONMENTAL CLEAN-UP OBLIGATIONS
The Company is in the remediation process of subsurface contamination at one
owned site. The Company has accrued and charged to expense the estimated
remaining remediation costs.
Due to the nature of the Company's business, it is always susceptible to
environmental clean-up obligations. However, management is not presently
aware of any unasserted environmental clean-up obligations that it considers
likely of assertion and that, if asserted, would have a reasonable likelihood
of having a material adverse impact on the Company.
NOTE 11. INCOME TAX MATTERS
Net deferred tax assets consist of the following components as of February 28,
1997 and February 29, 1996:
1997 1996
Current deferred tax assets:
Inventory lower of cost or market adjustments $ 46,037 $ 41,754
Inventory uniform capitalization 14,933 14,935
Allowance for bad debt 95,729 120,853
Accrued vacation 25,930 24,611
Other assets 52,440 7,706
Alternative minimum tax credit 25,797 --
260,866 209,859
Noncurrent deferred tax liabilities:
Property and equipment depreciation (249,104) (191,086)
$ 11,762 $ 18,773
F-11
<PAGE>
NOTE 12. OFF-BALANCE-SHEET RISK
The Company has an off-balance-sheet risk arising from the cash balance in two
bank accounts. The total cash balance exceeds the federally insured limit of
$100,000 by approximately $425,268 at February 28, 1997.
F-12
<PAGE>
Fleischli Oil Company, Inc.
Balance Sheets
February 29, 1996 and August 31, 1995
ASSETS
1996 1995
(Unaudited) (Unaudited)
Current Assets
Cash (Note 12) $ 288,073 $ 656,631
Receivables:
Trade, less allowance for doubtful
accounts 1996 $337,901; $319,568
(Notes 3,5, and 9) 4,855,865 4,764,872
Inventories (Notes 2, 3, and 5) 2,365,293 2,254,690
Prepaid Expenses 19,498 28,120
Deferred Income Taxes (Note 11) 209,859 207,782
Income Taxes Receivable 164,392 --
Total Current Assets 7,902,980 7,912,095
Investment, Cash Surrender Value of
Officers life insurance 94,246 84,566
Property and Equipment (Notes 3, 4 and 5)
Land 452,369 452,369
Buildings and Improvements 1,734,548 1,705,601
Equipment 4,096,517 3,901,777
Leasehold interest in equipment 1,097,594 996,666
Less: Accumulated depreciation, including
amounts applicable to assets being acquired
under capital leases 1996 $518,131; 1995
$412,691 3,715,661 3,472,727
3,665,367 3,583,686
$11,662,593 $11,580,347
See notes to financial statements.
F-13
<PAGE>
Fleischli Oil Company, Inc.
Balance Sheets (Continued)
February 29, 1996 and August 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
(Unaudited) (Unaudited)
CURRENT LIABILITIES
Notes Payable, shareholders (note 3) $ 200,000 $ 200,000
Current maturities of long-term
debt (note 5) 175,752 168,092
Current obligations under capital
leases (note 4) 199,634 175,079
Accounts payable (Note 9) 4,426,922 4,230,043
Accrued Expenses 282,744 933,704
Income Taxes Payable -- 468,147
Total current liabilities 5,285,052 6,175,065
Long-term debt
Notes payable, less current maturities
(Note 5) 863,406 951,995
Obligation under capital leases, less
current maturities (Note 4) 376,831 371,308
Notes payable (Notes 3 and 5) 900,000 --
2,140,237 1,323,303
Deferred Income taxes (Note 11) 191,086 174,306
Commitments (Notes 7 and 8)
Stockholders; Equity (Note 8)
Common Stock, no par value, authorized
200,000 shares, issued 27,860 shares 716,120 609,320
Retained earnings 3,904,794 3,842,409
4,620,914 4,451,729
Less cost of treasury stock 1996
3,430 shares; 1995 3,750 shares 574,696 544,056
4,046,218 3,907,673
$11,662,593 $11,580,347
See notes to financial statements.
F-14
<PAGE>
Fleischli Oil Company, Inc.
Statement of Income
Six months ended February 29, 1996 and the year ended August 31, 1995
1996 1995
(Unaudited) (Unaudited)
Net Sales (Note 9) $39,779,541 $74,125,575
Cost of Goods Sold (Note 9) 35,732,950 65,199,402
Gross Profit 4,046,591 8,926,173
Other Operating Revenue 324,487 744,320
OPERATING EXPENSES:
Warehouse and delivery 2,445,546 4,223,152
Selling 99,156 139,691
General and Administrative 1,671,893 3,602,664
4,216,595 7,965,507
Operating Income 154,483 1,704,986
Financial income (Expenses):
Interest income 43,759 84,260
Interest (Expense) (107,756) (181,862)
(63,997) (97,602)
Income before income taxes 90,486 1,607,384
Federal and state income taxes (credits):
Current 13,398 539,119
Deferred 14,703 20,249
28,101 559,368
Net income $ 62,385 $1,048,016
Net income per share $ 2.24 $ 37.62
See Notes to Financial Statements.
F-15
<PAGE>
Fleischli Oil Company, Inc.
Statements of Stockholders' Equity
Six months ended February 29, 1996 and the year ended August 31, 1995
(Unaudited)
Common Retained Treasury
Stock Earnings Stock
Balance, August 31, 1994 $ 593,372 $2,794,393 $ 484,178
Net income 1,048,016
Purchase of 1,756 shares of common
stock for treasury 273,608
Sale of 1,474 shares of treasury
stock 15,948 (213,730)
Balance, August 31, 1995 609,320 3,842,409 544,056
Net income 62,385
Purchase of 810 shares of common
stock for treasury 194,490
Sale of 1,130 shares of treasury
stock 106,800 (163,850)
Balance, February 29, 1996 $716,120 $3,904,794 $574,696
See Notes to Financial Statements.
F-16
<PAGE>
Fleischli Oil Company, Inc.
Statements of Cash Flows
Six Months Ended February 29, 1996 and the Year Ended August 31, 1995
1996 1995
(Unaudited) (Unaudited)
Cash Flows from Operating Activities
Net income $ 62,385 $1,048,016
Adjustments to reconcile net income to
net cash provided by (used in)operating
activities:
Depreciation 305,537 460,006
Amortization 7,728 15,455
Provision for doubtful accounts 18,000 36,000
(Gain) on sale of property and equipment
and other asset (25,357) (8,070)
Deferred income taxes 14,703 (20,249)
Change in assets and liabilities:
(Increase) decrease in:
Trade receivables (108,993) 276,873
Inventories (110,603) 529,706
Prepaid expenses 8,622 (9,641)
Income taxes receivable (164,392) 83,123
Increase (decrease) in:
Accounts payable and accrued expenses (454,081) 192,984
Income taxes payable (468,147) 468,147
Net cash provided by (used in) operating
activities (914,598) 2,053,436
Cash Flows from Investing Activities
Proceeds from sale of property and equipment
and other assets 26,250 21,407
Purchase of property and equipment (294,911) (683,301)
Increase in cash surrender value of
officers' life insurance (9,680) (9,253)
Net cash (used in) investing activities (278,341) (671,147)
Cash Flows from Financing Activities
Principal payments on borrowings, including
capital lease obligations (2,251,779) (4,616,019)
Proceeds from borrowings 3,000,000 3,550,956
Purchase of common stock for the treasury (194,490) (273,608)
Proceeds from sale of treasury stock 270,650 229,678
Net cash provided by (used in) financing
activities 824,381 (1,108,993)
Net increase (decrease) in cash $ (368,558) $ 273,296
Cash:
Beginning 656,631 383,335
Ending $ 288,073 $ 656,631
F-17
<PAGE>
Fleischli Oil Company, Inc.
Statements of Cash Flows
Six Months Ended February 29, 1996 and the Year Ended August 31, 1995
(Continued)
1996 1995
(Unaudited) (Unaudited)
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest $ 103,143 $ 181,937
Income taxes 645,937 53,370
Supplemental Schedule of Noncash Investing
and Financing Activities
Capital lease obligation incurred
for use of equipment 100,928 349,565
See Notes to Financial Statements.
F-18
<PAGE>
Fleischli Oil Company, Inc.
Notes to Financial Statements
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: The Company's operations are principally in the
distribution of petroleum products to entities operating in the construction
and extractive industries in Wyoming, Colorado, Utah and Nevada.
A summary of the Company's significant accounting policies follows:
Fiscal year: Beginning February 29, 1996, the Company adopted a fiscal year
ending on the last day of February. Previously, the Company's fiscal year
ended on the last day of August.
Inventories: The inventories are stated at the lower of cost (last-in,
first-out method) or market. The use of the last-in, first-out method of
determining the cost of inventories, which was adopted for the year ended
August 31, 1979, had the effect of decreasing the inventories by $237,085 and
$205,513 at February 29, 1996 and August 31, 1995, respectively, and
decreasing and increasing net income by $31,540 and $455,720 for the six
months ended February 29, 1996 and year ended August 31, 1995, respectively,
as compared to what they would have been under the first-in, first-out method.
Property and equipment: Property and equipment is stated at cost and
depreciated over estimated service lives primarily by the straight-line
method.
Maintenance and repairs are charged to operations and major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts and any gain or loss is included in operations.
The depreciation expense on assets being acquired under capital leases is
included with the depreciation expense on owned assets.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
Estimates: The preparation of financial statements in conformity with
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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
The reduction of inventory quantities in 1995 resulted in liquidations of LIFO
inventory quantities carried at costs prevailing in prior years which were
lower than current costs. The effect of this reduction was to increase net
income by approximately $18,500 for the year ended August 31, 1995.
F-19
<PAGE>
NOTES PAYABLE
The Company has a $1,750,000 line of credit with a bank secured by inventory,
accounts receivable, equipment, general intangibles and the personal
guarantees of the Company's major shareholders, bearing interest at New York
Citibank prime (8.25% at February 29, 1996) plus .5%, maturing July 31, 1997.
The available credit at August 31, 1995 was $850,000. The line-of-credit
advances are subject to borrowing base limitations as follows: accounts
receivable - 75% with receivables greater than 60 days excluded, and inventory
- - 50%. See Note 5 for discussion of loan covenants.
At February 29, 1996, the Company has unsecured notes payable to a major
stockholder in the amount of $200,000. The notes bear interest at New York
Citibank prime (8.25% at February 29, 1996) plus .5% and are due on demand.
Interest expense was $9,048 and $18,334 for the six months ended February 29,
1996 and the year ended August 31, 1995, respectively.
CAPITAL LEASES
The Company leases seven units of mobile equipment from related parties that
are being acquired under capital leases. The leases expire through June,
1999. The mobile equipment and the related liability under the capital leases
were recorded at the present value of the future payments due under the
leases, as determined using various interest rates ranging from 8.76% to
10.96%.
The following is a schedule by years of the future minimum lease payments due
under the capital leases, together with the net present value of the minimum
lease payments as of February 29, 1996:
1997 $199,634
1998 199,634
1999 191,270
2000 76,220
Total minimum lease payments 666,758
Less amount representing interest 90,293
Net present value of minimum lease payments $576,465
Interest expense applicable to the related-party leases was $20,287 and
$22,049 for the six months ended February 29, 1996 and the year ended August
31, 1995, respectively.
LONG TERM DEBT
Long term debt at February 29, 1996 consists of the following:
Note payable to bank, due in monthly installments
of $15,695 plus interest at the New York Citibank prime,
currently 8.5%, plus .75%, through January, 2000, collat-
eralized by inventory, accounts receivable, equipment,
and rolling stock and the personal guarantees of the
Company's major shareholders $615,742
Note payable to bank, due in monthly installments of
$6,259, including interest at the Wall Street Journal
F-20
<PAGE>
prime, currently 8.75%, plus .5%, through November,
2002, collateralized by real estate and the personal
guarantees of the Company's major shareholders 423,416
1,039,158
Less current maturities 175,752
Long term portion 863,406
In connection with the bank notes payable (see Note 3) and long term debt, the
Company has agreed, among other things, to: (1)maintain a ratio of total
liabilities to tangible net worth of less than 2.5 to 1; (2)maintain a ratio
of current assets to current liabilities of 1.2 to 1; and (3)maintain a
minimum global debt service coverage (as defined in the loan agreement) of 1.5
to 1.
Aggregate maturities required on long-term notes payable (see Note 3) and debt
at February 29, 1996 are as follows:
1997 $ 175,752
1998 1,092,833
1999 210,891
2000 215,243
2001 55,707
Later years 188,732
$1,939,158
PROFIT SHARING PLAN
The Company has a 401(k) Profit Sharing Plan with eligibility requirements of
21 years of age and one year of service. The Plan provides for employee
contributions not to exceed legal limitations, a discretionary employer
matching contribution, and a discretionary profit-sharing contribution. The
Company did not make any contributions to the Plan for the six months ended
February 29, 1996 or the year ended August 31, 1995.
LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE
The Company has leased a commercial office building from a related party under
an operating lease agreement expiring July 1, 2005, with the option to renew
for an additional five years. The agreement requires the Company to pay all
property taxes, repairs and maintenance and insurance on the property. The
Company has the option at any time during the lease term, including any
subsequent extension of the lease, to purchase the property at the appraised
value at the date the option is exercised, less 25% of the lease payments made
from the inception of the lease.
The total minimum rental commitment at February 29, 1996 under the lease is
due as follows:
During the next five years $165,500
During the remaining term of the lease 169,600
$335,100
Additionally, the Company has leased various trucks and autos under operating
leases which expire through September, 1999 and require various minimum
monthly rentals. The total minimum rental commitment at February 29, 1996
under the agreements of $250,756 is due as follows:
F-21
<PAGE>
Year ending August 31:
1997 $102,455
1998 57,407
1999 57,407
2000 33,487
$250,756
The Company also leases various equipment under separate, short-term lease
agreements.
The total rental expense included in the income statements for the six months
ended February 29, 1996 and the year ended August 31, 1995 is $144,118 and
$241,781, respectively, with $28,458 and $42,173 being with related parties.
STOCK REPURCHASE AGREEMENT
The Company and its stockholders have entered into stock repurchase agreements
under which, upon the death of the stockholder or their desire to dispose of
their stock, the Company must purchase the shares of its common stock owned by
the stockholder. There are 11,684 outstanding shares subject to the agreement
at February 29, 1996.
The Company has entered into repurchase agreements with employee stockholders
which require the Company to repurchase stock upon termination of employment.
The per share repurchase price as determined by the formula contained in the
agreement, utilizing the February 29, 1996 financial statements, is $191.
There are 12,746 outstanding shares subject to these agreements.
MAJOR CUSTOMERS AND SUPPLIERS
Net sales for the six months ended February 29, 1996 and the year ended August
31, 1995 included sales to two major customers totaling $18,315,530 and
$28,613,696, respectively. Trade accounts receivable from these customers at
February 29, 1996 and August 31, 1995 were $1,369,776 and $792,587,
respectively.
Cost of goods sold for the six months ended February 29, 1996 and the year
ended August 31, 1995 included purchases from two major suppliers of
$28,613,095 and $49,025,482, respectively. Accounts payable for these
suppliers at February 29, 1996 and August 31, 1995 were $807,763 and
$1,760,982, respectively.
The Company has entered into a long term fuel purchase and supply contract
expiring December 31, 2004. The contract requires the Company to purchase an
estimated 21,575,000 gallons of fuel per year from one of its major suppliers
to be delivered to one of the Company's major customers (that the Company has
been doing business with for the past nine years). The estimated contract
value, based on the estimated quantities and unit rates as detailed in the
contract, is $180,000,000.
ENVIRONMENTAL CLEAN UP OBLIGATIONS
The Company is in the remediation process of subsurface contamination at one
owned site. The Company has accrued and charged to expense, net of amounts
recoverable from the prior owner of the site, the estimated remaining
remediation costs.
F-22
<PAGE>
Due to the nature of the Company's business, it is always susceptible to
environmental clean-up obligations. However, management is not presently
aware of any unasserted environmental clean-up obligations that it considers
likely of assertion and that, if asserted, would have a reasonable likelihood
of having a material adverse impact on the Company.
INCOME TAX MATTERS
Net deferred tax assets consist of the following components as of February 29,
1996 and August 31, 1995:
1996 1995
Current deferred tax assets:
Inventory lower of cost or market
adjustments $ 41,754 $ 10,242
Inventory uniform capitalization 14,935 13,894
Allowance for bad debt 120,853 114,297
Accrued vacation 24,611 24,284
Other assets 7,706 45,065
209,859 207,782
Noncurrent deferred tax liabilities:
Property and equipment depreciation (191,086) (174,306)
$ 18,773 $ 33,476
OFF-BALANCE-SHEET RISK
The Company has an off-balance-sheet risk arising from the cash balance in a
bank account. The cash balance exceeds the federally insured limit of
$100,000 per account by approximately $458,000 at February 29, 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
financial instruments:
Cash: The carrying amount of cash deposits is the fair value.
Notes payable and long term debt: The carrying value of notes payable and long
term debt is estimated to equal the fair value based on terms currently
available in the market.
F-23
<PAGE>
Fleischli Oil Company, Inc.
Balance Sheets
August 31, 1995 and 1994
ASSETS
1995 1994
(Unaudited) (Unaudited)
Current Assets
Cash (Note 12) $ 656,631 $ 383,335
Receivables:
Trade, less allowance for doubtful
accounts 1995 $319,568, 1994
$298,307 (Notes 3,5, and 9) 4,764,872 5,077,745
Inventories (Notes 2, 3, and 5) 2,254,690 1,724,984
Prepaid Expenses 28,120 18,479
Deferred Income Taxes (Note 11) 207,782 152,586
Income Taxes Receivable -- 83,123
Total Current Assets 7,912,095 7,440,252
Investment, Cash Surrender Value of
Officers life insurance 84,566 75,313
Property and Equipment (Notes 3, 4 and 5)
Land 452,369 452,369
Buildings and Improvements 970,296 922,310
Equipment 3,901,777 3,262,617
Leasehold interest in:
Land and Buildings 735,305 735,305
Equipment 996,666 698,102
7,056,413 6,070,703
Less: Accumulated depreciation, including
amounts applicable to assets being acquired
under capital leases 1995 $804,352; 1994
$417,630 3,472,727 3,031,085
3,583,686 3,039,618
$11,580,347 $10,555,183
See notes to financial statements.
F-24
<PAGE>
Fleischli Oil Company, Inc.
Balance Sheets (Continued)
August 31, 1995 and August 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994
(Unaudited) (Unaudited)
CURRENT LIABILITIES
Notes Payable, Bank (Note 3) $ -- $1,099,678
Notes Payable, shareholders (Note 3) 200,000 $ 200,000
Current maturities of long-term
debt (note 5) 168,092 145,468
Current obligations under capital
leases (note 4) 175,079 134,566
Accounts payable (Note 9) 4,230,043 4,084,492
Accrued Expenses 933,704 886,271
Income Taxes Payable 468,147 --
Total current liabilities 6,175,065 6,550,475
Long-term debt less current maturities
Notes payable, (Note 5) 951,995 773,138
Obligation under capital leases (Note 4) 371,308 229,122
1,323,303 1,002,260
Deferred Income taxes (Note 11) 174,306 98,861
Commitments (Notes 7 and 8)
Stockholders' Equity (Note 8)
Common Stock, no par value, authorized
200,000 shares, issued 27,860 shares 609,320 593,372
Retained earnings 3,842,409 2,794,393
4,451,729 3,387,765
Less cost of treasury stock 1995
3,750 shares; 1994 3,468 shares 544,056 484,178
3,907,673 2,903,587
$11,580,347 $10,555,183
See notes to financial statements.
F-25
<PAGE>
Fleischli Oil Company, Inc.
Statement of Income
Years ended August 31, 1995 and 1994
1995 1994
(Unaudited) (Unaudited)
Net Sales (Note 9) $74,125,575 $64,061,796
Cost of Goods Sold (Note 9) 65,199,402 57,769,717
Gross Profit 8,926,173 6,292,079
Other Operating Revenue 744,320 1,143,008
OPERATING EXPENSES:
Warehouse and delivery 4,223,152 3,843,417
Selling 139,691 145,136
General and Administrative 3,602,664 3,196,025
7,965,507 7,184,578
Operating Income 1,704,986 250,509
Financial income (Expenses):
Interest income 84,260 82,972
Interest (Expense) (181,862) (156,588)
(97,602) (73,616)
Income before income taxes 1,607,384 176,893
Federal and state income taxes (credits):
Current 539,119 71,528
Deferred 20,249 (21,961)
559,368 49,567
Net income $1,048,016 $ 127,326
Net income per share $ 37.62 $ 4.57
See Notes to Financial Statements.
F-26
<PAGE>
Fleischli Oil Company, Inc.
Statements of Stockholders' Equity
Years Ended August 31, 1995 and 1994
(Unaudited)
Common Retained Treasury
Stock Earnings Stock
Balance, August 31, 1993 $ 589,809 $2,667,067 $ 259,670
Net income 127,326
Purchase of 2,740 shares of common
stock for treasury 385,370
Sale of 1,134 shares of treasury
stock 3,563 (160,862)
Balance, August 31, 1994 593,372 2,794,393 484,178
Net income 1,048,016
Purchase of 1,756 shares of common
stock for treasury 273,608
Sale of 1,474 shares of treasury
stock 15,948 (213,730)
Balance, August 31, 1995 $609,320 $3,842,409 $544,056
See Notes to Financial Statements.
F-27
<PAGE>
Fleischli Oil Company, Inc.
Statements of Cash Flows
Years Ended August 31, 1995 and 1994
1995 1994
(Unaudited) (Unaudited)
Cash Flows from Operating Activities
Net income $1,048,016 $ 127,326
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 460,006 354,038
Amortization 15,455 11,591
Provision for doubtful accounts 36,000 36,000
(Gain) on sale of property and equipment
and other asset (8,070) (1,300)
Deferred income taxes 20,249 (21,960)
Change in assets and liabilities:
(Increase) decrease in:
Trade receivables 276,873 146,181
Inventories (529,706) 111,265
Prepaid expenses (9,641) (2,082)
Income taxes receivable 83,123 (83,123)
Increase (decrease) in:
Accounts payable and accrued expenses 192,984 629,425
Income taxes payable 468,147 (49,879)
Net cash provided by operating activities 2,053,436 1,257,482
Cash Flows from Investing Activities
Proceeds from sale of property and equipment
and other assets 21,407 2,700
Purchase of property and equipment (683,301) (696,191)
Increase in cash surrender value of
officers' life insurance (9,253) (9,390)
Net cash (used in) investing activities (671,147) (702,881)
Cash Flows from Financing Activities
Outstanding checks in excess of bank balance -- (334,617)
Principal payments on borrowings, including
capital lease obligations 4,616,019 (4,167,722)
Proceeds from borrowings 3,550,956 4,286,850
Purchase of common stock for the treasury (273,608) (385,370)
Proceeds from sale of treasury stock 229,678 164,425
Net cash (used in) financing activities (1,108,993) (436,434)
Net increase in cash $ 273,296 $ 118,167
Cash:
Beginning 383,335 265,168
Ending $ 656,631 $ 383,335
F-28
<PAGE>
Fleischli Oil Company, Inc.
Statements of Cash Flows
Years Ended August 31, 1995 and 1994
(Continued)
1995 1994
(Unaudited) (Unaudited)
Supplemental Disclosures of Cash Flow
Information:
Cash payments for:
Interest $ 181,937 $ 157,898
Income taxes 53,370 204,529
Supplemental Schedule of Noncash Investing
and Financing Activities
Capital lease obligation incurred
for use of equipment 349,565 310,613
See Notes to Financial Statements.
F-29
<PAGE>
Fleischli Oil Company, Inc.
Notes to Financial Statements
Years Ended August 31, 1995 and 1994
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: The Company's operations are principally in the
distribution of petroleum products to entities operating in the construction
and extractive industries in Wyoming, Colorado, Utah and Nevada.
A summary of the Company's significant accounting policies follows:
Inventories: The inventories are stated at the lower of cost (last-in,
first-out method) or market. The use of the last-in, first-out method of
determining the cost of inventories, which was adopted for the year ended
August 31, 1979, had the effect of decreasing the inventories by $205,513 and
$661,233 at August 31, 1995 and 1994, respectively, and increasing and
decreasing net income by $455,720 and $311,488 for the years ended August 31,
1995 and 1994, respectively, as compared to what they would have been under
the first-in, first-out method.
Property and equipment: Property and equipment is stated at cost and
depreciated over estimated service lives primarily by the straight-line
method.
Maintenance and repairs are charged to operations and major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts and any gain or loss is included in operations.
The depreciation expense on assets being acquired under capital leases is
included with the depreciation expense on owned assets.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
INVENTORIES
Reductions of inventory quantities in 1995 and 1994 resulted in a liquidation
of LIFO inventory quantities carried at cost prevailing in prior years which
were lower than current costs. The effect of these reductions was to increase
net income by approximately $18,458 and $662,845 for the years ended August
31, 1995 and 1994, respectively.
NOTES PAYABLE
The Company has a $1,750,000 line of credit with a bank secured by inventory,
accounts receivable, equipment, and the personal guarantees of the Company's
major shareholders, bearing interest at New York Citibank prime (8.75% at
August 31, 1995) plus .5%, maturing January 28, 1996. The available credit at
F-30
<PAGE>
August 31, 1995 was $1,750,000. The line-of-credit advances are subject to
borrowing base limitations as follows: accounts receivable - 75% with
receivables greater than 60 days excluded, and inventory - 50%. See Note 5
for discussion of loan covenants.
At August 31, 1995, the Company has unsecured notes payable to a major
stockholder in the amount of $200,000. The notes bear interest at New York
Citibank (8.75% at August 31, 1995) plus .75% and are due on demand. Interest
expense was $18,334 and $14,469 for the years ended August 31, 1995 and 1994,
respectively.
CAPITAL LEASES
The Company leases seven units of mobile equipment from related parties that
are being acquired under capital leases. The leases expire through June,
1999. The mobile equipment and the related liability under the capital leases
were recorded at the present value of the future payments due under the
leases, as determined using various interest rates ranging from 8.76% to
10.96%.
The following is a schedule by years of the future minimum lease payments due
under the capital leases, together with the net present value of the minimum
lease payments as of August 31, 1995.
Year ending August 31:
1996 $ 175,079
1997 175,079
1998 175,079
1999 113,843
Total minimum lease payments 639,080
Less amount representing interest 92,693
Net present value of minimum
lease payments $ 546,387
Interest expense applicable to the related party leases was $22,049 and
$15,521 for the years ended August 31, 1995 and 1994, respectively.
LONG-TERM DEBT
Long-term debt at August 31, 1995 consists of the following:
Note payable to Bank, due in monthly installments of
$15,695 plus interest at the New York Citibank prime,
currently 8.5%, plus .75%, through January, 2000,
collateralized by inventory, accounts receivable,
equipment, and rolling stock $ 679,338
Note payable to Bank, due in monthly installments of
$6,259, including interest at the Wall Street Journal
prime, currently 8.5%, plus .50%, through November, 2002,
collateralized by real estate and the personal guarantees
of the Company's major shareholders 440,749
1,120,087
Less current maturities 168,092
Long-term portion $ 951,995
F-31
<PAGE>
In connection with the bank notes payable (see Note 3) and long-term debt, the
Company has agreed, among other things, to: (1) maintain a ratio of total
liabilities to tangible net worth of less than 2.5 to 1; (2) maintain a ratio
of current assets to current liabilities of 1.2 to 1; and (3) maintain a
minimum global debt service coverage (as defined in the loan agreement) of 1.5
to 1.
Aggregate maturities required on long-term debt at August 31, 1995 are as
follows:
Year ending August 31: 1996 $ 168,092
1997 184,427
1998 202,171
1999 221,623
2000 129,104
Later years 214,670
$1,120,087
PROFIT-SHARING PLAN
The Company has a 401(k) Profit-Sharing Plan with eligibility requirements of
21 years of age and one year of service. The Plan provides for employee
contributions not to exceed legal limitations, a discretionary employer
matching contribution, and a discretionary profit-sharing contribution. The
Company did not make any contributions to the Plan for the years ended August
31, 1995 and 1994.
LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE
The Company has leased a commercial office building from a related party under
an operating lease agreement expiring July 1, 2005, with the option to renew
for an additional five years. The agreement requires the Company to pay all
property taxes, repairs and maintenance, and insurance on the property. The
Company has the option at any time during the lease term, including any
subsequent extension of the lease, to purchase the property at the appraised
value at the date the option is exercised, less twenty-five percent of the
lease payments made from the inception of the lease.
The total minimum rental commitment at August 31, 1995 under the lease is due
as follows:
During the next five years $162,000
During the remaining term of the lease 192,000
$354,000
Additionally, the Company has leased various trucks and autos under operating
leases which expire through December, 1996 and require various minimum monthly
rentals. The total minimum rental commitment at August 31, 1995 under the
agreements of $89,230, including $12,258 due to related parties, are due as
follows:
Year ending August 31:
1996 $ 76,826
1997 12,404
$ 89,230
F-32
<PAGE>
The Company also leases various equipment under separate, short-term lease
agreements.
The total rental expense included in the income statements for the years ended
August 31, 1995 and 1994 is $241,781 and $306,911, respectively, with $42,173
and $36,773 being with related parties.
STOCK REPURCHASE AGREEMENT
The Company and its non-401(k) plan stockholders have entered into stock
repurchase agreements under which, upon the death of the stockholder or their
desire to dispose of their stock, the Company must purchase the shares of its
common stock owned by the stockholder. There are 24,100 outstanding shares
subject to the agreement at August 31, 1995.
The per share repurchase price as determined by the formula contained in the
agreement, utilizing the August 31, 1995 financial statements, is $240.
MAJOR CUSTOMER AND SUPPLIERS
Net sales for the years ended August 31, 1995 and 1994 included sales to a
major customer totaling $24,181,187 and $23,552,908, respectively. Trade
accounts receivable from this customer at August 31, 1995 and 1994 were
$588,784 and $1,007,753, respectively.
Cost of goods sold for the year ended August 31, 1995 and 1994 included
purchases from major suppliers of $49,025,482 and $36,750,342, respectively.
Accounts payable for these suppliers at August 31, 1995 and 1994 were
$1,760,982 and $1,462,748, respectively.
The Company has entered into a long-term fuel purchase and supply contract
expiring December 31, 2004. The contract requires the Company to purchase an
estimated 21,575,000 gallons of fuel per year from one of its major suppliers
to be delivered to the Company's major customer (that the Company has been
doing business with for the past nine years). The estimated contract value,
based on the estimated quantities and unit rates as detailed in the contract,
is $180,000,000.
ENVIRONMENTAL CLEAN-UP OBLIGATIONS
The Company is in the remediation process of subsurface contamination at one
owned site. The Company has accrued and charged to expense, net of amounts
recoverable from the prior owner of the site, the estimated remaining
remediation costs.
The Company, along with approximately 56 other entities, has also been
identified by the Environmental Protection Agency as a potentially responsible
party in connection with the required clean-up of a non-owned refinery site.
A settlement agreement was signed during the year, which releases the Company
from any further liability in this matter.
Due to the nature of the Company's business, it is always susceptible to
environmental clean-up obligations. However, management is not presently
aware of any unasserted environmental clean-up obligations that it considers
likely of assertion and that, if asserted, would have a reasonable likelihood
of having a material adverse impact on the Company.
F-33
<PAGE>
INCOME TAX MATTERS
Net deferred tax assets (liabilities) consist of the following components as
of August 31, 1995 and 1994:
1995 1994
Current deferred tax assets (liabilities):
Inventory lower of cost or market adjustments $ 10,242 $ --
Inventory uniform capitalization 13,894 8,225
Allowance for bad debt 114,297 101,424
Accrued vacation 24,284 21,584
Other assets (liabilities) 45,065 (24,745)
Alternative minimum tax credit -- 46,098
207,782 152,586
Noncurrent deferred tax liabilities:
Property and equipment depreciation (174,306) (98,861)
$ 33,476 $ 53,725
OFF-BALANCE-SHEET RISK
The Company has an off-balance-sheet risk arising from the cash balance in a
bank account. The cash balance exceeds the federally insured limit of
$100,000 per account by approximately $757,000 at August 31, 1995.
F-34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has
duly caused Amendment No. 1 to this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
METEOR INDUSTRIES, INC.
By:/s/ Dennis R. Staal
Dennis R. Staal, Treasurer(Chief
Financial and Accounting Officer)
Dated: September 30, 1997
