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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.
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(Exact Name of Issuer as Specified in its Charter)
COLORADO 84-1236619
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1401 BLAKE STREET, SUITE 200, DENVER, COLORADO 80202
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(Address of Principal Executive Offices)
(303)572-1135
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(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.
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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
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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.
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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.
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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.
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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
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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
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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.
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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.
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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:
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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.
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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.
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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.
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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.
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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.
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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.
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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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- -----------------------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,668
<SECURITIES> 0
<RECEIVABLES> 13,841
<ALLOWANCES> (142)
<INVENTORY> 4,111
<CURRENT-ASSETS> 20,588
<PP&E> 24,778
<DEPRECIATION> (4,586)
<TOTAL-ASSETS> 45,395
<CURRENT-LIABILITIES> 21,453
<BONDS> 0
<COMMON> 4
0
0
<OTHER-SE> 8,898
<TOTAL-LIABILITY-AND-EQUITY> 45,395
<SALES> 108,774
<TOTAL-REVENUES> 108,774
<CGS> 90,520
<TOTAL-COSTS> 90,520
<OTHER-EXPENSES> 276
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 859
<INCOME-PRETAX> 1,858
<INCOME-TAX> 684
<INCOME-CONTINUING> 806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 806
<EPS-BASIC> .24
<EPS-DILUTED> .23
</TABLE>
