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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 June 30, 2000
Commission File Number: 0-27968
METEOR INDUSTRIES, INC.
--------------------------------------------------
(Exact Name of Issuer as Specified in its Charter)
COLORADO 84-1236619
------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1401 BLAKE STREET, SUITE 200, DENVER, COLORADO 80202
-----------------------------------------------------
(Address of Principal Executive Offices)
(303) 572-1135
----------------------------------------------------
(Registrant=s Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
There were 3,526,027 shares of the Registrant=s $.001 par value common stock
outstanding as of August 14, 2000.
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Item 1: FINANCIAL STATEMENTS
METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
June 30, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash $ 540 $ 288
Restricted cash 2,522 600
Accounts receivable-trade, net of allowance
of $312 and $233, respectively 16,290 14,835
Accounts receivable, related party 328 678
Notes receivable, net of allowance of
$114 and $114, respectively 118 290
Notes receivable, related party 1,526 1,153
Inventory 3,937 3,596
Deferred tax asset 335 335
Other current assets 411 535
Total current assets 26,007 22,310
Property, plant and equipment, net 17,396 17,905
Other assets
Notes receivable, net 167 123
Notes receivable, related party 1,277 1,277
Investments in closely held businesses 1,495 1,581
Intangibles, net 1,322 1,409
Other assets 520 390
Total other assets 4,781 4,780
TOTAL ASSETS $ 48,184 $ 44,995
Continued on next page
2
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METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
June 30, December 31,
2000 1999
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 10,879 $ 8,323
Accounts payable, related party 14 14
Book overdraft 1,956 1,924
Current portion, long-term debt 1,428 1,438
Accrued expenses 736 755
Fuel taxes payable 884 909
Income taxes payable 35 0
Revolving credit facility 9,278 9,292
Total current liabilities 25,210 22,655
Long-term debt 5,545 5,865
Deferred tax liability 2,606 2,606
Minority interest in subsidiaries 5,657 5,412
Total liabilities 39,018 36,538
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value; 365,000
shares authorized, issued and outstanding 365 0
Common stock, $.001 par value; authorized
10,000,000 shares, 3,526,027 and
3,524,169 shares issued and
outstanding, respectively 4 4
Paid-in capital 4,899 4,458
Treasury stock, at cost, 132,098 and
132,098 shares held respectively (489) (489)
Retained earnings 4,387 4,484
Total shareholders' equity 9,166 8,457
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 48,184 $ 44,995
The accompanying notes are an integral part of the financial statements.
3
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands except per share information)
June 30, June 30,
2000 1999
Net sales $ 48,605 $ 36,965
Cost of sales 43,164 31,066
Gross profit 5,441 5,899
Selling, general and administrative
expenses 4,458 4,570
Depreciation and amortization 595 529
Total expenses 5,053 5,099
Income from operations 388 800
Other income and (expenses)
Interest income 86 54
Interest expense (371) (297)
Other (71) 4
Gain (loss) on sale of assets (2) (2)
Total other expenses (358) (241)
Income before income taxes and
minority interest 30 559
Income tax expense 13 206
Minority interest 123 122
Net income(loss) $ (106) $ 231
Earnings (loss) per share:
Basic $ (.03) $ .07
Diluted $ (.03) $ .07
Weighted average common share
and common share equivalents:
Basic 3,524,988 3,423,694
Diluted 3,524,988 3,433,754
The accompanying notes are an integral part of the financial statements.
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands except per share information)
June 30, June 30,
2000 1999
Net sales $ 90,623 $ 64,115
Cost of sales 79,544 52,773
Gross profit 11,079 11,342
Selling, general and administrative
expenses 9,003 8,764
Depreciation and amortization 1,195 1,009
Total expenses 10,198 9,773
Income from operations 881 1,569
Other income and (expenses)
Interest income 185 92
Interest expense (734) (608)
Other (66) 144
Gain (loss) on sale of assets (5) 1
Total other expenses (620) (371)
Income before income taxes and
minority interest 261 1,198
Income tax expense 113 441
Minority interest 245 245
Net income (loss) $ (97) $ 512
Earnings (loss)per share:
Basic $ (.03) $ .15
Diluted $ (.03) $ .15
Weighted average common share
and common share equivalents:
Basic 3,524,579 3,423,694
Diluted 3,524,579 3,433,754
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 YEAR TO DATE ENDED JUNE 30, 2000
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Preferred Additional
Stock Common Stock Paid-In Retained Treasury
Shares Amount Shares Amount Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
December
31, 1999 0 $ 0 3,656,267 $4 $4,458 $4,484 $(489) $8,457
Stock
issued for
401(K)/
bonus 1,858 27 27
Options
issued for
services 99 99
Issuance
of Pre-
ferred
stock,
net 365,000 365 315 680
Net
loss (97) (97)
Balance
June 30,
2000 365,000 $365 3,658,125 $4 $4,899 $4,387 $(489) $9,166
</TABLE>
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 SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands)
June 30, June 30,
2000 1999
Cash flows from operating activities:
Net income (loss) $ (97) $ 512
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 1,195 1,009
(Gain) loss on disposal of property,
plant & equipment 5 (1)
Minority interest 245 245
Other 99 0
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net (1,445) (2,255)
Inventories (341) 153
Other current assets 124 170
Other assets (130) (77)
Increase (decrease) in:
Accounts payable 2,556 3,296
Accrued liabilities (19) (496)
Taxes payable 10 (532)
Net cash provided by operating
activities 2,202 2,024
Cash flows from investing activities:
Cash proceeds from sale of property,
plant and equipment 126 73
Purchases of property, plant and equipment (692) (1,802)
Non-compete agreement 0 (80)
Investment in closely held business 48 (4)
Notes receivable issued (78) (145)
Notes receivable payments 173 99
Net cash used in investing activities (423) (1,859)
Continued on next page
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands)
(Continued)
June 30, June 30,
2000 1999
Cash flows from financing activities:
Borrowings (payments) on revolving credit
facilities, net $ (14) $ 1,532
Increase in book overdraft 32 735
Payments on long-term debt (696) (870)
Borrowings on long-term debt 366 581
Proceeds from preferred stock issued 730 0
Costs on preferred stock issued (23) 0
Restricted cash (1,922) (2,230)
Net cash used in financing activities (1,527) (252)
Net increase (decrease)in cash and equivalents 252 (87)
Cash and equivalents, beginning of
period 288 380
Cash and equivalents, end of period $ 540 $ 293
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
ORGANIZATION - Meteor Industries, Inc. ("Meteor" or "Company") was incor-
porated on December 22, 1992, as a Colorado based holding company. In January
2000, Meteor Marketing, Inc.("Meteor Marketing"), a Colorado corporation and a
wholly owned subsidiary of the Company, merged downstream with and into
Fleischli Oil Company, Inc. ("Fleischli"), a Wyoming corporation and a wholly
owned subsidiary of Meteor Marketing. Fleischli became the surviving
corporation and immediately changed its name to "Meteor Marketing, Inc." In
addition, the significant wholly owned subsidiaries included in Meteor
Marketing which are: Graves Oil & Butane Co., Inc. ("Graves"), and Tri-Valley
Gas Co. ("Tri-Valley") merged their marketing and distribution operations with
and into Meteor Marketing. The Company also owns 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, 1999, filed with the Company's Form 10-K. The year-end balance
sheet data was derived from audited financial statements, but does not include
all disclosures required by generally accepted accounting principles.
NEW ACCOUNTING PRONOUNCEMENT - In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("FAS") NO. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting standards
requiring that every derivative instrument be recorded on the balance sheet as
either an asset or liability measured at its fair value. FAS No. 133 also
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. In June 1999,
the FASB issued FAS No. 137 which defers the effective date of FAS No. 133 to
fiscal years beginning after June 15, 2000. The Company will adopt FAS No.
133 in the first quarter of fiscal 2001, but does not expect such adoption to
materially affect its financial statement presentation.
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
9
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warrants of 1,513,271 and 1,611,266 for the six months ended June 30, 2000
and 1999 respectively, are omitted from the denominator. The numerator is
unchanged. The shares available upon exchange of a subsidiary's preferred
stock of 1,043,835 and 1,014,635 for the six months ended June 30, 2000 and
1999, respectively, are omitted as they are antidilutive.
Three Months Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Denominator:
Average common shares
outstanding 3,524,988 3,423,694 3,524,579 3,423,694
Average dilutive stock
options and warrants 0 10,060 0 10,060
Diluted shares 3,524,988 3,433,754 3,524,579 3,433,754
NOTE 4 - COMMITMENTS AND 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 principal long-term balance owing on the note at June
30, 2000, is $359,000.
The Company has guaranteed a $1,350,000 note payable on the office building in
which the Company's corporate offices are located. The principal long-term
balance owing on the note at June 30, 2000 is $1,350,000.
In August 1999, the Company signed a definitive agreement to acquire Jardine
Petroleum Company ("Jardine"). Jardine is a petroleum distribution company
with operations primarily in Utah. The Company is currently negotiating a
restructuring of the transaction and reviewing certain financing options,
however, there is no assurance that such transaction will be successfully
closed.
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.
In June 2000, the Company entered into a non-binding letter of intent to
acquire all of the shares of Innovative Drug Delivery Systems, Inc. ("IDDS"),
a privately-held bio-pharmaceutical company dedicated to applying unique
delivery technologies to pharmaceutical products to achieve enhanced
therapeutic value. The closing of the merger transaction will be contingent
upon several conditions, including (a) satisfactory due diligence by both
parties, (b) the negotiation and execution of a definitive merger agreement,
(c) a $5 million investment by Meteor in IDDS, and (d) final approval of the
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transaction by Meteor's and IDDS's shareholders. The transaction, if
consummated, will result in IDDS shareholders owning approximately 80% of the
merged companies.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has both short-term and long-term notes receivable from Capco
Energy, Inc. ("Capco"), an affiliate of the Company. The notes bear interest
and are secured by all of the outstanding shares of a wholly owned subsidiary
of Capco and by certain shares of the Company's stock held by Capco. The
total notes receivable balance at June 30, 2000 and at December 31, 1999, is
$2,803,000 and $2,430,000.
NOTE 6 - BUSINESS SEGMENTS
The Company operates in six business segments: gasoline, diesel, propane,
grease and lubes, convenience store items and other products (anti-freeze,
chemicals, services, hardware, rental income 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: net sales and gross
profit before depreciation and amortization as presented below:
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Net sales
Gasoline $13,683 $10,100 $24,793 $15,651
Diesel 27,057 18,565 50,002 31,298
Propane 939 808 3,136 2,394
Greases and lubes 5,913 5,091 9,948 9,780
Convenience store items 0 1,631 0 2,933
Other items 1,013 770 2,744 2,059
Total net sales $48,605 $36,965 $90,623 $64,115
Gross profit, before
depreciation
Gasoline $ 822 $ 1,502 $ 1,681 $ 2,280
Diesel 2,003 2,236 3,902 4,039
Propane 329 358 1,104 1,068
Greases and lubes 1,310 1,000 2,209 1,982
Convenience store items 0 409 0 722
Other items 977 394 2,183 1,251
Total gross profit $ 5,441 $ 5,899 $11,079 $11,342
Reconciliation to net income:
Selling, general and
administrative $ 4,458 $ 4,570 $ 9,003 $ 8,764
Depreciation and amortization 595 529 1,195 1,009
Income from operations 388 800 881 1,569
Other expense (358) (241) (620) (371)
Income tax expense 13 206 113 441
Minority interest 123 122 245 245
Net income (loss) $ (106) $ 231 $ (97) $ 512
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In December 1999, Meteor sold its retail store operating subsidiary to allow
the Company to focus on its core business of commercial, wholesale and
cardlock petroleum distribution.
The Company does not account for assets by business segment and, therefore,
depreciation and amortization are not factors used in evaluating operating
performance.
NOTE 7 - PREFERRED STOCK
During June 2000, the Company issued 365,000 shares of Series B Convertible
Preferred Stock. The Company received $707,000, net of cash issuance costs of
$23,000. In addition, the Company issued stock options to consultants
related to the issuance of the preferred stock that resulted in $27,000 of
non-cash expenses. Each share is: (1) not entitled to dividends, (2) entitled
to a liquidation preference of $2.00, (3) entitled to one vote, (4) not
redeemable, and (5) convertible. Holders of the Series B Convertible
Preferred Stock have the right to convert all or a portion of their shares
into units, each unit consisting of one share of Common Stock and one warrant
to purchase Common Stock. The warrants to be issued as part of the units upon
conversion shall be in a form determined by the Board of Directors and shall
be exercisable until May 15, 2005, at an exercise price of $2.50 per share.
NOTE 8 - SUBSEQUENT EVENTS
On August 9, 2000 the company entered into a settlement and debt restructuring
agreement with the Estate of Theron J. Graves related to the Graves Oil &
Butane Co., Inc. ("Graves") Series A Convertible Preferred Stock. The terms of
the agreement are:
- Graves will acquire all 1,000,000 shares of Series A Convertible Preferred
Stock of Graves in exchange for a promissory note in the amount of $4,466,311.
Subsequent to acquisition of such shares, Graves will retire and cancel such
shares. The note will be amortized over a four-year period with an interest
rate of 8%. The note requires a $1,500,000 payment in September, 2000, to be
obtained from the sale of certain assets currently secured by the preferred
stock. The note will be guaranteed by Meteor Marketing, Inc. and will be
secured with the remaining assets currently securing the preferred stock. The
preferred stock is reflected as minority interest on the consolidated
financial statements at June 30, 2000 in the amount of $5,407,000. A portion
of the difference between the amount of the promissory note and the minority
interest will be established as a reserve for environmental conditions in the
third quarter.
- Graves will release the Estate and the Estate will release Meteor
Industries, Inc. from any and all claims that relate to the original Graves
purchase agreement and to any environmental conditions related to Graves.
Graves and Meteor Marketing will indemnify the Estate for all claims related
to environmental conditions of Graves.
- Graves will acquire other properties of the Estate in Farmington, New
Mexico and Cortez, Colorado for promissory notes of $900,000. The notes will
be amortized over thirty years with interest of 7% and with a balloon at the
end of ten years.
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- Graves will have an option to acquire the one third ownership of Mesa
Propane owned by the Estate for $700,000 for a period of sixteen months. If
the option is exercised the payment will be in the form of a promissory note
amortized over 30 years with interest at 7% and with a balloon at the end of
ten years.
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.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
The Company had sales of $49.0 million for the three months ended June 30,
2000, compared to $37.0 million for the three months ended June 30, 1999, a
$12.0 million (32%) increase. The increase is primarily due to higher product
prices during the current period and an increase in product sales volumes.
Gross profit for the three months ended June 30, 2000 and 1999, was $5.4
million and $5.9 million, respectively. The decrease is primarily due to the
exchange of higher retail margins with wholesale margins resulting from the
sale of Meteor Stores, Inc. In addition, diesel gross margins declined as a
result of increased competition.
The Company experienced a net loss of $106,000 for the three months ended June
30, 2000, compared to net income of $231,000 in 1999. The net loss results
from higher operating costs due to an increase in the level of activity and an
increase in expenses incurred in building the infrastructure necessary for
future growth of the Company. Also, The Company had an increase in interest
expense related to carrying higher levels of accounts receivable and
inventory. Accounts receivable and inventory are significantly higher in 2000
vs 1999 due to the rapid increase in the cost of petroleum based products.
The increase in expense was partially offset by a reduction in expenses
resulting from the sale of Meteor Stores, Inc. and lower income tax expense.
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Gasoline Segment
Gasoline volumes increased to 13.0 million gallons for the three months ended
June 30, 2000, compared to 12.8 million gallons in 1999, an increase of .2
million (2%). The volume increase is primarily due to the Carroll Oil Company
acquisition. Gasoline sales increased to $13.7 million for the three months
ended June 30, 2000, compared to $10.1 million in 1999, an increase of $3.6
million (36%) primarily due to higher product prices during the current
period. Gross profit decreased to $.8 million for the three months ended June
30, 2000, from $1.5 million in 1999, a decrease of $.7 million (47%),
primarily due to the exchange of higher retail margins with wholesale margins
resulting from the sale of Meteor Stores, Inc. (retail c-store subsidiary) in
December 1999. Gross profit per gallon of gasoline sold decreased to $.06 for
the three months ended June 30, 2000, from $.12 in 1999 for the reason stated
above.
Diesel Segment
Diesel volumes increased to 28.4 million gallons for the three months ended
June 30, 2000, from 27.0 million in 1999, an increase of 1.4 million gallons
(5%) due to acquiring new customers. Diesel sales increased to $27.1 million
for the three months ended June 30, 2000, from $18.6 million in 1999, an
increase of $8.5 million (46%) due to higher product prices during the current
period and increased sales volumes. Gross profit decreased to $2.0 million for
the three months ended June 30, 2000, from $2.2 million in 1999, a decrease of
$.2 million (9%). Gross profit per gallon of diesel sold decreased to $.07 for
the three months ended June 30, 2000, from $.08 in 1999, due to increased
competition.
Propane Segment
Propane volumes decreased to 1.2 million gallons for the three months ended
June 30, 2000, from 1.7 million gallons in 1999, a .5 million decrease (29%)
due to a decrease in wholesale volume caused by unseasonably warm weather in
our marketing area. Propane sales increased to $.9 million for the three
months ended June 30, 2000, from $.8 million in 1999, an increase of $.1
million (13%) due to higher product prices during the current period,
partially offset by a decrease in sales volume. Gross profit decreased to $.3
million for the three months ended June 30, 2000, from $.4 million in 1999 a
decrease of $.1 million (25%), due to a decrease in wholesale propane sales
volume.
Greases and Lubricants Segment
Grease and lubricants sales increased to $5.9 million for the three months
ended June 30, 2000, compared to $5.1 million 1999 an increase of $.8 million
(16%) due to higher product prices during the current period. Gross profit
increased to $1.3 million for the three months ended June 30, 2000, compared
to $1.0 million in 1999, an increase of $.3 million (30%).
Convenience Store Items Segment
Sales of convenience store items decreased to -0- for the three months ended
June 30, 2000, from $1.6 million in 1999, due to the sale of Meteor Stores,
Inc. in December 1999.
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Other Items Segment
Sales of other items, which consist of anti-freeze, chemicals, services,
hardware, rental income and miscellaneous items, increased to $1.0 million
for the three months ended June 30, 2000, compared to $.8 million in 1999, an
increase of $.2 million (25%). Gross profit increased to $1.0 million for the
three months ended June 30, 2000, compared to $.4 million in 1999, an increase
of $.6 million (150%) due to rental income and freight revenue.
Expenses
Selling, general, and administrative ("SG&A") expenses were $4.5 million for
the three months ended June 30, 2000, compared to $4.6 million for the three
months ended June 30, 1999, a decrease of $.1 million (2%). The decrease is
primarily related to the reduction in SG&A expenses related to the sale of
Meteor Stores, Inc. partially offset by the increase in the level of activity
and costs incurred to build the infrastructure necessary for future growth of
the Company.
Depreciation and amortization expense increased to $.6 million for the three
months ended June 30, 2000, compared to $.5 million in 1999.
Other expense, net increased to $.4 million for the three months ended June
30, 2000, compared to $.2 million in 1999, primarily due to increased interest
expense.
Income Taxes
The provision for income taxes for the three months ended June 30, 2000, was
$13,000 compared to $206,000 for the same period ended June 30, 1999. The
decrease is due to lower taxable income for the three months ended June 30,
2000, as compared to 1999.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 TO JUNE 30, 1999
The Company had sales of $90.0 million for the six months ended June 30, 2000,
compared to $64.0 million for the six months ended June 30, 1999, a $26.0
million (41%) increase. The increase is primarily due to an increase in
product sales volumes as a result of the Carroll Oil Company acquisition in
April 1999, and higher product prices during the current period.
Gross profit for the six months ended June 30, 2000 and 1999, was $11.1
million and $11.3 million, respectively. The decrease is due to the exchange
of higher retail margins with wholesale margins resulting from the sale of
Meteor Stores, Inc. In addition, diesel gross margins declined as a result of
increased competition.
The Company experienced a net loss of $97,000 for the six months ended June
30, 2000, compared to net income of $512,000 in 1999. The net loss results
from higher operating costs due to an increase in the level of activity and an
increase in expenses incurred in building the infrastructure necessary for
future growth of the Company. Also, the Company had an increase in interest
expense related to carrying higher levels of accounts receivable and
inventory. Accounts receivable and inventory are significantly higher in 2000
vs 1999 due to the rapid increase in the cost of petroleum based products. In
addition, depreciation and amortization expense increased primarily due to the
acquisition of Carroll Oil Company. The increase in expense was partially
offset by a reduction in expenses resulting from the sale of Meteor Stores,
Inc. and lower income tax expense.
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Gasoline Segment
Gasoline volumes increased to 25.0 million gallons for the six months ended
June 30, 2000, compared to 23.4 million gallons in 1999, an increase of 1.6
million (7%). The volume increase is primarily due to the Carroll Oil Company
acquisition. Gasoline sales increased to $24.8 million for the six months
ended June 30, 2000, compared to $15.7 million in 1999, an increase of $9.1
million (58%) due to higher product prices during the current period and
increased sales volumes. Gross profit decreased to $1.7 million for the six
months ended June 30, 2000, from $2.3 million in 1999,a decrease of $.6
million (26%) primarily due to the exchange of higher retail margins with
wholesale margins resulting from the sale of Meteor Stores, Inc. (retail c-store
subsidiary) in December 1999. Gross profit per gallon of gasoline sold
decreased to $.07 for the six months ended June 30, 2000 from $.10 in 1999 for
the above stated reason.
Diesel Segment
Diesel volumes increased to 53.0 million gallons for the six months ended June
30, 2000, from 51.4 million in 1999, an increase of 1.6 million gallons (3%)
due to acquiring new customers and the Carroll Oil Company acquisition.
Diesel sales increased to $50.0 million for the six months ended June 30,
2000, from $31.3 million in 1999, an increase of $18.7 million (60%) due to
higher product prices during the current period and increased sales volumes.
Gross profit decreased to $3.9 million for the six months ended June 30, 2000,
from $4.0 million in 1999, a decrease of $.1 million (3%). Gross profit per
gallon of diesel sold decreased to $.07 for the six months ended June 30,
2000, from $.08 in 1999, due to increased competition.
Propane Segment
Propane volumes decreased to 3.9 million gallons for the six months ended June
30, 2000, from 4.6 million gallons in 1999, a .7 million decrease (15%) due to
a decrease in wholesale volume caused by unseasonably warm weather in our
marketing area. Propane sales increased to $3.1 million for the six months
ended June 30, 2000, from $2.4 million in 1999, an increase of $.7 million
(29%) due to higher product prices during the current period, partially offset
by a decrease in sales volume. Gross profit remained constant at $1.1 million
for the six months ended June 30, 2000, compared to 1999. Gross profit per
gallon of propane sold increased to $.28 for the six months ended June 30,
2000, compared to $.24 in 1999, due to higher residential margins.
Greases and Lubricants Segment
Grease and lubricants sales increased to $9.9 million for the six months ended
June 30, 2000, compared to $9.8 million in 1999, an increase of $.1 million
(1%) due to higher product prices during the current period. Gross profit
increased to $2.2 million for the six months ended June 30, 2000, compared to
$2.0 million, an increase of $.2 million (10%).
Convenience Store Items Segment
Sales of convenience store items decreased to -0- for the six months ended
June 30, 2000, from $2.9 million in 1999, due to the sale of Meteor Stores,
Inc. in December 1999.
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Other Items Segment
Sales of other items, which consist of anti-freeze, chemicals, services,
hardware, rental income and miscellaneous items, increased to $2.7 million
for the six months ended June 30, 2000, compared to $2.1 million in 1999, an
increase of $.6 million (29%). Gross profit increased to $2.2 million for the
six months ended June 30, 2000, compared to $1.3 million in 1999, an increase
of $.9 million (69%) due to rental income and freight revenue.
Expenses
Selling, general and administrative ("SG&A") expenses were $9.0 million for
the six months ended June 30, 2000, compared to $8.8 million for the six
months ended June 30, 1999, an increase of $.2 million (2%). The increase is
due to the acquisition of Carroll Oil Company and corresponding increase in
the level of activity and costs incurred to build the infrastructure necessary
for future growth of the Company, partially off set by a reduction in SG&A
expenses due to the sale of Meteor Stores, Inc.
Depreciation and amortization for the six months ended June 30, 2000, was $1.2
million compared to $1.0 million for the six months ended June 30, 1999. The
increase is attributable to the Carroll Oil Company acquisition and property,
plant and equipment additions, partially offset by the sale of Meteor Stores,
Inc.
Other expense, net increased to $620,000 for the six months ended June 30,
2000, compared to $371,000 in 1999, primarily due to increased interest
expense and the recognition of a $140,000 gain recorded in 1999, related to
the sale of an investment.
Income Taxes
The provision for income taxes for the six months ended June 30, 2000, was
$113,000 compared to $441,000 for the same period ended June 30, 1999. The
decrease is due to lower taxable income for the six months ended June 30,
2000, as compared to 1999.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had working capital of $.8 million compared to a
working capital deficit of $.3 million at December 31, 1999.
Net cash provided by operating activities totaled $2.2 million for the six
months ended June 30, 2000, compared to $2.0 million for the six months ended
June 30, 1999. This increase in cash provided by operating activities is
principally related to changes in working capital items due to higher product
prices.
Net cash used in investing activities totaled $.4 million for the six months
ended June 30, 2000, compared to cash used of $1.9 million for the six months
ended June 30, 1999. The decrease in cash used in investing activities is
principally related to a reduction in expenditures for property, plant and
equipment and the sale of a parcel of land in Colorado.
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Net cash used in financing activities totaled $1.5 million for the six months
ended June 30, 2000, compared to cash used of $.3 million for the six months
ended June 30, 1999. The increase in cash used in financing activities
primarily related to decrease in borrowing on the revolving line of credit
facility and proceeds from the issuance of preferred stock.
The Company has a revolving bank credit facility with Wells Fargo Business
Credit, Inc. for $11 million which expires August 31, 2000. The credit line
is subject to the borrowing base, as defined. At June 30, 2000, the borrowing
base was approximately $10.8 million. $9.3 million was borrowed against the
facility and is recorded as a current liability. During the quarter the
Company was in default on timely filing of financial information to the
lender. A waiver for this default was obtained from the lender.
The Company is currently working with the lender to renegotiate and extend
this facility. If the facility is not renewed by the lender, $9.3 million and
long-term debt in the amount of $2.3 million at June 30, 2000, is due upon
demand from the lender.
The Company has various loans with banks, suppliers and individuals which
require principal payments of $1.4 million in 2000.
The Company is obligated to pay lease costs of approximately $.9 million in
2000 for land, building, facilities and equipment.
On August 9, 2000 the company entered into a settlement and debt restructuring
agreement with the Estate of Theron J. Graves related to the Graves Oil &
Butane Co., Inc. ("Graves") Series A Convertible Preferred Stock. The terms of
the agreement are:
- Graves will acquire all 1,000,000 shares of Series A Convertible Preferred
Stock of Graves in exchange for a promissory note in the amount of $4,466,311.
Subsequent to acquisition of such shares, Graves will retire and cancel such
shares. The note will be amortized over a four-year period with an interest
rate of 8%. The note requires a $1,500,000 payment in September, 2000, to be
obtained from the sale of certain assets currently secured by the preferred
stock. The note will be guaranteed by Meteor Marketing, Inc. and will be
secured with the remaining assets currently securing the preferred stock. The
preferred stock is reflected as minority interest on the consolidated
financial statements at June 30, 2000 in the amount of $5,407,000. A portion
of the difference between the amount of the promissory note and the minority
interest will be established as a reserve for environmental conditions in the
third quarter.
- Graves will release the Estate and the Estate will release Meteor
Industries, Inc. from any and all claims that relate to the original Graves
purchase agreement and to any environmental conditions related to Graves.
Graves and Meteor Marketing will indemnify the Estate for all claims related
to environmental conditions of Graves.
- Graves will acquire other properties of the Estate in Farmington, New
Mexico and Cortez, Colorado for promissory notes of $900,000. The notes will
be amortized over thirty years with interest of 7% and with a balloon at the
end of ten years.
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- Graves will have an option to acquire the one third ownership of Mesa
Propane owned by the Estate for $700,000 for a period of sixteen months. If
the option is exercised the payment will be in the form of a promissory note
amortized over 30 years with interest at 7% and with a balloon at the end of
ten years.
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
six months ended June 30, 2000 and 1999, the Company expended $95,000 and
$91,000, respectively, for site assessment and related cleanup costs. The
Company has accrued $33,500 at June 30, 2000, for environmental remediation
which management believes is adequate to cover known remediation requirements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to interest rate changes is primarily related to its
variable rate debt issued under its $11.0 million revolving credit facility,
which bears interest at prime plus 0.5%. As of June 30, 2000, there was $9.3
million in borrowings outstanding. Because the interest rates on this
facility is variable, based upon the bank's prime rate, the Company's interest
expense and net income are affected by interest rate fluctuations. If
interest rates were to increase or decrease by 100 basis points, the result,
based upon the existing outstanding debt as of June 30, 2000, and using the
average interest rate paid on borrowed funds during the second quarter of
2000, would be an annual increase or decrease of approximately $93,000 in
interest expense and a corresponding decrease or increase of approximately
$53,000 in the Company's net income after taxes.
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.
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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: August 14, 2000
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. FINANCIAL DATA SCHEDULE Filed herewith electronically
