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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, 2000
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 3,548,056 shares of the Registrant=s $.001 par value common stock
outstanding as of November 14, 2000.
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Item 1: FINANCIAL STATEMENTS
METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
September 30, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash $ 270 $ 288
Restricted cash 1,957 600
Accounts receivable-trade, net of allowance
of $314 and $233, respectively 16,451 14,835
Accounts receivable, related party 1,078 678
Notes receivable, net of allowance of
$114 and $114, respectively 516 290
Notes receivable, related party 1,307 1,153
Inventory 4,235 3,596
Deferred tax asset 335 335
Other current assets 612 535
Total current assets 26,761 22,310
Property, plant and equipment, net 16,783 17,905
Other assets
Notes receivable, net 138 123
Notes receivable, related party 1,190 1,277
Investments in closely held businesses 1,495 1,581
Intangibles, net 1,274 1,409
Other assets 309 390
Total other assets 4,406 4,780
TOTAL ASSETS $ 47,950 $ 44,995
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,
2000 1999
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 12,271 $ 8,323
Accounts payable, related party 96 14
Book overdraft 2,844 1,924
Current portion, long-term debt 2,928 1,438
Accrued expenses 1,360 755
Fuel taxes payable 793 909
Revolving credit facility 7,062 9,292
Total current liabilities 27,354 22,655
Long-term debt 8,350 5,865
Deferred tax liability 2,606 2,606
Minority interest in subsidiaries 250 5,412
Total liabilities 38,560 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, 3,548,056 and
3,524,169 shares issued and
outstanding, respectively 4 4
Paid-in capital 5,577 4,458
Treasury stock, at cost, 132,098 and
132,098 shares held respectively (489) (489)
Retained earnings 3,933 4,484
Total shareholders' equity 9,390 8,457
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 47,950 $ 44,995
The accompanying notes are an integral part of the financial statements.
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands except per share information)
September 30, September 30,
2000 1999
Net sales $ 53,485 $ 44,659
Cost of sales 47,894 37,748
Gross profit 5,591 6,911
Selling, general and administrative
expenses 4,526 5,826
Depreciation and amortization 585 521
Total expenses 5,111 6,347
Income from operations 480 564
Other income and (expenses)
Interest income 91 39
Interest expense (361) (251)
Gain on sale of assets 11 5
Other (818) 303
Total other income (expense) (1,077) 96
Income (loss) before income taxes and
minority interest (597) 660
Income tax (benefit) expense (266) 243
Minority interest 123 123
Net income (loss) $ (454) $ 294
Earnings (loss) per share:
Basic $ (.13) $ .09
Diluted $ (.13) $ .08
Weighted average common share
and common share equivalents:
Basic 3,533,370 3,445,027
Diluted 3,533,370 3,491,960
The accompanying notes are an integral part of the financial statements.
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands except per share information)
September 30, September 30,
2000 1999
Net sales $144,108 $108,774
Cost of sales 127,438 90,520
Gross profit 16,670 18,254
Selling, general and administrative
expenses 13,529 14,590
Depreciation and amortization 1,780 1,530
Total expenses 15,309 16,120
Income from operations 1,361 2,134
Other income and (expenses)
Interest income 276 130
Interest expense (1,095) (859)
Gain on sale of assets 6 6
Other (884) 447
Total other expense (1,697) (276)
Income (loss) before income taxes and
minority interest (336) 1,858
Income tax (benefit) expense (153) 684
Minority interest 368 368
Net income (loss) $ (551) $ 806
Earnings(loss)per share:
Basic $ (.16) $ .24
Diluted $ (.16) $ .23
Weighted average common share
and common share equivalents:
Basic 3,527,509 3,430,805
Diluted 3,527,509 3,477,738
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 SEPTEMBER 30, 2000
(UNAUDITED)
(Dollars in Thousands)
Preferred Additional
Stock Common Stock Paid-In Retained Treasury
Shares Amount Shares Amount Capital Earnings Stock Total
Balance
December
31, 1999 0 $ 0 3,656,267 $4 $4,458 $4,484 $(489) $8,457
Stock
issued for
401(K)/
bonus 23,887 81 81
Options
issued for
services 99 99
Issuance
of pre-
ferred
stock,
net 365,000 365 315 680
Acquisition
of subsid-
iary's pre-
ferred stock 624 624
Net loss (551) (551)
Balance
September
30,
2000 365,000 $365 3,680,154 $4 $5,577 $3,933 $(489) $9,390
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, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands)
September 30, September 30,
2000 1999
Cash flows from operating activities:
Net income (loss) $ (551) $ 806
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 1,780 1,530
Gain on disposal of property,
plant & equipment (6) (6)
Minority interest 368 368
Other 732 0
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net (2,400) (4,107)
Inventories (639) (137)
Other current assets (77) 171
Other assets 81 59
Increase (decrease) in:
Accounts payable 4,030 3,653
Accrued liabilities 157 (149)
Taxes payable (116) (426)
Net cash provided by operating
activities 3,359 1,762
Cash flows from investing activities:
Cash proceeds from sale of property,
plant and equipment 171 78
Purchases of property, plant and equipment (477) (2,364)
Non-compete agreement 0 (80)
Investment in closely held business 49 5
Notes receivable payments (issued), net 113 (379)
Net cash used in investing activities (144) (2,740)
Continued on next page
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(Dollars in Thousands)
(Continued)
September 30, September 30,
2000 1999
Cash flows from financing activities:
Borrowings (payments) on revolving credit
facilities, net $ (2,230) $ 1,983
Increase in book overdraft 920 (179)
Payments on long-term debt (1,274) (1,187)
Borrowings on long-term debt 0 427
Proceeds from preferred stock issued 731 0
Costs on preferred stock issued (23) 0
Restricted cash (1,357) 66
Net cash (used in) provided by
financing activities (3,233) 1,110
Net increase (decrease)in cash and equivalents (18) 132
Cash and equivalents, beginning of
period 288 380
Cash and equivalents, end of period $ 270 $ 512
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 (loss) by
the weighted average number of common shares outstanding. Diluted earnings
per share are calculated taking into account all potentially dilutive
secur-ities. A reconciliation of the denominator used in the calculation of
basic and diluted earnings per share is presented below. Antidilutive stock
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options and warrants of 772,267 and 1,309,266 for the nine months ended
September 30, 2000 and 1999 respectively, are omitted from the denominator.
The numerator is unchanged.
Three Months Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Denominator:
Average common shares
outstanding 3,533,370 3,445,027 3,527,509 3,430,805
Average dilutive stock
options and warrants -0- 46,933 -0- 46,933
Diluted shares 3,533,370 3,491,960 3,527,509 3,477,738
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. The Company accrues
for environmental remedial actions, operation, maintenance and monitoring
costs based on the net present value of the costs, net of probable recoveries,
after a remediation plan has been developed. These costs are discounted using
a risk free interest rate over the estimated period which the remediation,
operation, maintenance and monitoring costs are to be expended.
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
September 30, 2000, is $330,000.
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 September 30, 2000 is $1,350,000.
In August 2000 the Company entered into a restructuring agreement with the
former shareholder of a subsidiary. Under the terms of the agreement, the
Company acquired for retirement the preferred shares owned by the former
shareholder in exchange for a note and the assumption of certain environmental
liabilities. The note is being amortized over a four-year period with an
interest rate of 8%. The note requires a $1,500,000 payment to be made from
the receipt of funds received from the future sale or refinancing of certain
assets. The note is dated September 15, 2000. The note is guaranteed by
Graves and Meteor Marketing, Inc. and is secured with certain assets of
Graves. The excess of the carrying value for the minority interest (the
preferred shares) and the liabilities recorded in the transaction is included
in the paid in capital section of the balance sheet. This income is not
included in the income statement.
In October 2000, the Company entered into a non-binding letter of intent to
merge with Active IQ Technologies, Inc. ("Active IQ") a privately-held company
providing Internet infrastructure software solutions for business-to-business
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(B2B) ecommerce. The closing of the merger transaction will be contingent upon
several conditions, including the negotiation and execution of a definitive
merger agreement, and approval of the transaction by Meteor's and Active IQ's
shareholders. The transaction, if consummated, will result in Active IQ
shareholders owning approximately 50% of the merged companies.
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.
The Company has terminated all negotiations to acquire Jardine Petroleum
Company and Innovative Drug Delivery Systems, Inc. resulting in approximately
$552,000 being charged to other expense during the third quarter of 2000.
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 September 30, 2000 and at December 31, 1999,
is $2,765,000 and $2,430,000.
NOTE 6 - BUSINESS SEGMENTS
The Company operates in six business segments: gasoline, diesel, propane,
grease and lubricants, 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 Nine months
Ended September 30, Ended September 30,
2000 1999 2000 1999
Net sales
Gasoline $ 14,026 $12,197 $ 38,819 $ 27,848
Diesel 31,433 23,639 81,435 54,937
Propane 864 722 4,000 3,116
Greases and lubes 5,058 3,742 14,233 12,631
Convenience store items 0 1,931 0 4,865
Other items 2,104 2,428 5,621 5,377
Total net sales $ 53,485 $44,659 $144,108 $108,774
Gross profit, before
depreciation
Gasoline $ 938 $ 1,210 $ 2,619 $ 3,489
Diesel 2,335 2,392 6,237 6,432
Propane 272 280 1,376 1,348
Greases and lubes 725 812 2,701 2,505
Convenience store items 0 514 0 1,236
Other items 1,321 1,703 3,737 3,244
Total gross profit $ 5,591 $ 6,911 $ 16,670 $ 18,254
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Three Months Nine months
Ended September 30, Ended September 30,
2000 1999 2000 1999
Reconciliation to net income:
Selling, general and
administrative $ 4,526 $ 5,826 $ 13,529 $ 14,590
Depreciation and amortization 585 521 1,780 1,530
Income from operations 480 564 1,361 2,134
Other income (expense) (1,077) 96 (1,697) (276)
Income tax expense (266) 243 (153) 684
Minority interest 123 123 368 368
Net income (loss) $ (454) $ 294 $ (551) $ 806
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 issuance costs of
$23,000. In addition, the Company issued stock options to consultants 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, and (4) not redeemable. 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
shall be exercisable until May 15, 2005, at an exercise price of $2.50 per
share.
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.
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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 SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
The Company had sales of $53.5 million for the three months ended September
30, 2000, compared to $44.7 million for the three months ended September 30,
1999, an $8.8 million (20%) increase. The increase is primarily due to higher
product prices during the current period partially offset by a decrease in
sales volumes.
Gross profit for the three months ended September 30, 2000 and 1999, was $5.6
million and $6.9 million, respectively, a decrease of $1.3 million (19%). The
decrease is primarily due to the exchange of higher retail margins with
wholesale margins resulting from the sale of Meteor Stores, Inc. and lower
sales volumes.
The Company experienced a net loss of $454,000 for the three months ended
September 30, 2000, compared to net income of $294,000 in 1999. The loss was
attributable to two one time items: (1) acquisition costs totaling $552,000
due to terminating acquisition attempts of two companies and (2) recording
environmental expense of $268,000. Income from operations declined slightly
for the three months ended September 30, 2000, as compared to 1999, resulting
from a decline in gross profit primarily due to the exchange of higher retail
margins with wholesale margins, partially offset by a reduction in SG&A
expenses resulting from the sale of Meteor Stores, Inc. In addition,
depreciation and amortization expense increased due to the acquisition of
property, plant and equipment additions, partially offset by the sale of
Meteor Stores, Inc.
Gasoline Segment
Gasoline volumes decreased to 12.8 million gallons for the three months ended
September 30, 2000, compared to 15.4 million gallons in 1999, a decrease of
2.6 million gallons (17%). The volume decrease is primarily due to reduced
demand as a result of the rapid increase in the cost of petroleum based
products. Gasoline sales increased to $14.0 million for the three months
ended September 30, 2000, compared to $12.2 million in 1999, an increase of
$1.8 million (15%) primarily due to higher product prices during the current
period partially offset by the decrease in sales volumes. Gross profit
decreased to $.9 million for the three months ended September 30, 2000, from
$1.2 million in 1999, a decrease of $.3 million (25%), 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 increased to $.07 for the three
months ended September 30, 2000, from $.06 in 1999.
Diesel Segment
Diesel volumes decreased to 29.3 million gallons for the three months ended
September 30, 2000, from 30.5 million in 1999, a decrease of 1.2 million
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gallons (4%) due to one large mining customer accepting a bid from a diesel
supplier although the Company retained the trucking service. Diesel sales
increased to $31.4 million for the three months ended September 30, 2000,
from $23.6 million in 1999, an increase of $7.8 million (33%) due to higher
product prices during the current period partially offset by the decrease in
sales volumes. Gross profit decreased to $2.3 million for the three months
ended September 30, 2000, from $2.4 million in 1999, a decrease of $.1 million
(4%). Gross profit per gallon of diesel sold remained constant at $.08 for the
three months ended September 30, 2000 and 1999.
Propane Segment
Propane volumes decreased to 1.0 million gallons for the three months ended
September 30, 2000, from 1.1 million gallons in 1999, a .1 million gallon
decrease (9%) 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 September 30, 2000, from $.7 million in 1999, an
increase of $.2 million (29%) due to higher product prices during the current
period, partially offset by a decrease in sales volumes. Gross profit
remained constant at $.3 million for the three months ended September 30, 2000
and 1999. Gross profit per gallon sold increased to $.28 for the three months
ended September 30, 2000, from $.24 in 1999.
Greases and Lubricants Segment
Grease and lubricants sales increased to $5.1 million for the three months
ended September 30, 2000, compared to $3.7 million in 1999, an increase of
$1.4 million (40%) due to higher product prices during the current period.
Gross profit decreased to $.7 million for the three months ended September 30,
2000, compared to $.8 million in 1999, a decrease of $.1 million (13%).
Convenience Store Items Segment
Sales of convenience store items decreased to -0- for the three months ended
September 30, 2000, from $1.9 million in 1999, due to the sale of Meteor
Stores, Inc. in December 1999.
Other Items Segment
Sales of other items, which consist of anti-freeze, chemicals, services,
hardware, rental income and miscellaneous items, decreased to $2.1 million
for the three months ended September 30, 2000, compared to $2.4 million in
1999, a decrease of $.3 million (13%). Gross profit decreased to $1.3 million
for the three months ended September 30, 2000, compared to $1.7 million in
1999, a decrease of $.4 million (24%).
Expenses
Selling, general, and administrative ("SG&A") expenses were $4.5 million for
the three months ended September 30, 2000, compared to $5.8 million for the
three months ended September 30, 1999, a decrease of $1.3 million (22%). 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.
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Depreciation and amortization expense increased to $.6 million for the three
months ended September 30, 2000, compared to $.5 million in 1999.
Interest expense increased to $361,000 for the three months ended September
30, 2000, compared to $251,000 in 1999, an increase of $110,000 (44%). The
increase is due 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 costs of petroleum based products.
The Company recognized other expense of $818,000 for the three months ended
September 30, 2000, as compared to other income of $303,000 in 1999. The
Company has terminated all negotiations to acquire Jardine Petroleum Company
and Innovative Drug Delivery Systems, Inc. resulting in a one time expense of
approximately $552,000. The Company also recorded environmental expense of
$268,000. 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.
Income Taxes
The provision for income taxes for the three months ended September 30, 2000,
resulted in a benefit of $266,000 as compared to tax expense of $243,000 for
the same period ended September 30, 1999. The change was due to the net loss
for the current period.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 TO SEPTEMBER 30, 1999
The Company had sales of $144.1 million for the nine months ended September
30, 2000, compared to $108.8 million for the nine months ended September 30,
1999, a $35.3 million (32%) 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 nine months ended September 30, 2000 and 1999, was $16.7
million and $18.3 million, respectively. The decrease is due to the exchange
of higher retail margins with wholesale margins resulting from the sale of
Meteor Stores, Inc.
The Company experienced a net loss of $551,000 for the nine months ended
September 30, 2000, compared to net income of $806,000 in 1999. The loss
results from the Company ending negotiations to acquire Jardine Petroleum
Company and Innovative Drug Delivery Systems, Inc. resulting in a one time
expense of approximately $552,000. The Company also recorded environmental
expense of $268,000. Income from operations declined for the nine months
ended September 30, 2000, as compared to 1999, resulting from a decline in
gross profit primarily due to the exchange of higher retail margins with
wholesale margins, partially offset by a reduction in SG&A expenses resulting
from the sale of Meteor Stores, Inc. In addition, depreciation and
amortization expense increased due to the acquisition of equipment additions,
partially offset by the sale of Meteor Stores, Inc.
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Gasoline Segment
Gasoline volumes increased to 37.8 million gallons for the nine months ended
September 30, 2000, compared to 33.3 million gallons in 1999, an increase of
4.5 million gallons (14%). The volume increase is primarily due to the Carroll
Oil Company acquisition. Gasoline sales increased to $38.8 million for the
nine months ended September 30, 2000, compared to $27.8 million in 1999, an
increase of $11 million (40%) due to higher product prices during the current
period and increased sales volumes. Gross profit decreased to $2.6 million
for the nine months ended September 30, 2000, from $3.5 million in 1999,a
decrease of $.9 million gallons (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 nine months ended September
30, 2000, from $.08 in 1999 for the above stated reason.
Diesel Segment
Diesel volumes increased to 82.3 million gallons for the nine months ended
September 30, 2000, from 82.1 million gallons in 1999, an increase of .2
million gallons due to acquiring new customers and the Carroll Oil Company
acquisition. Diesel sales increased to $81.4 million for the nine months
ended September 30, 2000, from $54.9 million in 1999, an increase of $26.4
million (48%) due to higher product prices during the current period and
increased sales volumes. Gross profit decreased to $6.2 million for the nine
months ended September 30, 2000, from $6.4 million in 1999, a decrease of $.2
million (3%). Gross profit per gallon of diesel sold remained constant at $.08
per gallon for the nine months ended September 30, 2000 and 1999.
Propane Segment
Propane volumes decreased to 4.8 million gallons for the nine months ended
September 30, 2000, from 5.8 million gallons in 1999, a 1.0 million gallon
decrease (17%) due to a decrease in wholesale volume caused by unseasonably
warm weather in our marketing area. Propane sales increased to $4.0 million
for the nine months ended September 30, 2000, from $3.1 million in 1999, an
increase of $.9 million (29%) due to higher product prices during the current
period, partially offset by a decrease in sales volumes. Gross profit
increased to $1.4 million for the nine months ended September 30, 2000,
comparted to $1.3 million in 1999, an increase of $.1 million (8%). Gross
profit per gallon of propane sold increased to $.29 for the nine months ended
September 30, 2000, compared to $.22 in 1999, due to higher residential
margins.
Greases and Lubricants Segment
Grease and lubricants sales increased to $14.2 million for the nine months
ended September 30, 2000, compared to $12.6 million in 1999, an increase of
$1.6 million (13%) due to higher product prices during the current period.
Gross profit increased to $2.7 million for the nine months ended September 30,
2000, compared to $2.5 million, an increase of $.2 million (8%).
Convenience Store Items Segment
Sales of convenience store items decreased to -0- for the nine months ended
September 30, 2000, from $4.9 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 $5.6 million
for the nine months ended September 30, 2000, compared to $5.4 million in
1999, an increase of $.2 million (4%). Gross profit increased to $3.7 million
for the nine months ended September 30, 2000, compared to $3.2 million in
1999, an increase of $.5 million (16%) due to rental income and freight
revenue.
Expenses
Selling, general and administrative ("SG&A") expenses were $13.5 million for
the nine months ended September 30, 2000, compared to $14.6 million for the
nine months ended September 30, 1999, a decrease of $1.1 million (8%). The
decrease is due to a reduction in SG&A expenses resulting from the sale of
Meteor Stores, Inc., partially offset by 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.
Depreciation and amortization for the nine months ended September 30, 2000,
was $1.8 million compared to $1.5 million for the nine months ended September
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.
Interest expense increased to $1.1 million for the nine months ending
September 30, 2000, compared to $.9 million in 1999, an increase of $.2
million (22%). The increase is due 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 Company recognized other expense of $884,000 for the nine months ended
September 30, 2000, as compared to other income of $447,000 in 1999. The
Company terminated all negotiations to acquire Jardine Petroleum Company and
Innovative Drug Delivery Systems, Inc. resulting in a one time expense of
approximately $552,000. The Company also recorded environmental expense of
$268,000. 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.
Income Taxes
The provision for income taxes for the nine months ended September 30, 2000,
resulted in a benefit of $153,000 as compared to tax expense of $684,000 for
the same period ended September 30, 1999. The change was due to the net loss
in the current period.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had a working capital deficit of $.6
million compared to a working capital deficit of $.3 million at December 31,
1999.
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Net cash provided by operating activities totaled $3.4 million for the nine
months ended September 30, 2000, compared to $1.8 million for the nine months
ended September 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 $.1 million for the nine months
ended September 30, 2000, compared to cash used of $2.7 million for the nine
months ended September 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.
Net cash used in financing activities totaled $3.2 million for the nine months
ended September 30, 2000, compared to cash provided by of $1.1 million for the
nine months ended September 30, 1999. The increase in cash used in financing
activities primarily related to a decrease in borrowing on the revolving line
of credit facility offset by proceeds from the issuance of preferred stock.
Effective November 1, 2000, the Company renegotiated its revolving bank credit
facility with Wells Fargo Business Credit, Inc. for $12.5 million which
expires December 31, 2002. The credit line is subject to the borrowing base,
as defined. At September 30, 2000, the borrowing base was approximately $11.2
million. $7.1 million was borrowed against the facility and is recorded as a
current liability.
The Company has various loans with banks, suppliers and individuals which
require principal payments of approximately $1.3 million in 2000.
The Company is obligated to pay lease costs of approximately $.9 million in
2000 for land, building, facilities and equipment.
In August 2000 the Company entered into a restructuring agreement with the
former shareholder of a subsidiary. Under the terms of the agreement, the
Company acquired for retirement the preferred shares owned by the former
shareholder in exchange for a note and the assumption of certain environmental
liabilities. The note is being amortized over a four-year period with an
interest rate of 8%. The note requires a $1,500,000 payment to be made from
the receipt of funds received from the future sale or refinancing of certain
assets. The note is dated September 15, 2000. The note is guaranteed by
Graves and Meteor Marketing, Inc. and is secured with certain assets of
Graves. The excess of the carrying value for the minority interest (the
preferred shares) and the liabilities recorded in the transaction is included
in the paid in capital section of the balance sheet. This income is not
included in the income statement.
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
quarters ended September 30, 2000 and 1999, the Company expended $92,000 and
$91,000, respectively, for site assessment and related cleanup costs. The
Company has accrued $741,000 at September 30, 2000, for environmental
remediation which management believes is adequate to cover known remediation
requirements.
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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 $12.5 million revolving credit facility,
which bears interest at prime plus 0.5%. As of September 30, 2000, there was
$7.1 million in borrowings outstanding. Because the interest rate 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 September 30, 2000, and using
the average interest rate paid on borrowed funds during the third quarter of
2000, would be an annual increase or decrease of approximately $71,000 in
interest expense and a corresponding decrease or increase of approximately
$40,000 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: November 14, 2000
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. FINANCIAL DATA SCHEDULE Filed herewith electronically
