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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of November, 1998
Sparkling Spring Water Group Limited
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One Landmark Square, Stamford CT, USA 06901
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F]
Form 20-F X Form 40-F
----- -----
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3 - 2(b) under the
Securities Exchange Act of 1934.]
Yes No X
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On November 16, 1998 Sparkling Spring Water Group Limited issued a press
release announcing its 3rd Quarter 1998 Financial Results.
Exhibit I Press release dated November 16, 1998 announcing 3rd Quarter
1998 Financial Results.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sparkling Spring Water Group Limited
By:
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Name: David M. Arnold
Title: Vice President Finance, Treasurer
Date:
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Exhibit I
PRESS RELEASE (For Immediate Release) November 16, 1998
SPARKLING SPRING WATER GROUP LIMITED
ANNOUNCES 3RD QUARTER FINANCIAL RESULTS
(ALL CURRENCY AMOUNTS IN $US)
VANCOUVER, B.C. ---- Sparkling Spring Water Group Limited released financial
results for the third quarter ended September 30, 1998. Revenues increased by
43.4% to $16.5 million from $11.5 million in the twelve-week year ago period.
Including a charge of $1.8 million, principally for costs incurred to integrate
its 1998 acquisitions into the Company's operations, operating income decreased
by $1.3 million or 54.2% to $1.1 million. Excluding this charge, operating
income would have increased by $486,000 or 19.7% over the 1997 period. Primarily
as a result of this charge the Company recorded a net loss of $462,000.
Excluding the $1.8 million acquisition charge, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") was $4.9 million or
34.5% greater than the twelve-week period ended September 30, 1997. Separate
from the $1.8 million acquisition charge, during the quarter the Company also
increased reserves for obsolete inventory by $100,000 (included in Cost of
Sales), and for bad debt by $475,000 (included in Selling, Delivery and
Administrative expense). See accompanying financial tables for the third quarter
"Table 1" and nine month results "Table 2".
The Company believes the third quarter of 1998 is not necessarily comparable to
the 1997 period. In 1998, the Company changed its internal reporting timeframe
from the thirteen four-week periods used in 1997 to twelve monthly periods. As
a result, the 1998 third quarter reporting period included 63 delivery days
versus 55 delivery days in the 1997 twelve-week reporting period, an increase of
14.5%. The Company also acquired several business operations since the 1997
reporting period which increased the 1998 results. In addition, as outlined
above, in the third quarter of 1998 the Company took a charge for various costs
related to acquisitions acquired in 1998 concerning facility closures, route
blending, computer conversions, severance, relocation and other costs. Included
in this charge is $125,000 of expenses incurred for a proposed 1998 acquisition
that will not be completed.
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Page 2: SSWGL Press Release
On a pro-forma basis (assuming that all operations owned during the third
quarter 1998 were owned for the same period last year) the Company achieved
third quarter comparable revenue growth of approximately 10 %. The Company's
pro-forma 5-gallon unit sales growth was approximately 16% and customer base
increased approximately 18% on a year over year basis. In addition, during
the 1998 third quarter, the Company added (excluding business acquisitions)
approximately 8,000 net new customer locations. Inclusive of acquisitions,
the Company ended the quarter with approximately 154,000 customer locations
of which approximately 81% were rental locations. This represents a 34%
increase in customer locations since December 31, 1997.
The Company's gross profit margin increased in the third quarter of 1998 to
82.8% from 80.7% in the 1997 period. This was due to a lower percentage mix
of both lower margin small pack sales (1 gallon and 2.5 gallon) and other
lower margin products including cups and coffee. In addition, the Company
experienced improved efficiencies in the production of its main package, 5 &
6 gallon returnable containers for its home and office business. These
improvements were offset somewhat by the $100,000 reserve for obsolete
inventory which reduced the Company's third quarter gross profit margin by
0.6%.
Selling, Delivery and Administrative expense as a percentage of revenue
increased in the third quarter of 1998 by 4.1% to 53.3% from 49.2% in the 1997
period. This increase was due to increased reserves for bad debt of $475,000
(2.9%) as well as significant increases in marketing expenditures to fund the
strong customer growth and increased administrative charges particularly in
corporate personnel and computer systems.
The net loss of $462,000 for the quarter was primarily the result of the
acquisition charge and increased bad debt and obsolete inventory reserves. These
charges were partially offset by benefits accrued in relation to the Company's
cross currency debt swaps. The increased value of the swaps reduced interest
expense by approximately $1.4 million in the quarter and $2.7 million in the
nine-months. After the end of the third quarter the Company closed out its
Canadian currency swap realizing cash proceeds of approximately $3.4 million.
Excluding the impact of this benefit, the Company would have recorded
significantly higher interest expense on significantly higher debt levels
incurred to finance acquisitions and complete the reorganization of the Company
implemented last November. The Company also had a higher average interest rate
on its debt due to the issuance of its 11.5% Senior Subordinated Notes last
November.
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Page 3: SSWGL Press Release
The Company had approximately $6.8 million in cash and cash equivalents at the
end of the third quarter. It is anticipated that this cash will be used
primarily for acquisitions and capital investment in the Company's existing
operations.
According to Stewart Allen, Sparkling Spring's President, "Our operating
performance, excluding the charge related to acquisitions, was negatively
impacted by 1) the high level of marketing and distribution costs to support our
strong customer growth and 2) investment in additional executive staffing to
manage the larger enterprise. We are hopeful that these expenditures will be
sufficient to allow us to manage a significantly larger business in the future.
We were pleased with our organic growth of 8,000 net new customer locations, a
record quarter for the Company. This was achieved despite below plan performance
in England where we had a difficult quarter all around. I am pleased to report
that our strong organic customer growth combined with the Springfield
acquisition at the end of August has caused Sparkling Spring to surpass 150,000
customer locations during the third quarter".
Sparkling Spring is a leading producer and distributor of bottled water to
the home and office segment now serving over 155,000 customer locations. The
Company does business as "Nature Springs" in England, "Water at Work" in
Scotland, "Sparkling Springs" in the Atlantic Provinces of Canada, "Canadian
Springs" and "Springfield Water" in British Columbia Canada, "Cullyspring"
and "Crystal Springs" in Washington State and "Crystal Springs" in Oregon
State.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements as defined by the Private
Securities Reform Act of 1995, which are inherently subject to various risks and
uncertainties. These include, without limitation, the following: (i) the
Company's plans, strategies, objectives, expectations and intentions are subject
to change at any time at the discretion of the Company, (ii) the Company's
ability to expand by acquisitions is dependent upon, and may be limited by, the
availability of suitable acquisition candidates and the availability of
financing therefor on suitable terms; (iii) the Company's ability to obtain
financing will be affected by restrictions contained in the Indenture and the
Company's other existing and future financing arrangements; (iv) the Company's
proposed expansion strategy will be substantially dependent upon the Company's
ability to hire and retain skilled management, financial, marketing and other
personnel; (v) the Company's plans and results of operations will be affected by
the Company's ability to successfully manage growth (including monitoring
operations,
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Page 4: SSWGL Press Release
controlling costs and maintaining effective quality and inventory controls);
(vi) the market for attractive acquisitions in the bottle water industry is
becoming increasingly competitive, which could make the Company's acquisition
strategy more difficult to achieve; (vii) the Company's operations are subject
to the jurisdiction of various governmental and regulatory agencies which
regulate the quality of drinking water and other products and any failure by the
Company to comply with existing and future laws and regulations could subject
the Company to significant penalties or impose additional costs on the Company
or otherwise have a material adverse affect on its financial position or results
of operations; (viii) any interruption in the availability of water to the
Company from municipal sources and local natural springs could have a material
adverse affect on the Company's operations until suitable replacement sources
are located; and (ix) other risks and uncertainties indicated from time to time
in the Company's filings with the SEC.
CONTACT:
K. DILLON SCHICKLI
Sparkling Spring Water Group Limited
c/o C.F. Capital Corporation
200 Sea Pines Rd
Bellingham, WA 98226
360-671-2602
Fax: 360-671-2604
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TABLE 1
SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998
(US $ IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTHS ENDED % OF 12 WEEKS ENDED % OF % CHANGE
SEPTEMBER 30, 1998 REVENUES SEPTEMBER 30, 1997 REVENUES 98 VS 97
------------------ --------- ------------------ -------- --------
<S> <C> <C> <C> <C> <C>
REVENUE:
WATER $ 10,646 64.6% $ 7,211 62.7% 47.6%
RENTAL 3,868 23.5% 2,790 24.3% 38.6%
OTHER 1,974 12.1% 1,496 13.0% 31.9%
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TOTAL REVENUE 16,488 100.0% 11,497 100.0% 43.4%
COST OF SALES:
WATER 1,965 11.9% 1,476 12.8% 33.1%
OTHER 871 5.3% 745 6.5% 16.9%
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TOTAL COST OF SALES 2,836 17.2% 2,221 19.3% 27.7%
GROSS PROFIT 13,652 82.8% 9,276 80.7% 47.2%
EXPENSES:
SELLING, DELIVERY & ADMIN. 8,783 53.3% 5,657 49.2% 55.3%
ACQUISITION INTEGRATION CHARGE (1) 1,825 11.1% 0 0.0% N/A
DEPRECIATION & AMORTIZATION 1,912 11.6% 1,148 10.0% 66.6%
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OPERATING PROFIT 1,132 6.8% 2,471 21.5% (54.2%)
INTEREST EXPENSE (2) 1,694 10.3% 1,172 10.2% 44.5%
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INCOME BEFORE INCOME TAXES (562) (3.4%) 1,299 11.3% N/A
PROVISION FOR INCOME TAXES (100) (0.6%) 547 4.8% N/A
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NET INCOME / (LOSS) $ (462) (2.8%) $ 752 6.5% N/A
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"EBITDA" (Includes add back of Acquisition Charge) $ 4,869 29.5% $ 3,620 31.5% 34.5%
DELIVERY DAYS 63 55 14.5%
EXCHANGE RATES - AVERAGE
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English Pound 1.6535 1.6252 1.7%
Canadian Dollar 0.6603 0.7221 (8.6%)
EXCHANGE RATES - ENDING
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English Pound 1.6995 1.6117 5.4%
Canadian Dollar 0.6552 0.7234 (9.4%)
</TABLE>
(1) Includes expenses related to the closing of acquired facilities, blending
of delivery routes, conversion of computer systems, severance, relocation
and other costs related to the acquisitions completed in 1998.
(2) Interest Expense was reduced in the 1998 3rd quarter by $1,427 due to the
increase in the net value of the Company's currency swaps from
fluctuating interest rates, market volatility and the drop in value of
the Canadian Dollar.
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TABLE 2
SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(US $ IN THOUSANDS)
<TABLE>
<CAPTION>
9 MONTHS ENDED % OF 9 MONTHS ENDED % OF % CHANGE
SEPTEMBER 30, 1998 REVENUES SEPTEMBER 30, 1997 REVENUES 98 VS 97
------------------ -------- ------------------ -------- --------
<S> <C> <C> <C> <C> <C>
REVENUE:
WATER $ 27,127 63.4% $ 19,537 61.4% 38.9%
RENTAL 10,182 23.8% 7,777 24.5% 30.9%
OTHER 5,492 12.8% 4,484 14.1% 22.5%
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TOTAL REVENUE 42,801 100.0% 31,798 100.0% 34.6%
COST OF SALES:
WATER 5,422 12.7% 3,881 12.2% 39.7%
OTHER 2,313 5.4% 1,983 6.2% 16.7%
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TOTAL COST OF SALES 7,735 18.1% 5,864 18.4% 31.9%
GROSS PROFIT 35,066 81.9% 25,934 81.6% 35.2%
EXPENSES:
SELLING, DELIVERY & ADMIN. 23,199 54.2% 16,818 53.0% 37.9%
ACQUISITION INTEGRATION CHARGE(1) 1,825 4.2% - 0.0% N/A
DEPRECIATION & AMORTIZATION 5,505 12.9% 3,918 12.3% 40.5%
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OPERATING PROFIT 4,537 10.6% 5,198 16.3% (12.7%)
INTEREST EXPENSE (2) 5,997 14.0% 2,901 9.1% 106.7%
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INCOME BEFORE INCOME TAXES (1,460) (3.4%) 2,297 7.2% N/A
PROVISION FOR INCOME TAXES (287) (0.7%) 1,063 3.3% N/A
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NET INCOME / (LOSS) $ (1,173) (2.7%) $ 1,234 3.9% N/A
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"EBITDA" (Includes add back of Acquisition Charge) $ 11,867 27.7% $ 9,116 28.7% 30.2%
DELIVERY DAYS 189 189 0.0%
EXCHANGE RATES - AVERAGE
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English Pound 1.6510 1.6307 1.2%
Canadian Dollar 0.6831 0.7262 (5.9%)
EXCHANGE RATES - ENDING
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English Pound 1.6995 1.6117 5.4%
Canadian Dollar 0.6552 0.7234 (9.4%)
</TABLE>
(1) Includes expenses related to the closing of acquired facilities, blending
of delivery routes, conversion of computer systems, severance, relocation
and other costs related to the acquisitions completed in 1998.
(2) Interest Expense was reduced in the 1998 nine months by $2,749 due to the
increase in the net value of the Company's currency swaps from
fluctuating interest rates, market volatility and the drop in value of
the Canadian Dollar.
