<PAGE>
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 quarter ended March 31, 2000
SPARKLING SPRING WATER GROUP LIMITED
------------------------------------
19 FIELDING AVENUE, DARTMOUTH, NOVA SCOTIA, CANADA B3B 1C9
----------------------------------------------------------
(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/
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:
-----------------------------------
Name: David M. Arnold
Title: Vice President Finance, Treasurer
Date:
--------------------------------
<PAGE>
Sparkling Spring Water Group Limited
Quarterly Report On Form 6 - K
For The Quarter Ended March 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999..................................................................1
Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999..........................................................2
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999.........................................................3
Notes to Consolidated Financial Statements............................................ 4
Item 2. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations..........................................7
</TABLE>
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD
INDUSTRIAL
STATE OR OTHER JURISDICTION OF CLASSIFICATION CODE
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER INCORPORATION OF ORGANIZATION NUMBER
<S> <C> <C>
Sparkling Spring Water Limited Nova Scotia 5149
Spring Water, Inc. Delaware 5149
Cullyspring Water Co., Inc. Washington 5149
Crystal Springs Acquisition, Inc. Delaware 5149
Nature Springs Water Company Limited England 5149
Krystal Fountain Water Co. Limited England 5149
Water at Work Limited Scotland 5149
Natural Water Limited Scotland 5149
</TABLE>
The address of the principal executive offices of each of the
Additional Registrants is the same as for Sparkling Spring Water Group Limited,
as set forth on the facing page of this Report.
<PAGE>
Part I Financial Information
Item 1. Financial Statements
SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands of U.S. dollars)
March 31, December 31,
2000 1999
-------- --------
ASSETS (Unaudited)
<S> <C> <C>
Current
Cash and cash equivalents $ 754 $ 567
Accounts receivable 11,167 11,491
Inventories [NOTE 3] 1,843 1,482
Prepaid expenses 1,392 1,453
-------- --------
Total current assets 15,156 14,993
Fixed assets 35,586 36,207
Goodwill and deferred charges 49,358 50,227
Other assets 1,662 1,634
-------- --------
Total assets $101,762 $103,061
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities $ 11,544 $ 10,028
Income tax payable 39 103
Customer deposits 5,231 5,466
Debt due within one year 2,945 2,963
-------- --------
Total current liabilities 19,759 18,560
-------- --------
Obligations under capital leases and other debt 1,960 2,267
Senior bank debt 14,526 13,973
Subordinated notes payable [NOTE 4] 88,100 88,100
-------- --------
Total long-term liabilities 104,586 104,340
-------- --------
Shareholder's equity (deficiency)
Capital Stock
Issued and outstanding:
Class D common shares - 1,383,328 6,189 6,241
Class E common shares - 5,860 176 177
-------- --------
6,365 6,418
Cumulative translation adjustment (2,146) (1,538)
Deficit (26,802) (24,719)
-------- --------
Total shareholder's equity (deficiency) (22,583) (19,839)
-------- --------
Total liabilities and
shareholder's equity (deficiency) $101,762 $103,061
======== ========
</TABLE>
SEE ACCOMPANYING NOTES
1
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SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands of U.S. dollars) Three Three
Months Ended Months Ended
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
Revenue:
Water $ 10,126 $ 9,206
Rental 3,602 3,383
Other 1,867 1,824
-------- --------
Total revenue 15,595 14,413
-------- --------
Cost of sales:
Water 2,038 1,995
Other 685 765
-------- --------
Total cost of sales 2,723 2,760
-------- --------
Gross profit 12,872 11,653
Expenses:
Selling, delivery and administrative 8,922 8,242
Depreciation and amortization 2,562 2,525
-------- --------
Operating profit 1,388 886
Interest expense 3,062 2,742
-------- --------
Loss before income taxes (1,674) (1,856)
Provision for income taxes (409) --
-------- --------
Net loss (2,083) (1,856)
Other comprehensive loss:
Foreign currency translation adjustment (608) (225)
-------- --------
Comprehensive loss $ (2,691) $ (2,081)
-------- --------
Basic and diluted loss per share $ (1.50) $ (1.34)
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
SPARKLING SPRING WATER GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Three
(in thousands of U.S. dollars) Months Ended Months Ended
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (2,083) $ (1,856)
Items not requiring cash
Depreciation and amortization 2,562 2,525
Amortization of deferred financing costs 145 100
Cross currency swap [NOTE 4] (26) (410)
-------- --------
598 359
Net change in non-cash working capital balances 1,223 2,431
-------- --------
Cash provided by operating activities 1,821 2,790
-------- --------
INVESTING ACTIVITIES
Purchase of fixed assets, net (1,847) (2,319)
-------- --------
FINANCING ACTIVITIES
Increase (repayment) in long-term debt 244 (1,929)
Decrease in deferred charges -- 20
-------- --------
Cash provided by (used in) financing activities 244 (1,909)
-------- --------
Effect of foreign currency translation on cash (31) (26)
-------- --------
Increase (decrease) in cash and cash equivalents during the period 187 (1,464)
Cash and cash equivalents, beginning of period 567 9,728
-------- --------
Cash and cash equivalents, end of period $ 754 $ 8,264
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid $ 489 $ 392
======== ========
Income taxes paid $ 479 $ 13
======== ========
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
SPARKLING SPRING WATER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2000
(Unaudited)
1. Basis of Presentation
Sparkling Spring Water Group Limited ("Sparkling Spring") is
incorporated under the laws of the Province of Nova Scotia, Canada and provides
containered water to home and office markets in British Columbia and the
Maritime provinces of Canada, England, Scotland and the Pacific Northwestern
United States.
The Company uses the U.S. dollar as its reporting currency. Balance
sheet accounts of all non-U. S. entities are translated into U.S. dollars at the
exchange rates in effect at the balance sheet date. Income statement accounts of
all non-U.S. entities are translated into U.S. dollars at average exchange rates
prevailing during the period. Gains and losses on translation are included in a
separate component of shareholder's equity titled "cumulative translation
adjustment".
The accompanying unaudited consolidated financial statements have been
prepared on a historical cost basis by management in accordance with United
States generally accepted accounting principles for interim financial
information. Accordingly, they do not include all information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited interim consolidated financial
statements of the Company reflect all adjustments necessary to present fairly
the financial position of the Company, the results of its operations and the
changes in its cash flows for the interim periods presented. All such
adjustments are of a normal recurring nature.
The accompanying consolidated financial statements should be read in
conjunction with the Audited Financial Statements for the year ended December
31, 1999 and the notes thereto contained in the Company's Annual Report on Form
20-F filed with the Securities and Exchange Commission.
2. Seasonal Nature of Business
Operating results for the three month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000 due to the seasonal nature of the business. This
seasonality results from a combination of higher unit sales of the Company's
products in the second and third quarters and the accounting for such
administrative and other overhead costs including but not limited to
depreciation, amortization and interest expense which are not significantly
impacted by business seasonality.
3. Inventories
Inventories consist of the following (thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
(unaudited)
<S> <C> <C>
Packaging materials $ 336 $ 339
Coolers not yet in service 595 327
Goods for resale 439 417
Cooler parts 350 246
Other 123 153
------ ------
$1,843 $1,482
====== ======
</TABLE>
4
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SPARKLING SPRING WATER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2000
(Unaudited)
4. Financial Instruments
In December 1997, the company entered into two cross currency interest
rate swaps with a US bank to more closely match the interest requirements of its
subordinated notes with the cash flows earned by the Company's Canadian and UK
subsidiaries. The Company entered into a $30 million US six year swap in British
pounds sterling and a $28 million US five year swap in Canadian dollars which
was terminated in October 1998. The semi annual interest payments on the pounds
sterling swap are approximately 1.1 million pounds. At March 31, 2000 and
December 31, 1999, the aggregate fair market value of the pounds sterling swap
was approximately $346,000 and $318,000 in favor of the Company respectively.
For the three months ended March 31, 2000, approximately $26,000 of the $28,000
increase in the swap asset between December 31, 1999 and March 31, 2000 was
recorded as a decrease in interest expense. For the three months ended March 31,
1999, approximately $410,000 of the $440,000 decrease in the swap liability
between December 31, 1998 and March 31, 1999 was recorded as a decrease in
interest expense.
5. Earnings per Share
The weighted average number of shares used to calculate basic and
diluted loss per share is 1,389,188 for the three months ended March 31, 2000
and 1999. The effect of the exercise of outstanding options and warrants has not
been included in the computation of earnings per share as the effect would be
antidilutive.
6. Acquisitions
On November 27, 1999, the Company purchased the assets of the Misty
Mountain Water Division of Baxter Foods Limited ("Misty") for approximately $1.4
million. Misty operates in the Maritime Provinces of Canada.
The following unaudited pro forma information presents a summary of
consolidated results of operations as if the acquisition of Misty had occurred
at January 1, 1999.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
(thousands of dollars except per share amounts) March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Total revenue $15,595 $14,859
Net loss (2,083) (1,818)
Basic loss per share (1.50) (1.31)
</TABLE>
7. Senior Credit Facility
The Company has available a $30 million multi-currency facility that
provides for a $15 million operating line (the "Operating Line Facility) which
is renewable annually by April 30th, a $5 million five year acquisition line
(the "Acquisition Facility") and a $10 million short term credit line (the "Note
Buyback Facility") that was available until October 31, 1999 that provided the
Company with flexibility to repurchase, at its discretion, certain of the
Company's outstanding Subordinated Notes Payable. In March, 2000, the Operating
Line Facility was renewed to April 30, 2001. Amounts outstanding as at October
31, 1999 under the Note Buyback Facility will be repaid in equal annual amounts
over a five-year period commencing October 31, 2000. The Company has pledged as
collateral a first priority security interest
5
<PAGE>
granted in favor of the lenders over substantially all of the assets of the
Company. The Company's obligations under the facility rank senior to the payment
of the Company's Subordinated Notes Payable.
8. Summary of Business Segments
The Company's business segments derive substantially all their revenues
from the sale of bottled water and the rental of water coolers. The Company has
identified three primary business segments: Canada, the United Kingdom and the
United States.
Segment detail is summarized as follows:
<TABLE>
<CAPTION>
Three Three
(thousands of dollars) Months Ended Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenue:
Canada $ 6,122 $ 5,507
United Kingdom 6,024 5,704
United States 3,449 3,202
------- -------
$15,595 $14,413
======= =======
Net income before depreciation, interest and income taxes:
Canada $ 1,509 $ 1,257
United Kingdom 2,033 2,081
United States 810 747
Unallocated corporate overhead (402) (674)
------- -------
$ 3,950 $ 3,411
======= =======
</TABLE>
9. Comparative Figures
Certain of the comparative figures have been reclassified to conform
with the presentation adopted in the current period.
6
<PAGE>
ITEM 2. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying consolidated
financial statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated certain
statement of operations and other data of the Company.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenue 100% 100%
Cost of sales 17.5 19.1
---- ----
Gross profit 82.5 80.9
Selling, delivery and administrative 57.2 57.2
---- ----
EBITDA 25.3 23.7
Depreciation and amortization 16.4 17.5
---- ----
Operating profit 8.9 6.2
Interest expense 19.6 19.0
---- ----
Loss before income taxes (10.7) (12.8)
Provision for income taxes (2.6) --
---- ----
Net loss (13.3) (12.8)
==== ====
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1999
REVENUE. Revenue increased $1.2 million or 8.2% to $15.6 million in the
three months ended March 31, 2000 compared to $14.4 million in the three months
ended March 31, 1999. An increase in the exchange rate for the Canadian Dollar
offset a decrease in the Pound Sterling resulting in a net increase of $0.1
million or 1.0% in revenues compared to the exchange rates in the 1999 period.
Revenues from the acquisition of Misty Mountain completed during the fourth
quarter of 1999 accounted for approximately $0.2 million of the increase. The
balance of the increase was from growth in sales from the Company's higher
customer location base compared to the 1999 period. The Company's water cooler
customer location base was 158,500 as at March 31, 2000 compared to 160,300 as
at December 31, 1999.
7
<PAGE>
COST OF SALES. The cost of sales in 2000 remained unchanged from the
1999 balance of $2.7 million. The cost of sales as a percentage of revenue
decreased by 1.6% from 19.1% in 1999 to 17.5% in 2000 as a result of growth in
higher margin home and office water and cooler rental revenues and a decrease in
the Company's revenues from lower margin products.
OPERATING EXPENSES. Selling, delivery, and administrative operating
expenses increased by $0.7 million or 8.3% to $8.9 million for the three months
ended March 31, 2000 compared to $8.2 million in the 1999 period. This increase
is due primarily to increased business operations resulting from the underlying
growth in the Company's water cooler location base.
As a percentage of revenue, selling, delivery and administrative
expenses were 57.2% for the three months ended March 31, 2000, the same
percentage as the 1999 period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for the three months ended March 31, 2000 remained unchanged from the 1999
balance of $2.5 million. Depreciation for the three months ended March 31, 2000
reflects the change in the Company's depreciation method from the declining
balance method to the straight line method which was adopted in the Company's
1999 year end financial statements. Depreciation expense for the three months
ended March 31, 1999 was calculated using the declining balance method.
OPERATING PROFIT. Operating profit increased $0.5 million or 56.7% from
$0.9 million in 1999 to $1.4 million in 2000. As a percentage of revenue,
operating profit increased from 6.2% in the 1999 period to 8.9% in the three
months ended March 31, 2000. Earnings before interest, taxes, depreciation and
amortization expense increased by 15.8% or $0.5 million to $3.9 million from
$3.4 million in the 1999 period as a result of the changes noted above.
INTEREST EXPENSE. Interest expense increased by $0.3 million from $2.7
million in the 1999 period to $3.0 million in the 2000 period. Interest expense
in the three months ended March 31, 2000 increased approximately $0.4 million
from the 1999 period as a result of interest accrued due to the fluctuating
value of the Company's cross currency swaps (see Note 4 of the Notes to
Consolidated Financial Statements included elsewhere in this Report). Excluding
the impact of accounting for the cross currency swap, interest expense in 1999
decreased by $0.1 compared to the 1999 period. An increase in interest expense
associated with increased borrowings under the Company's Senior Credit Facility
was offset by lower interest costs arising from the redemption of $11.9 million
of the Company's Subordinated Notes Payable which were redeemed after the 1999
first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its capital and operating
requirements with a combination of cash flow from operations, borrowings under
bank credit facilities and equity investments from shareholders. The Company has
utilized these sources of funds to make acquisitions, to fund significant
capital expenditures at its properties, to fund operations and to service debt.
The Company presently expects to fund its future capital and operating
requirements at its existing operations through a combination of cash generated
from operations and borrowings under the Senior Credit Facility (see below).
Net cash provided by operating activities was $1.8 million for the
three months ended March 31, 2000 and $2.8 million for the three months ended
March 31, 1999. The Company made net capital expenditures of $1.8 million in the
three months ended March 31, 2000 and $2.3 million in 1999. Capital expenditures
in the 2000 period were primarily related to the addition of water bottles,
water coolers, delivery trucks and computer equipment. Based on the Company's
existing operations, management expects that the Company's capital expenditures
will total approximately $10.0 million in 2000. This estimate includes
approximately $2.0 million that may be spent on a new plant in Scotland that is
currently under evaluation.
8
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The Company believes that existing cash balances together with
available cash, cash generated from operations and available borrowings under
the Senior Credit Facility will be sufficient to finance the Company's working
capital and capital expenditure requirements for 2000 as well as some
acquisitions. However, there can be no assurance that such resources will be
sufficient to meet the Company's anticipated requirements or that capital will
be available to the Company on terms and conditions acceptable to the Company.
SENIOR CREDIT FACILITY
The Company has available a $30 million multi- currency facility that
provides for a $15 million operating line (the "Operating Line Facility") which
is renewable annually by April 30th, a $5 million five year acquisition line
(the "Acquisition Facility") and a $10 million short term credit line (the "Note
Buyback Facility") that was available until October 31, 1999 that provided the
Company with flexibility to repurchase, at its discretion, certain of the
Company's outstanding Subordinated Notes Payable. In March 2000, the Operating
Line Facility was renewed to April 30, 2001. Amounts outstanding as at October
31, 1999 under the Note Buyback Facility will be repaid in equal annual amounts
over a five-year period commencing October 31, 2000. The Company has pledged as
collateral a first priority security interest granted in favor of the lenders
over substantially all of the assets of the Company. The Company's obligations
under the facility rank senior to the payment of the Company's Subordinated
Notes Payable.
Amounts outstanding under the Senior Credit Facility bear interest at
specified rates based on the Canadian prime, U.S. prime, London inter-bank
market and Bankers' Acceptances rates. As of March 31, 2000, the Company had
approximately $8.1 million outstanding under the Operating Line Facility
including $2.8 million of outstanding letters of credit, $1.2 million
outstanding under the Acquisition Facility and $10 million outstanding under the
Note Buyback Facility.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The new statement requires all derivatives
to be recorded on the balance sheet at fair value and establishes new accounting
rules for hedging instruments. The statement is effective for years beginning
after June 15, 2000. The impact of this statement on the consolidated financial
statements has not yet been determined.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included in this Report that do not relate to present or
historical conditions are "forward looking statements" within the meaning of the
Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995
(the "1995 Reform Act"). Additional oral or written forward-looking statements
may be made by the Company from time to time, and such statements may be
included in documents other than this Report that are filed with the SEC. Such
forward-looking statements involve risks and uncertainties that could cause
results or outcomes to differ materially from those expressed in such
forward-looking statements. Forward-looking statements in this Report and
elsewhere may include without limitation, statements relating to the Company's
plans, strategies, objectives, expectations, intentions and adequacy of
resources and are intended to be made pursuant to the safe harbor provisions of
the 1995 Reform Act. Words such as "believes," "forecasts," "intends,"
"possible," "expects," "estimates," "anticipates," or "plans" and similar
expressions are intended to identify forward-looking statements. Investors are
cautioned that such forward-looking statements involve risks and uncertainties
including 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
9
<PAGE>
Company's ability to successfully manage growth (including monitoring
operations, controlling costs and maintaining effective quality and inventory
controls; (vi) the market for attractive acquisitions in the bottled 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.
10
