<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995
Commission File Number: 33-6738-D
Eldorado Artesian Springs, Inc.
(Exact name of registrant as specified in its charter as amended)
Colorado 84-0907853
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
P.O. Box 445, Eldorado Springs, Colorado 80025
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(Address of principal executive offices) (Zip Code)
(303) 499-1316
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
---- ----
Number shares of common stock outstanding at the latest practicable date,
June 30, 1995: 32,164,948 with 56,045 shares in the treasury.
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Eldorado Artesian Springs, Inc.
Form 10-Q, September 30, 1995
TABLE OF CONTENTS
Page
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Part I - Financial Information
Balance Sheet as of March 31, 1995 and
September 30, 1995 3
Statement of Operations for the three and six months
ended September 30, 1995 and September 30, 1994 4
Statement of Cash Flow for the three and six months
ended September 30, 1995 and September 30, 1994 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial
Condition & Results of Operations 7-8
Part II - Other Information 9
Signature Page 10
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The financial statements for the year ended March 31, 1995 have been
audited, and the financial statements have not been audited for the three
months ended September 30, 1995 or 1994. However, the management of Eldorado
Artesian Springs, Inc. believes that all necessary adjustments have been
reflected to present fairly the Company's financial position at September 30,
1995 and the results of its operations and cash flows for the three months
ended September 30, 1995.
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ELDORADO ARTESIAN SPRINGS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------ --------------
ASSETS
<S> <C> <C>
Current Assets
Cash $ 115,930 $ 44,120
Accounts Receivable
Trade Net 222,904 195,673
Other 6,155 5,078
Inventories 78,057 91,472
Prepaid Expenses and Other 27,324 37,126
---------- ----------
Total Current Assets 450,370 373,469
---------- ----------
Property, Plant & Equipment (net of depreciation) 990,844 918,778
---------- ----------
Other Assets
Notes Receivable - stockholders 41,200 40,088
Water Rights - net 125,837 128,081
Other - net 134,153 111,463
---------- ----------
Total Other Assets 301,190 279,632
---------- ----------
Total 1,742,404 1,571,879
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable 82,491 46,244
Accured Expenses 41,623 48,025
Unearned Income 8,657 12,268
Current Maturities 167,420 155,327
---------- ----------
Total Current Liabilities 300,191 261,864
---------- ----------
Long Term Debt 1,057,105 1,034,859
Deferred Income Taxes 16,240 16,240
---------- ----------
1,073,345 1,051,099
Equity
Common Stock 32,165 32,165
Additional Paid-in Capital 266,303 266,303
Accumulated Deficit (27,357) (27,357)
Less Cost of Treasury Stock (12,195) (12,195)
Net Earnings 109,952 --
---------- ----------
Total Equity 368,868 258,916
---------- ----------
Total 1,742,404 1,571,879
========== ==========
</TABLE>
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<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
3 MONTHS 6 MONTHS
------------------------------- -------------------------------
SEPT. 30, 1995 SEPT. 30, 1994 SEPT. 30, 1995 SEPT. 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue
Water and Related $ 559,317 $ 437,627 $ 1,039,948 $ 812,952
Pool 65,335 48,368 78,042 79,954
Rentals 9,915 9,915 19,830 20,030
Returns and Allowances (4,284) (3,727) (8,155) (6,019)
----------- ----------- ----------- -----------
NET REVENUE 630,283 492,183 1,129,665 906,917
Cost of Goods Sold 89,569 59,182 168,996 113,184
----------- ----------- ----------- -----------
Gross Profit 540,714 433,001 960,669 793,733
----------- ----------- ----------- -----------
Operating Expenses
Salaries and Related 226,330 208,519 437,012 363,170
Administrative and
General 59,749 58,803 123,628 117,076
Selling and Delivery 71,041 84,016 139,796 142,848
Depreciation and
Amortization 43,974 34,496 87,948 68,960
----------- ----------- ----------- -----------
401,094 385,834 788,384 692,054
----------- ----------- ----------- -----------
Operating Income 139,620 47,167 172,285 101,679
----------- ----------- ----------- -----------
Other Income (expense)
Interest Income 836 774 1,662 1,408
Interest Expense (31,423) (26,981) (63,995) (51,599)
----------- ----------- -----------
Net Income (loss) 109,033 20,960 109,952 51,488
=========== =========== =========== ============
Net Income Per
Common Share -- -- -- --
----------- ----------- ----------- -----------
Weighted Average Number
of Shares Outstanding 32,108,903 32,108,903 32,108,903 32,108,903
=========== =========== =========== ===========
</TABLE>
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<PAGE>
ELDORADO ARTESIAN SPRINGS, INC.
STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
3 MONTHS ENDED 6 MONTHS ENDED
------------------------------ -----------------------------
SEPT. 30, '95 SEPT. 30, '94 SEPT. 30, '95 SEPT. 30, '94
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash Flows From Activities
Net Income $109,033 $ 20,960 $109,952 $ 51,488
Adjustments to Reconcile
Depreciation and
Amortization 43,974 34,496 87,948 68,960
Changes in Assets
and Liabilities
Accounts Receivable (8,712) (102) (28,308) (12,477)
Inventory 7,432 (11,058) 13,415 (14,116)
Prepaid Expenses
and Other (7,912) (5,247) 9,802 1,397
Accounts Payable 12,641 4,394 36,247 28,683
Accrued Expenses (22,345) (8,924) (6,402) 10,433
Unearned Income (1,825) (1,445) (3,611) (2,793)
-------- -------- -------- ---------
Net Cash From
Operating Activ. 132,286 33,074 219,043 131,575
Cash Flows From Investing
Purchase of Property
and Equipment (52,970) (68,855) (157,770) (161,011)
Increase in
Note Receivable (-) (556) (556) (1,112) (1,112)
-------- -------- -------- ---------
Net Cash From Investg. (53,526) (69,411) (158,882) (162,123)
Cash Flows From
Financing Activities
Increase In Long-Term Debt 15,273 44,341 113,913 115,481
Loan Fees and Other Assets (1,322) (11,501) (22,690) (18,511)
Payments On
Long-Term Debt (39,087) (28,859) (79,974) (55,152)
-------- -------- -------- ---------
Net Cash From Financg. (25,136) 3,981 11,649 41,818
Net Increase (Decrease)
in Cash 53,624 (32,356) 71,810 11,270
Cash -- Beginning 62,306 85,588 44,120 41,962
Cash -- Ending 115,930 53,232 115,930 53,232
</TABLE>
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<PAGE>
NOTES TO FINANCIAL STATEMENTS
OPINIONS OF MANAGEMENT
A. In the opinion of management, the accompanying financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position as of September 30, 1995, the
results of operations and cash flow for the period then ended.
B. In the opinion of management, the results of operations for the three
months ended September 30, 1995 are not necessarily indicative of the
results to be expected for the full year.
C. Summary of the Company's significant accounting policies are incorporated
by reference to the Company's March 31, 1995 Annual Report filed under
cover of Form 10-K.
D. The financial statements presented were prepared on a proforma consolidated
basis. This gives effect to the combination of Eldorado Artesian Springs,
Inc. and Lexington Funding, Inc. as if it had occurred April 1, 1986.
This business combination was accounted for as a reverse acquisition using
the purchase method in a manner similar to a pooling of interests. The
management of Eldorado Artesian Springs, Inc. has retained control of the
combined entity.
E. Income per common share is computed by dividing the net income by the
weighted average number of shares of common stock outstanding during
the period.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The Company achieved net revenues for the three months and six months ended
September 30, 1995 of $630,283 and $1,129,665 respectively. Both figures are
record revenues for the respective time periods and increased by 28% for the
quarter and 24.5% for the six months over the same periods a year ago. The
growth for the industry as reported by trade journals shows a consensus
average of 11%. Contributing strongly to the dynamic second quarter was an
unseasonably hot summer in the primary distribution areas serviced by the
Company. Just as unseasonable cold and wet weather dampened first quarter
results, the hot weather of the second quarter had a positive impact on
revenues.
The cost of goods sold expense increased by 51.3% for the three month period
and 49.3% for the six months ended September. This increase reflects the
increased volume in the wholesale products division, which has a much greater
cost of goods than the five gallon delivery business. Even though the
wholesale products division contributed 9.8% of gross revenues it generated
50.9% of the cost of goods. As the Company continues to expand its wholesale
products distribution, primarily in PET bottles, we should expect to see
continuing increases in the cost of goods expense. The Company plans and is
working on several methods for reducing the costs associated with the PET
products line. The principal costs are for the bottles, the box, and freight
to the Company's production facility. The Company is currently exploring
possible joint ventures with bottle manufacturers in closer proximity to the
Company facility, and as volume justifies may even begin to manufacture the
bottles itself at a company-owned facility.
Wages, salaries, and related expenses increased 8.5% for the three month
period versus a year ago, and 20.3% for the six months ended September 30,
1995 versus the same six months in 1994. This disparity of wage-related
increases is due primarily to the fact that the Company raised wage scales
for all employees on July 1, 1994. Therefore, the wages for three months
ended June 30, 1995 are reflective of growth in volume and a higher wage
scale than 1994, whereas during the three months ended September 1995 wages
were on the same wage scale as the like period in 1994. The 8.5% increase in
wages during the three months ended September 1995 versus a 28% growth in
revenue during the same period reflects improved operating efficiencies from
new bottling equipment and from economies of scale from the increased volumes.
Depreciation expenses were up 27.5% for both the three months and six months
ended September 30, 1995 when compared to the same period one year ago. These
increases reflect the equipment additions made over the last twelve months in
advance of anticipated volume increases.
Interest expenses increased by 16.5% for the three months and 24% for the six
months when compared to the same period a year ago. This is reflective of the
Company financing new equipment purchases through additions of debt.
Selling, delivery and administrative expenses increased only $3,500 or 1.3%
for the six months versus the same six months one year ago. There were slight
additions to liability insurance expenses due to increased volumes and
additional vehicles. Also, employee covered health insurance increased with
addition of new employees and annual premium increases. These increases were
offset by reductions in workers compensation premiums that were a result of a
reduced modification factor and a better managed work injury-related program.
Also, helping to control theses costs was a slight reduction in extended
selling season advertising. The Company believes that some continued
advertising into late summer produced diminishing returns to sales growth and
are therefore unwarranted.
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<PAGE>
Net income for the three months and six months ended September 30, 1995 was
$109,033 and $109,952 respectively. Both are records for the Company and are
increases of 420% for the three months and 113.5% for the six months over the
same reporting periods in 1994. The warm weather and ability of the Company
to hold the line on many expense items, primarily labor costs in the second
quarter, are the main contributing factors to the increased net income
results.
The liquidity position of the Company is fairly sound with respect to the
commonly used ratios; the current ratio is 1.5:1 and the quick ratio is
1.41:1. The Company is highly leveraged and therefore quite subject to
changes in interest rates or a dramatic downturn in business volume.
Management is continuing to formulate strategic options with respect to
restructuring the debt/equity ratio on the balance sheet. It is anticipated
that the Company debt will be restructured and management is hopeful that an
equity raising strategy can be formulated to provide the Company with the
necessary funds for desired growth.
The Company has historically financed operations through a combination of
internally generated funds and funds provided by banks, trade credit, leasing
companies, and through manufacturer's financing plans. Management believes
all of the traditionally used sources are available to the Company at this
time, but remains cautious about additions to long-term debt without any
additions to equity.
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<PAGE>
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings
No legal proceedings have been filed on behalf of or against the
Company, nor have any claims been made.
Item 2 -- Change in Securities
None
Item 3 -- Defaults Upon Senior Obligations
There have been no defaults on any securities. The Company has
no obligations with regard to dividends and no preferred stock
outstanding.
Item 4 -- Submission of Matters to a Vote of the Security Holders
The annual Shareholder's Meeting was held July 17, 1995. Two
matters were subject to a vote. The shareholders elected the Board
members to serve an additional one year term. Shareholders ratified
Ehrhardt, Keefe, Steiner & Hottman as the independent auditor.
Item 5 -- Other Information
None
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<PAGE>
SIGNATURES
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 thereonto duly authorized.
ELDORADO ARTESIAN SPRINGS INC.
By: /s/ Douglas A. Larson
------------------------------
Douglas A. Larson, President
By: /s/ Kevin M. Sipple
------------------------------
Kevin M. Sipple, Secretary
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 115,930
<SECURITIES> 0
<RECEIVABLES> 229,059
<ALLOWANCES> (5,000)
<INVENTORY> 78,057
<CURRENT-ASSETS> 450,370
<PP&E> 990,844
<DEPRECIATION> 87,948
<TOTAL-ASSETS> 1,742,404
<CURRENT-LIABILITIES> 300,191
<BONDS> 0
<COMMON> 32,165
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,742,404
<SALES> 1,129,665
<TOTAL-REVENUES> 1,129,665
<CGS> 168,996
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 788,384
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (63,994)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,952
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
