1
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, 1996
Commission File Number: 33-6738-D
Eldorado Artesian Springs, Inc.
(Exact name of registrant as specified in its charter as
amended)
Colorado 84-0907853
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
PO Box 445, Eldorado Springs, Colorado 80025
(Address of principal executive offices) (Zip Code)
(303)499-1316
(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, September 30,1996: 32,344,948 with 56,045
shares in the treasury.
Eldorado Artesian Springs, Inc.
Form 10-Q, September 30, 1996
TABLE OF CONTENTS
Part I - Financial Information
Page
Balance Sheet as of March 31, 1996 and
September 30, 1996
3
Statement of Operations for the six month and 3 month
ended September 30, 1996 and 1995
4
Statement of Cash Flow for the six month and 3 month
ended September 30, 1996 and September 30, 1995
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
ELDORADO ARTESIAN SPRINGS, INC.
Balance Sheet
<TABLE>
<CAPTION>
September 30, 1996 March 31, 1996
<S> <C> <C>
Assets
Current Assets
Cash 66,427 89,289
Accounts Receivable
Trade Net 303,406 234,543
Other 5,092 4,809
Inventories 107,538 96,210
Prepaid Expenses and Other 16,783 16,783
Deferred Income Taxes 18,251 18,251
Total Current Assets 517,497 459,885
Property, Plant & Equipment
(net of depreciation) 1,144,519 1,144,308
Other Assets
Water Rights - net 121,349 123,593
Other - net 52,636 53,977
Total Other Assets 173,985 177,570
Total 1,836,001 1,781,763
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 43,930 53,598
Accrued Expenses 48,356 73,288
Unearned Income 18,279 23,863
Current Maturities 53,546 54,148
Total Current
Liabilities 164,111 204,897
Long Term Debt 1,176,725 1,202,967
Deferred Income Taxes 30,359 30,359
Total Liabilities 1,371,195 1,438,223
Equity
Common Stock 32,345 32,345
Additional Paid-in Capital 265,225 265,225
Retained Earnings 45,970 -
Net Earnings 121,266 45,970
Total Equity 464,806 343,540
Total 1,836,001 1,781,763
</TABLE>
ELDORADO ARTESIAN SPRINGS, INC.
Statement of Operations
<TABLE>
<CAPTION>
3 Months 6 Months
Sept. 30, 1996 Sept. 30,1995 Sept. 30, 1996 Sept. 30, 1995
<S> <C> <C> <C> <C>
Revenue
Water and
Related 712,605 559,317 1,301,809 1,039,948
Pool 55,165 65,335 75,419 78,042
Rentals 11,865 9,915 23,730 19,830
Returns and
Allowances (5,578) (4,284) (9,962) (8,155)
NET REVENUE 774,057 630,283 1,390,996 1,129,665
Cost of Goods Sold 147,000 89,569 241,578 168,996
Gross Profit 627,057 540,714 1,149,418 960,669
Operating Expenses
Salaries and
Related 274,175 226,330 502,258 437,012
Administrative
and General 79,861 59,749 165,782 123,628
Selling and
Delivery 120,937 71,041 200,571 139,796
Depreciation and
Amortization 53,654 43,974 103,649 87,948
TOTAL OTHER
EXPENSE 528,627 401,094 972,260 788,384
Operating Income 98,430 139,620 177,158 172,285
Other Income
(expense)
Interest Income 273 836 544 1,662
Interest Expense (28,614) (31,423) (56,436) (63,995)
Net Income (loss) 70,089 109,033 121,266 109,952
Net Income Per
Common Share - - - -
Weighted Average
Number of Shares
Outstanding 32,344,948 32,164,948 32,344,948 32,164,948
</TABLE>
ELDORADO ARTESIAN SPRINGS, INC.
Statement of Cash Flows
3 Months Ended 6 Months Ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
Cash Flows From
Activities
Net Income 70,089 109,033 121,266 109,952
Adjustments to
Reconcile
Depreciation and
Amortization 53,654 43,974 103,649 87,948
Changes in Assets
and Liabilities
Accounts
Receivable (41,572) (8,712) (69,146) (28,308)
Inventory 8,891 7,432 (11,328) 13,415
Prepaid Expenses
and Other 0 (7,912) 0 9,802
Accounts Payable (25,963) 12,641 (9,668) 36,247
Accrued Expenses (25,230) (22,345) (24,932) (6,402)
Unearned Income (3,695) (1,825) (5,584) (3,611)
Net Cash From
Operating
Activities 36,174 132,286 104,257 219,043
Cash Flows From Investing
Purchase of
Property and
Equipment (38,874) (52,970) (101,616) (157,770)
Increase in
Note Receivable 0 (556) 0 (1,122)
Net Cash Investing (38,874) (53,526) (101,616) (158,892)
Cash Flows From
Financing Activities
Additions to
Long-Term Debt 0 15,273 0 113,913
Loan Fees and
Other Assets 670 (1,322) 1,341 (22,690)
Payments on
Long-Term Debt (13,266) (39,087) (26,844) (79,974)
Net Cash Flows
From Financing (12,596) (25,136) (25,503) 11,649
Net Increase
(Decrease) in
Cash (15,296) 53,624 (22,862) 71,810
Cash - beginning 81,723 62,306 89,289 44,120
Cash - ending 66,427 115,930 66,427 115,930
NOTES TO FINANCIAL STATEMENTS
OPINIONS OF MANAGEMENT
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, 1996, the results of
operations and cash flow for the period then ended.
In the opinion of management, the results of operations
for the six months ended September, 30, 1996 are not
necessarily indicative of the results to be expected for the
full year.
Summary of the Company's significant accounting policies
are incorporated by reference to the Company's March 31,
1996 Annual Report filed under cover of Form 10-K.
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.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Revenues for the three months ended September 30, 1996 increased
22.8% to $774,057 versus $630,283 for the same period in
1995. Similarly, revenues for the six months ended
September 30, 1996 increased 23.1% to $1,390,996 versus
$1,129,665 for the same period in 1995.
Revenues for water products and related items increased 27.4% for
the three months and 25.2% for the six months ended
September 30, 1996 over the same periods one year ago. By
comparison, a sampling of bottled water industry growth
estimates taken from trade publications, indicate national
category growth rates to be in the range of 8% to 12%.
Wholesale products sold to retail chains for resale
increased revenues by 87.6% in the six month period when
compared to the same period a year ago. And as a percentage
of total revenues, wholesale products increased from 10.1%
of revenues in 1995 up to 15.3% of revenues in 1996. At the
same time, cost of goods sold on these products only
increased by 46.5%, reflecting improved purchasing habits
and quantity discounts. Overall, the cost of gods sold on
all products increased 64.1% for the three month period and
42.9% for the six month period. The abnormally high
increase for the three month period is due primarily to
losses incurred in liquidation of glass bottle inventory at
prices substantially less than originally booked purchase
prices. This was done because the company no longer
packages its products in glass containers.
Operating expenses increased at rates similar to the growth in
revenues, increasing 31.7% in the three months and 23.3% in
the six months when compared to the same periods in 1995.
The six month increase is almost identical to growth in
revenues. However, the most recent three month trend is
somewhat higher. This higher rate is due principally to a
wage increase for all employees that went into effect on
June 30, 1996, and increased seasonal selling expenses for
the summer months.
Accounts receivable have increased from $239,352 on March 31,
1996 to $266,926 on June 30, 1996 and to $308,498 as of
September 30, 1996. While the level of accounts receivable
as of June 30, 1996 was up it still represented 39 days
sales, whereas the number of days sales in receivables as of
September 30, 1996 has risen to 45 days. This is an
alarming trend and immediate steps have been taken to
correct this reversal of the trend of the past two years.
With these funds used up in customer credit the company is
not generating the full useful cash flow expected from
restructuring the company debt in March of this year. It is
imperative that the company apply its resources to the
collection of these accounts and additionally reassess its
credit policies and billing practices. And while the rise
in receivables may be in lock-step with consumer practices
recently around the country, it does not mean the company
will not take preventative measures to control its level of
receivables at a target level of 38 days sales.
Net Income for the three months ended September 30, 1996 was
$70,089, down 35.8% from $109,033 during the same period in
1995. However, for the six months ended September 30, 1996
net income was up 10.3% to 121,266 compared to $109,952 for
the same period one year ago. Management believes this is
reflective of more consistent earnings patterns that should
occur because of the more predictable cash flows resulting
from restructuring company debt six months ago.
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,
1996. Two matters were subject to a vote. The
shareholders elected the Board members to serve an
additional on year term. Shareholders ratified
Ehrhardt, Keefe, Steiner & Hottman as the
independent auditor.
Item 5 - Other Information
None
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.
ELDORADO ARTESIAN SPRINGS,
INC.
By: /s/ Douglas Larson
Douglas A. Larson, President
By: /s/ Kevin M. Sipple
Kevin M. Sipple, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 66,427
<SECURITIES> 0
<RECEIVABLES> 308,498
<ALLOWANCES> 0
<INVENTORY> 107,538
<CURRENT-ASSETS> 517,497
<PP&E> 1,144,519
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,836,001
<CURRENT-LIABILITIES> 164,111
<BONDS> 0
0
0
<COMMON> 32,345
<OTHER-SE> 432,461
<TOTAL-LIABILITY-AND-EQUITY> 1,836,001
<SALES> 1,390,996
<TOTAL-REVENUES> 1,391,540
<CGS> 241,578
<TOTAL-COSTS> 972,260
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,436
<INCOME-PRETAX> 121,266
<INCOME-TAX> 0
<INCOME-CONTINUING> 121,266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,266
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
