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 December 31, 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
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
P.O. 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, June 30, 1995: 32,164,948 with 56,045 shares in the treasury.
Eldorado Artesian Springs, Inc.
Form 10-Q, September 30, 1995
TABLE OF CONTENTS
Part I - Financial Information Page
Balance Sheet as of March 31, 1995 and
December 31, 1995 3
Statement of Operations for the three and nine months
ended December 31, 1995 and December 31, 1994 4
Statement of Cash Flow for the three and nine months
ended December 31, 1995 and December 31, 1994 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
Part II - Other Information 9
Signature Page 10
The financial statements for the year ended March 31, 1995,
have been audited. The financial statements have not been audited
for the nine months ended December 31, 1995 or 1994. However, the
management of Eldorado Artesian Springs, Inc. believe that all
necessary adjustments have been reflected to present fairly the
Company's financial position at December 31, 1995, and the results
of its operations and cash flows for the nine months ended December 31
1995.
ELDORADO ARTESIAN SPRINGS, INC.
Balance Sheet
Dec. 31, 1995 March 31, 1995
Assets
Current Assets
Cash 94,795 44,120
Accounts Receivable
Trade Net 210,763 195,673
Other 5,963 5.078
Inventories 84,984 91,472
Prepaid Expenses and Other 28,739 37,126
Total Current Assets 425,244 373,469
Property, Plant & Equipment 1,124,099 918,778
Other Assets
Notes Receivable - stockholders 41,755 40,088
Water Rights - net 124,715 128,081
Other - net 134,833 111,463
Total Other Assets 301,303 279,632
Total 1,850,646 1,571,879
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 49,149 46,244
Accrued Expenses 40,517 48,025
Unearned Income 6,408 12,268
Current Maturities 163,771 155,327
Total Current Liabilities 259,845 261,864
Long Term Debt 1,182,787 1,034,859
Deferred Income Taxes 16,240 16,240
Total Long Term Debt 1,199,027 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 132,858
Total Equity 391,774 258,916
Total 1,850,646 1,571,879
ELDORADO ARTESIAN SPRINGS, INC.
Statement of Operations
3 Months Ended Dec. 31 9 Months Ended Dec. 31
1995 1994 1995 1994
Revenue
Water and Related 468,543 415,055 1,508,491 1,228,007
Pool 378 - 78,420 79,954
Rentals 11,515 10,365 31,345 30,395
Returns and Allowances 7,304 (94) (851) (6,113)
NET REVENUE 487,740 425,326 1,617,405 1,322,243
Cost of Goods Sold 66,388 48,124 235,384 161,308
Gross Profit 421,352 377,202 1,382,021 1,170,935
Operating Expenses
Salaries and Related 190,722 164,289 627,734 527,459
Administrative and General 60,583 52,114 184,211 163,280
Selling and Delivery 71,753 61,178 211,549 209,936
Depreciation and Amortization 43,973 34,463 131,921 103,423
TOTAL OPERATING EXPENSE 367,031 312,044 1,155,415 1,004,098
Operating Income 54,321 65,158 226,606 166,837
Other Income (expense)
Interest Income 651 793 2,313 2,201
Interest Expense (32,066) (29,373) (96,061) (80,972)
TOTAL OTHER EXPENSE (31,415)(28,580)(93,748)(78,771)
Net Income (loss) 22,906 36,578 132,858 88,066
Net Income Per Share - - - -
Weighted Average Number of
Shares Outstanding 32,108,90332,108,90332,108,90332,108,903
ELDORADO ARTESIAN SPRINGS, INC.
Statement of Cash Flow
3 Months Ended 9 Months Ended
Dec. 31, '95Dec. 31, '94Dec. 31, '95Dec. 31, '94
Cash Flows From Activities
Net Income 22,906 36,578 132,858 88,066
Adjustments to Reconcile
Depreciation and Amortization 43,973 34,463 131,921 103,423
Changes in Assets and Liabilities
Accounts Receivable 12,333 63 (15,975)(12,414)
Inventory (6,927) (15,897)6,488 (30,013)
Prepaid Expenses and Other (1,415) 6,376 8,387 7,773
Accounts Payable (33,342)(7,899) 2,905 20,784
Accrued Expenses (1,106) (5,484) (7,508) 4,949
Unearned Income (2,249) (2,257) (5,860) (5,050)
Net Cash From Operating 34,173 45,943 253,216 177,518
Cash Flows From Investing
Purchase of Property and Equipment(176,106)(64,784)(333,876)(225,795)
Increase in
Note Receivable (-) (555) (555) (1,667) (1,667)
Net Cash From Investing Activities(176,661)(65,339)(335,543) (227,462)
Cash Flows From Financing Activities
Increase In Long-Term Debt 186,210 56,588 300,123 172,069
Loan Fees and Other Assets (680) (680) (23,370)(19,191)
Payments On Long-Term Debt (64,177)(32,643)(143,751)(87,795)
Net Cash From Financing 121,353 23,265 133,002 65,083
Net Increase (Decrease) in Cash (21,135)3,869 50,675 15,139
Cash - Beginning 115,930 53,232 44,120 41,962
Cash - Ending 94,795 57,101 94,795 57,101
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 December 31, 1995, the
results of operations and cash flow for the period then ended.
In the opinion of management, the results of operations for the three months
ended December 31, 1995 are not necessarily indicative of the results to be
expected for the full year.
Summaries 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.
The financial statements presented were prepared on a pro forma 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 quarter end December 31, 1995, were $487,740, an increase
of 14.7% from the same period a year ago. For the nine months ended
December 31, 1995, revenues increased 21.4% from the similar nine months
ended December 31, 1994, to $1,617,405. Industry information tracking
services estimated growth for the bottled water industry for the year
1995 to be 10.8%. The company's revenue growth is nearly twice the industry
average. Of the company's net revenues, only 93.27% are derived from the
sales of bottled water and related items, the balance of revenues are
attained through property rentals and operation of the summer resort
facilities. When water and related revenues only are compared to the same
period a year ago the increase is 22.8% ($1,508,491 in 1995 versus
$1,228,007 in 1994).
Cost of goods sold expenses increased by 38% for the three months ended
December 31, 1995, and by 45.9% for the nine month period when compared to
the same period a year ago. These larger than revenue increases are mostly
due to the increased volume of PET bottle products that have significantly
higher costs of inventory than the basic five gallon delivered products.
An ongoing higher cost of goods is expected as management promotes the
company's PET bottle products to an ever increasing percentage of the
company's business.
Operating expenses for the three months and nine months ended December 31,
1995, increased by 17.6% and 15.1% respectively from the same periods a year
ago. The individual categories of Salaries and Wages, General and
Administrative, Selling and Delivery, and Depreciation and Amortization all
were very representative of the category increase as a whole, except for
depreciation that increased 27.6% when compared to a year ago for both the
three and nine month periods. The increased depreciation expense is a
direct result of the additions of machinery and equipment necessary to
expand manufacturing capabilities and provide dispenser rental equipment to
an increasing customer base.
Interest expense increased by 9.1% and 19% from a year ago for the three and
nine month reporting periods. The overall increase is attributable to
additional debt financing of the aforementioned equipment additions.
The lower increase for the three months when compared to year to date
increases reflects the seasonal slowing of business for winter and thus
reduced equipment additions.
Net income for the three months was $22,906 down 37.4% from the same period
a year ago. This is representative in part by a $10,224 expense for damaged
inventory, the increased depreciation, and a slower than expected sales
period. Net income for the nine months was $132,858 and increase of 50.9%
from the same nine months in 1994.
During the nine months ended December 31, 1995, total assets of the company
have increased $278,767 to $1,850,646. During the same period of time
liabilities increased by $145,909 and shareholder's equity increased
$132,858 to $391,774. For the same nine months the liquidity position of
the company has improved significantly as is demonstrated by the current
ratio, which has improved to 1.64:1 from 1.43:1 on March 31, 1995.
Accounts receivable increased slightly during the latest three months end
December 31,1995. When measured in terms of days sales in receivables, the
increase was from 38 days to 39.6 days. This reflects prior years history
for this quarter. Management believes this to be a seasonal holiday related
occurrence and not a long-term trend.
During the quarter ended December 31, 1995, the company purchased a parcel
of adjacent (surrounded) property for a total cost of $175,000. The
property contains two dwelling units that the company intends to rent out to
defray any effects of negative cash flow. Management believed this
acquisition prudent for several reasons: 1) Parts of the dwellings were
constructed on land already deeded to the company, therefore this purchase
circumvents the protracted costs of expensive litigation. 2) The dwelling
units are in close proximity to one of the twelve sources of water the
company uses, and now management can undertake measures to insure protection
of the water source in question from household waste.
On December 18, 1995, the company received a letter of commitment from its
principle bank (Bank One - Boulder) to restructure the company's debt by
bundling it into one all-encompassing note secured by the company's real
properties. This commitment is pending completion of an environmental audit
and depends upon adequate appraisal valuation of the property. Terms of the
commitment are a rate of prime plus 3/4%, amortized over twelve years, with
a five year call. There are additional financial covenants contained in the
commitment that were negotiated and mutually agreed upon by management and
Bank One representative. Management is cautiously optimistic that this debt
restructuring will be completed prior to the end of the fiscal year on March
31, 1996. If closed the net effect of the new note structure would increase
earnings before tax an estimated $60,oo annually and also increase free
cash flow approximately $200,000 per year. This would enable the company to
fund growth and capital equipment additions from internally generated funds.
Management is continuing to investigate the possibility of raising equity
capital through private placement sources. Even though the aforementioned
debt restructuring would greatly improve the company's cash position,
management believes an equity infusion is necessary if the company is to
become a viable factor in the bottled water market.
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
None
Item 5 - Other Information
None
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 thereunto duly authorized.
ELDORADO ARTESIAN SPRINGS, INC.
By: /s/ Douglas Larson
Douglas A. Larson, President
By: /s/ Kevin Sipple
Kevin M. Sipple, Secretary
