-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BIA6yAp8Xg6dl3pOc2H9ha3jXyGn1OR/A4BMhOJIIQuQ9J2bIPLowKVUKODHWLsB L6uNwqu0UOyh0dYJUEy4EQ== 0001042645-98-000171.txt : 19980729 0001042645-98-000171.hdr.sgml : 19980729 ACCESSION NUMBER: 0001042645-98-000171 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980728 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPARKLING SPRING WATER GROUP LTD CENTRAL INDEX KEY: 0001050760 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 333-43061 FILM NUMBER: 98672428 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQUARE CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQUARE CITY: STAMFORD STATE: CT ZIP: 06901 6-K 1 FOR THE QUARTER ENDED MARCH 31, 1998 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, 1998 Sparkling Spring Water Group Limited One Landmark Square, Stamford CT, USA 06901 (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: /s/ David M. Arnold Name: David M. Arnold Title: Vice President Finance, Treasurer Date: July 27, 1998 Sparkling Spring Water Group Limited Quarterly Report On Form 6 - K For The Quarter Ended March 31, 1998 INDEX Page Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997...............................................1 Consolidated Statements of Operations for the three months ended March 31, 1998 and the twelve weeks ended March 21, 1997......2 Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and the twelve weeks ended March 21, 1997......3 Notes to Consolidated Financial Statements......................... 4 Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations.......................6
TABLE OF ADDITIONAL REGISTRANTS Primary Standard Industrial State or other jurisdiction of Classification Code Exact name of registrant as specified in its charter incorporation of organization Number Sparkling Spring Water Limited Nova Scotia 5149 Spring Water, Inc. Delaware 5149 Cullyspring Water Co., Inc. Washington 5149 Crystal Springs of Seattle, Inc. Delaware 5149 Crystal Springs Drinking Water, Inc. Washington 5149 Crystal Springs Acquisition, Inc. Delaware 5149 Mountain Fresh Acquisition Corp. Delaware 5149 Water Jug Enterprises Limited Nova Scotia 5149 Withey's Water Softening & Purification Ltd. Nova Scotia 5149 Aqua Care Water Softening & Purification Inc. Nova Scotia 5149 High Valley Water Limited Nova Scotia 5149 3003969 Nova Scotia Limited Nova Scotia 5149 Coastal Mountain Water Corp. British Columbia 5149 Canadian Springs Water Company Limited Nova Scotia 5149 Sparkling Spring Water UK Limited UK 5149 Aquaporte (UK) Limited UK 5149 Marlborough Employment Limited Scotland 5149 Water at Work Limited Scotland 5149 Natural Water Limited Scotland 5149
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. Part I Financial Information Item 1 Financial Statements
SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED BALANCE SHEETS March 31, December 31, 1998 1997 ---- ---- ASSETS (Unaudited) Current Cash and cash equivalents $ 21,703,589 $ 27,507,257 Accounts receivable 9,106,712 8,267,315 Inventories 1,721,049 1,751,562 Prepaid expenses 1,784,175 1,536,755 ------------ ------------ Total current assets 34,315,525 39,062,889 Deferred taxes 1,946,620 1,379,736 Fixed assets 24,641,774 23,307,315 Goodwill and deferred charges 47,051,857 43,248,972 ------------ ------------ Total assets $107,955,776 $106,998,912 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Accounts payable and accrued liabilities $ 9,537,684 $ 6,645,552 Income tax payable 463,931 1,042,567 Unearned revenue 22,434 75,488 Customer deposits 3,480,082 3,396,466 Debt due within one year 1,296,130 1,189,868 ------------ ------------ Total current liabilities 14,800,261 12,349,941 ------------ ------------ Obligations under capital leases 2,024,791 2,485,204 Loans payable 1,123,019 1,123,617 Subordinated notes payable 100,000,000 100,000,000 ------------ ------------ Total long-term liabilities 103,147,810 103,608,821 ------------ ------------ Temporary equity (note 6) 262,080 - ------------ ------------ Shareholders' equity (deficit) Capital Stock Issued and outstanding: Class D common shares 1,383,328 (1997-1,383,328) 6,339,675 6,269,204 Less: Subscriptions receivable (230,003) (230,003) ------------ ------------ 6,109,672 6,039,201 Cumulative translation adjustment (891,032) (770,729) Deficit (15,473,015) (14,228,322) ------------ ------------ Total shareholders' equity (deficit) (10,254,375) (8,959,850) ------------ ------------ Total liabilities and shareholders' equity (deficit) $107,955,776 $106,998,912 ============ ============
See accompanying notes 1
SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Twelve Months Ended Weeks Ended March 31, March 21, 1998 1997 ---- ---- Revenue: Water $ 7,341,857 $ 4,508,163 Rental 2,872,317 1,921,810 Other 1,647,573 1,097,528 ---------- --------- Total revenue 11,861,747 7,527,501 ---------- --------- Cost of sales: Water 1,660,360 861,873 Other 678,487 467,413 ---------- --------- Total cost of sales 2,338,847 1,329,286 ---------- --------- Gross profit 9,522,900 6,198,215 Expenses: Selling, delivery and administrative 6,747,515 4,286,306 Depreciation and amortization 1,778,309 1,149,142 ---------- --------- Operating profit 997,076 762,767 Interest expense 3,373,990 675,655 ---------- --------- Income (loss) before income taxes (2,376,914) 87,112 Provision for (recovery of) income taxes (1,132,221) 95,250 ---------- --------- Net loss $ (1,244,693) $ (8,138) ============ ========= Basic and diluted loss per share $(0.900) $(0.005)
See accompanying notes 2
SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended Twelve Weeks Ended March 31, March 21, 1998 1997 ---- ---- OPERATING ACTIVITIES Net loss $ (1,244,693) $ (8,138) Items not requiring cash Depreciation and amortization 1,778,309 1,149,142 Deferred taxes (566,884) - Unrealized loss on cross currency swap 618,479 - --------- ---------- 585,211 1,141,004 Net change in non-cash working capital balances 328,441 (1,347,063) ------- ---------- Cash provided by (used in) operating activities 913,652 (206,059) --------- ---------- INVESTING ACTIVITIES Purchase of fixed assets, net (1,734,678) (676,085) Acquisitions (4,217,724) (14,746,258) --------- ---------- Cash used in investing activities (5,952,402) (15,422,343) --------- ---------- FINANCING ACTIVITIES Increase in long-term debt 93,587 15,769,654 Repayment of long-term debt (481,478) (322,225) Issuance of common shares 262,080 - Increase in deferred charges (490,949) (1,157,491) --------- ---------- Cash (used in) provided by financing activities (616,760) 14,289,938 --------- ---------- Effect of foreign currency translation on cash (148,158) (156,903) --------- ---------- Decrease in cash and cash equivalents during the period (5,803,668) (1,495,367) Cash and cash equivalents, beginning of period 27,507,257 2,230,735 --------- ---------- Cash and cash equivalents, end of period $ 21,703,589 $ 735,368 ============ ========= SUPPLEMENTAL CASH FLOW DISCLOSURE Interest paid $ 179,407 $ 744,110 ========= ========= Income taxes paid $ 9,501 $ 10,004 ======= ========
See accompanying notes 3 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1998 (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 US$ as its reporting currency and the Canadian dollar as its functional currency. The accompanying unaudited consolidated financial statements have been prepared 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 financial position 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, 1997 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, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998 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: March 31, 1998 December 31, 1997 (unaudited) -------------- ----------------- Packaging materials $ 962,894 $ 973,583 Goods for resale 514,622 502,608 Cooler parts 164,945 151,208 Other 78,588 124,163 ------- ------- $ 1,721,049 $ 1,751,562 =========== ============ 4. Derivative 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. The semi annual interest payments are approximately 1.1 million pounds on the pounds sterling swap and $2.2 million Canadian dollars on the Canadian swap. At March 31, 1998 and December 31, 1997, the aggregate fair market value of the two swaps was approximately $840,000 in favor of the US bank and $423,000 in favor of the Company respectively. Of these amounts approximately $618,000 was recorded as an increase in interest expense for the three months ended March 31, 1998 and approximately $115,000 was recorded as a reduction in interest expense for the year ended December 31, 1997. 4 5. Earnings per Share The Company has adopted Statement of Financial Accounting Standard No. 128 (SFAS No. 128), Earnings per Share. SFAS No. 128 replaces the previous standards for presentation of primary and fully diluted earnings per share (EPS) with basic and diluted EPS. Basic EPS excludes the dilutive effect of the exercise of all outstanding options and warrants. Diluted EPS includes the dilutive effect of the exercise of all outstanding options and warrants. The effect of the exercise of outstanding options and warrants has not been included in the computation of earnings per share for the three months ended March 31, 1998 and the twelve weeks ended March 21, 1997 as the effect would be antidilutive during these periods. The weighted average number of shares used to calculate basic and diluted loss per share is 1,383,328 for the three months ended March 31, 1998 and 1,720,746 for the twelve weeks ended March 21, 1997. 6. Common Stock In January 1998, certain key managers of the Company subscribed for an aggregate of 9,360 shares of Common Stock of the Company. The shares were recorded at $28 per share, representing the estimated fair value as determined by an agreed upon formula. These managers have granted an option to Sparkling Spring enabling Sparkling Spring to repurchase these shares of Common Stock at any time at their estimated fair market value determined in accordance with the same agreed upon formula price. Sparkling Spring is obligated to repurchase these shares at the option of the key managers for the same formula price during a one-month period each year, subject to any financial covenants and financing requirements affecting the Company. The shares are shown as "Temporary Equity" in the Company's financial statements. 7. Acquisitions On February 24, 1998, the Company purchased all of the outstanding capital stock of Coastal Mountain Water Corp. (Coastal) for approximately $4.2 million. Coastal is based in Vancouver, British Columbia and focuses on the direct delivery of eighteen litre containers of water to residential and commercial customers and the rental of water coolers. The following unaudited pro forma information presents a summary of consolidated results of operations as if the acquisitions of D&D and Company, Inc., High Valley Water Limited, Withey's Water Softening and Purification Limited, Marlborough Employment Limited, Soja Enterprises Inc., Crystal Spring Bottled Water Co., Inc., Cullyspring Water Co., Inc., Crystal Springs Drinking Water Inc. and Coastal had occurred at January 1, 1998 and January 1, 1997. Three Months Twelve Weeks Ended Ended March 31, 1998 March 21, 1997 -------------- -------------- Total revenue $ 12,109,587 $ 9,350,380 Net loss (1,247,502) (222,721) Extraordinary item - - Basic loss per share $(0.902) $(0.129) 8. Subsequent Events On May 26, 1998, the Company completed a $40 million senior credit facility for purposes of financing future capital investments, working capital, business acquisitions and general corporate purposes. The loan facility matures in 2007. The Company's payment obligations under the credit facility have 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 credit facility rank senior to the payment of the Company's subordinated notes payable. On May 15, 1998, the Company purchased all of the outstanding shares of Krystal Fountain Water Co. Ltd. (Krystal Fountain) for approximately $6.9 million including debt assumed. Krystal Fountain operates in the M25 area in London, England. 5 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. Three Months Twelve weeks Ended Ended March 31, 1998 March 21, 1997 Revenue 100% 100% Cost of sales 19.7 17.7 ---- ---- Gross profit 80.3 82.3 Selling, delivery and administrative 56.9 56.9 ---- ---- EBITDA 23.4 25.4 Depreciation and amortization 15.0 15.3 ---- ---- Operating profit 8.4 10.1 Interest expense 28.4 9.0 ---- --- Income (loss) before income taxes (20.0) 1.1 Provision for (recovery of) income taxes (9.5) 1.2 --- --- Net income (10.5) (0.1) ===== ==== Three Months Ended March 31, 1998 Compared To The Twelve Weeks Ended March 21, 1997 Revenue. Revenue increased $4.3 million or 57.6% to $11.8 million in the three months ended March 31, 1998 compared to $7.5 million in the twelve weeks ended March 21, 1997. Approximately $0.75 million or 17% of the increase was the result of additional working days in the longer 1998 quarter. Acquisitions completed in 1997 but not owned for the entire first quarter accounted for approximately $1.8 million or 42% of the increase and the acquisition of Coastal Mountain Water Corp. in February 1998 accounted for approximately $0.2 million or 5% of the increase. The balance of the increase was from growth in sales from the Company's increasing customer base. The Company's water cooler customer locations ended the first quarter at 124,131 up from 115,037 at December 31, 1997. Approximately 6,600 of this increase came from the acquisition of Coastal Mountain. 6 Cost of Sales. The cost of sales increased by $1.0 million or 76.0% to $2.3 million in 1998 compared to $1.3 million in 1997 largely as a result of acquisitions completed since the 1997 period. The cost of sales as a percentage of revenue increased by 2.0% from 17.7% in the 1997 period to 19.7% in the 1998 first quarter. Approximately 40% or 0.8% of the percentage cost increase was a result of higher costs associated with production problems in the Atlantic Canada and the England operations. The balance of the percentage increase was primarily the result of an increased percentage mix of lower margin small pack sales associated with operations acquired in the United States after the 1997 period. Operating Expenses. Selling, delivery, and administrative operating expenses increased by $2.5 million or 57.4% to $6.8 million in the 1998 first quarter from $4.3 million in the 1997 period. Approximately 18% or $0.45 million of this increase was the result of additional days in the 1998 quarter. The balance of the increase was the result of increased business operations from businesses acquired during and after the 1997 period and from the underlying growth in the Company's water cooler location base. At the end of the first quarter of 1998 the Company's actual water cooler rental account base was up over 43% over the period ending count in 1997. The acquisition adjusted water cooler account base was up by approximately 14%. As a percentage of revenue, selling, delivery and administrative expenses remained constant at 56.9% in both periods. The Company's semi-fixed operating expenses and higher corporate expenses related to its larger size and conversion to an SEC reporting entity were offset by higher revenue even in the Company's seasonally weak first quarter. Depreciation and Amortization. Depreciation and amortization expense increased by 55% or $0.7 million to $1.8 million from $1.1 million in the 1997 period. This increase was due to the significant increase in fixed and intangible assets acquired as a result of acquisitions consummated during and after the 1997 period. In addition, this increase is a result of depreciation of capital expenditures required to support the increase in the Company's water cooler customer base and capital expenditures required to maintain existing operations. Operating Profit. The Company's operating profit increased by 30.7% or $234,000 to $997,000 from $763,000 as result of the changes noted above. As a percentage of revenue, operating profit decreased to 8.4% in the 1998 quarter from 10.1% in the 1997 period as the higher cost of sales percentage offset a slight decrease in the percentage of depreciation and amortization expense. Earnings before interest, taxes, depreciation and amortization expense increased by 45% or $863,000 to $2.8 million from $1.9 million in the 1997 period as a result of the changes noted above. As a percentage of revenues, EBITDA decreased to 23.4% in the 1998 quarter from 25.4% in the 1997 period due to higher production expenses and the shift in the companies mix of products as noted in changes highlighted in the Cost of Sales discussion above. Interest Expense. Interest expense increased by $2.7 million from $0.7 million in the 1997 period to $3.4 million in the 1998 quarter. Approximately $2.1 million of this increase was the result of higher borrowing levels and interest rates as a result of the issuance of $100 million of 11.5% Senior Subordinated Notes in November of 1997. The proceeds from the Notes were used to refinance existing debt and complete a reorganization of the Company as well as to provide funding for future acquisitions, capital expenditures and working capital for the Company. Approximately $0.6 million of the increase in interest expense was a result of interest accrued due to the fluctuating value of the Company's currency swaps (see Note 4 of the Notes to Consolidated Financial Statements included elsewhere in this report). 7 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, excess cash proceeds from the issuance of the Subordinated Notes and borrowings under the Senior Credit Facility (see below). Net cash provided by operating activities was $914,000 for the three months ended March 31, 1998 and net cash used in operating activities was $206,000 for the twelve weeks ended March 21, 1997. Net cash used in investment activities was $6.0 million in 1998 and $15.4 million in 1997. These amounts relate primarily to one acquisition completed in the three months ended March 31, 1998 for $4.2 million and four acquisitions completed in 1997 for $14.7 million. Capital expenditures include expenditures related to the addition of bottling lines at existing facilities, construction of new bottling facilities, and the purchase of water bottles, water coolers and delivery trucks. The Company made net capital expenditures of $1.7 million in the three months ended March 31, 1998 and $700,000 in the twelve weeks ended March 21, 1997. Based on the Company's existing operations, management expects that the Company's capital expenditures will total approximately $7.5 million in 1998. The Company believes that the net proceeds from the sale of the Subordinated Notes 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 1998 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 the Company will not require additional financing within this time frame. Senior Credit Facility On May 26, 1998, the Company closed a $40 million Senior Credit Facility (the "Credit Facility") with Toronto-Dominion. The Credit Facility will be used for general corporate purposes including working capital, acquisitions and capital expenditure financing. The Credit Facility is structured as a multi-currency revolving facility having a term of approximately six and one half years. The Company's payment obligation under the Credit Facility is secured by a first priority security interest over substantially all of the assets of the Company; obligations under the Credit Facility will rank senior to the payment of the Subordinated Notes. Amounts outstanding under the Credit Facility will bear interest at specified rates based on the Canadian prime rate in the case of advances made in Canadian dollars, at specified rates based on the London inter-bank market in the case of advances made in British pounds sterling or U.S. dollars, and at specified rates based on the U.S. prime rate in the event of advances made in U.S. dollars. Recent Accounting Pronouncements In June 1997, SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information were issued. These standards are applicable to the Company commencing with the December 31, 1998 Financial Statements and its March 31, 1999 Interim Financial Statements. The impact of SFAS No. 130 will be to include the change in the cumulative translation adjustment account in the determination of Comprehensive Income. The impact of SFAS No. 131 will be to disclose certain information about the revenues the Company derives from each of its major products in addition to segmented information for the countries in which it earns revenues and holds assets. 8 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 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. 9 -----END PRIVACY-ENHANCED MESSAGE-----