-----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, Oj6IntPc8wlxwT+6Wvtdl4Voet/PrsTtPG3996cH1j9r9F6Xd1HYnlbNCUlJJ0jH PP979QcH2dFGQp243WoeLQ== 0001047469-98-021147.txt : 19980520 0001047469-98-021147.hdr.sgml : 19980520 ACCESSION NUMBER: 0001047469-98-021147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980405 FILED AS OF DATE: 19980519 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLACIER WATER SERVICES INC CENTRAL INDEX KEY: 0000883505 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-NONSTORE RETAILERS [5960] IRS NUMBER: 330493559 STATE OF INCORPORATION: DE FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11012 FILM NUMBER: 98627819 BUSINESS ADDRESS: STREET 1: 2261 COSMOS CT CITY: CARLSBAD STATE: CA ZIP: 92009 BUSINESS PHONE: 6199302420 MAIL ADDRESS: STREET 1: 2261 COSMOS CT CITY: CARLSBAD STATE: CA ZIP: 92009 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: April 5, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission FILE NUMBER: 1-11012 GLACIER WATER SERVICES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 33-0493559 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2261 Cosmos Court, Carlsbad, California 92009 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (760) 930-2420 ---------------------------------------------------- (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 / / Indicate the number of shares outstanding of each of issuer's class of common stock as of the latest practicable date: 3,198,325 shares of common stock, $.01 par value, outstanding at May 3, 1998. PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS GLACIER WATER SERVICES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
APRIL 5, JANUARY 4, 1998 1998* -------- --------- ASSETS (unaudited) Current assets: Cash and cash equivalents........................ $ 15,575 $ 13 Short-term investments, at fair value............ 33,242 315 Accounts receivable.............................. 928 467 Inventories...................................... 3,248 3,007 Prepaid commissions and other.................... 1,816 1,164 ------- -------- Total current assets........................ 54,809 4,966 Property and equipment, net of accumulated depreciation........................................ 51,294 48,523 Other assets.......................................... 9,383 5,984 -------- -------- Total assets.......................................... $115,486 $ 59,473 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................. $ 863 $ 602 Accrued commissions and other liabilities........ 3,137 2,389 -------- -------- Total current liabilities................... 4,000 2,991 Long-term debt......................................... -- 28,732 Deferred income taxes................................. 3,178 3,127 Company obligated manditorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures....................... 85,000 -- Stockholders' equity: Preferred stock, $.01 par value; 100,000 shares authorized, no shares issued or outstanding...... -- -- Common stock, $.01 par value; 10,000,000 shares authorized, 3,198,325 and 3,226,175 shares issued and outstanding, respectively................................. 34 34 Additional paid-in capital....................... 15,665 15,548 Retained earnings................................ 12,175 12,661 Treasury stock, at cost, 206,800 and 172,600 shares, respectively................. (4,660) (3,620) Unrealized gain on marketable securities, net of tax................................... 94 -- -------- -------- Total stockholders' equity.................. 23,308 24,623 -------- -------- Total liabilities and stockholders' equity............ $115,486 $ 59,473 -------- -------- -------- --------
* Amounts derived from audited information See accompanying notes 1 GLACIER WATER SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except shares and per share data) (unaudited)
THREE MONTHS ENDED APRIL 5, APRIL 4, 1998 1997 -------- -------- Revenues......................................... $ 12,814 $ 11,176 Operating costs and expenses: Operating expenses............................... 8,411 7,075 Selling, general and administrative expenses..... 1,941 1,608 Depreciation and amortization.................... 2,437 1,880 Non-recurring charges..................... -- 471 --------- --------- Total operating costs and expenses............... 12,789 11,034 --------- --------- Income from operations........................... 25 142 Interest expense, net............................ 763 319 --------- --------- Loss before income taxes......................... (738) (177) Income tax benefit............................... (252) (66) --------- --------- Net loss......................................... $ (486) $ (111) --------- --------- --------- --------- Basic and diluted net loss per share............. $ (.15) $ (.03) --------- --------- --------- --------- Weighted average shares outstanding.............. 3,211,988 3,316,391 --------- --------- --------- ---------
See accompanying notes 2 GLACIER WATER SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
THREE MONTHS ENDED APRIL 5, APRIL 4, 1998 1997 -------- -------- Cash flows from operating activities: Net loss........................................................ $ (486) $ (111) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization.............................. 2,437 1,880 Loss on disposal of assets................................. 9 216 Realized gains on sales of marketable securities........... (276) -- Change in operating assets and liabilities..................... (874) (544) -------- -------- Net cash provided by operating activities............... 810 1,441 -------- -------- Cash flows from investing activities: Purchases of marketable securities............................. (39,686) -- Proceeds from sales and maturities of marketable securities.... 7,180 -- Purchases of property and equipment............................ (95) (69) Net investment in vending equipment............................ (4,592) (3,161) Purchase of Aqua-Vend.......................................... -- (9,355) -------- -------- Net cash used in investing activities................... (37,193) (12,585) -------- -------- Cash flows from financing activities: Issuance of company obligated manditorily redeemable preferred securities, net of discount................... 81,600 -- Proceeds from long-term borrowings............................. 950 14,717 Principal payments on long-term borrowings..................... (29,682) (3,579) Proceeds from issuance of stock................................ 117 6 Purchase of treasury stock..................................... (1,040) -- -------- -------- Net cash provided by financing activities............... 51,945 11,144 -------- -------- Net increase in cash and cash equivalents.............................. 15,562 -- Cash and cash equivalents, beginning of period......................... 13 11 -------- -------- Cash and cash equivalents, end of period............................... $ 15,575 $ 11 -------- -------- -------- -------- Supplemental disclosure of cash flow information: Interest paid.................................................. $ 1,622 $ 406 -------- -------- -------- -------- Income taxes paid.............................................. $ 4 $ 69 -------- -------- -------- --------
See accompanying notes 3 GLACIER WATER SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 5, 1998 (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CHANGE IN FISCAL YEAR Effective January 1, 1997, the Company prospectively changed its fiscal year from twelve calendar months ending December 31 to a 52- or 53- week fiscal year ending on the Sunday closest to December 31. The period from January 1, 1997 to January 3, 1997 was not significant to the first quarter of 1997, and accordingly was not reported separately. As a result of the change, the first quarter of fiscal 1997 had 94 days, compared to 91 days in the first quarter of fiscal 1998. BASIS OF PRESENTATION In the opinion of the Company's management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the consolidated financial position of the Company and the consolidated results of its operations and its cash flows for the three-month periods ending April 5, 1998 and April 4, 1997. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information, including footnote information, normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Results of operations for the period ended April 5, 1998 are not necessarily indicative of results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended January 4, 1998. OTHER COMPREHENSIVE INCOME Effective January 5, 1998, the Company adopted FASB Statement No. 130, REPORTING COMPREHENSIVE INCOME ("Statement No. 130"), which established standards for reporting and displaying comprehensive income (loss) and its components in a financial statement that is displayed with the same prominence as other financial statements. Prior to 1998, the Company had no other comprehensive income. The components of comprehensive income (loss) for the three-month period ended April 5, 1998 are reported as follows (in thousands):
Net loss $(486) Other comprehensive income: Unrealized gain on marketable securities, net of tax 94 ------- Comprehensive loss $(392) ------- -------
RECLASSIFICATION Certain prior year amounts have been reclassified to conform to the current presentation. 4 GLACIER WATER SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) April 5, 1998 (unaudited) 2. ACQUISITION On March 28, 1997, the Company purchased substantially all of the assets of the Aqua-Vend division of McKesson Water Products Company, a wholly-owned subsidiary of McKesson Corporation, for $9.0 million in cash plus certain direct costs, including sales tax on assets purchased. The transaction was accounted for under the purchase method, and the purchase price and related direct costs were allocated based on the estimated fair values of assets acquired and liabilities assumed, as follows (in thousands):
Inventories $ 208 Prepaid expenses 255 Vending equipment 7,565 Other fixed assets 145 Prepaid marketing incentives 1,225 Other non-current assets 110 Sales tax liability (153) ------- $9,355 ------- -------
The unaudited consolidated pro forma results of operations for the three- month period ended April 4, 1997 set forth below assume that the transaction occurred as of the beginning of the period (in thousands, except per share amounts):
April 4, 1997 -------- Net revenues $14,334 Loss from operations (609) Net loss (695) Net loss per common share ($.22)
3. INVESTMENTS Investments are accounted for in accordance with FASB Statement No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, which requires that the Company determine the appropriate classification of investments at the time of purchase and reevaluate such designation as of each balance sheet date. At April 5, 1998 and January 4, 1998, the Company considered all investments as available for use in its current operations, and therefore classified them as short-term, available-for-sale investments. Available-for-sale investments are stated at fair value, with unrealized gains and losses, if any, net of tax, reported as a separate component of stockholders' equity. Interest, dividends, realized gains and losses and declines in value judged to be other-than-temporary are included in interest expense, net. The cost of securities sold is based on the specific identification method. 5 GLACIER WATER SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) April 5, 1998 (unaudited) At January 4, 1998, short-term investments consisted of corporate securities and convertible securities, and cost approximated fair value. At April 5, 1998, short-term investments consisted of the following (in thousands):
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ -------- Corporate securities $14,034 $ 114 $ (219) $13,929 Convertible securities 6,257 385 (47) 6,595 U.S. government securities 2,103 $ 55 -- 2,158 ------- ------ ------- ------- Total debt securities 22,394 554 (266) 22,682 Equity securities 10,703 883 (1,026) 10,560 ------- ------ ------- ------- Total marketable securities $33,097 $1,437 $ (1,292) $33,242 ------- ------ ------- ------- ------- ------ ------- -------
Proceeds from sales or maturities of marketable securities for the three- month period ended April 5, 1998 were $7,180,000. Gross gains and losses realized on such sales or maturities were $322,000 and $46,000, respectively. The Company's investment guidelines include investing approximately $15.5 million of its portfolio with a professional asset management firm whose investment approach consists of investing in hedged transactions. Each position in the portfolio is created by purchasing a convertible debt or equity security and selling short the underlying common stock against it. Gains and losses in the convertible security are offset by losses and gains in the short position. The gross gains and losses reflected in the above table are primarily the result of this investment approach. 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW Effective January 1, 1997, the Company prospectively changed its fiscal year from twelve calendar months ending December 31 to a 52- or 53-week fiscal year ending on the Sunday closest to December 31. The period from January 1, 1997 to January 3, 1997 was not significant to the first quarter of 1997, and accordingly, was not reported separately. As a result of the change, the first quarter of fiscal 1997 had 94 days, compared to 91 days in the first quarter of fiscal 1998. During the first quarter of 1998, the Company installed 262 outside machines and 151 in-store machines to finish the quarter with 12,857 machines in operation, 12,168 outside and 689 in-store machines. At April 4, 1997, the Company had a total of 12,438 machines in operation, 12,198 outside and 240 in- store machines. On March 28, 1997, the Company purchased substantially all of the assets of the Aqua-Vend division of McKesson Water Products Company, a wholly-owned subsidiary of McKesson Corporation. The assets purchased included approximately 3,000 water vending machines. In connection with the acquisition, the Company developed a detailed integration plan which included the removal of approximately 800 Aqua-Vend machines from service, the upgrade and modification of the majority of the remaining Aqua-Vend machines and the rationalization and relocation of Aqua-Vend machines within Glacier's network of machines. The revenues and operating costs associated with these machines from March 29, 1997 to April 4, 1997 were not material and are included in the Company's results of operations for the quarter ended April 4, 1997. REVENUES For the quarter ended April 5, 1998, revenues increased 14.7% to $12,814,000, from $11,176,000, in the first quarter of fiscal 1997. This increase was due to the increase of approximately 36.1% in the average number of machines in operation throughout the quarter; however, average revenues per machine declined approximately 15.7% due to the negative effects of El Nino and the related heavy rainfall in Southern California, the Company's largest market area. COSTS AND EXPENSES Operating expenses for the quarter ended April 5, 1998 were $8,411,000, or 65.6% of revenues, compared to $7,075,000, or 63.3% of revenues in the same period last year. The total dollar increase is due to the additional commissions and service costs associated with the additional number of machines in operation throughout the first quarter. The increase as a percentage of revenues is due to the decrease in average revenues per machine discussed above. Selling, general and administrative ("SG&A") expenses for the quarter ended April 5, 1998 increased to $1,941,000, or 15.1% of revenues, compared to $1,608,000, or 14.4% of revenues in the same period last year. The increase in total dollars is due primarily to additional activities supporting the Company's significant increase in machines, primarily the result of the Aqua- Vend acquisition that occurred at the end of the first quarter 1997. The increase in SG&A as a percentage of revenues is due to the decrease in average revenues per machine discussed above. 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) The non-recurring charges of $471,000 in 1997 represent costs incurred to close certain Glacier locations and write off obsolete assets pursuant to the Company's plan to integrate Aqua-Vend's operations with its own. Depreciation and amortization expense was $2,437,000, for the quarter ended April 5, 1998, compared to $1,880,000 in the same period last year. The increase is a result of the net addition of approximately 2,400 Aqua-Vend machines through the March 28, 1997 acquisition, and the installation of approximately 616 new Glacier machines since April 5, 1997. Interest expense, net of interest income and realized gains and losses on sales of short-term investments, for the quarter increased to $763,000, from $319,000 in the same period last year. The increase is due to the increase in new machines, combined with the issuance of $85 million of Trust Preferred Securities. As a result of the foregoing, the net loss for the quarter ended April 5, 1998 was $486,000, or $.15 per share, compared with a net loss of $111,000, or $.03 per share for the same period last year. LIQUIDITY AND CAPITAL RESOURCES On January 27, 1998, the Company, through a newly created business trust and wholly-owned subsidiary, completed a public offering of 3.4 million of 9.1/16% Cumulative Trust Preferred Securities with a liquidation amount of $25 per security (the "Trust Preferred Securities"). The proceeds from the sale of the Trust Preferred Securities were used to purchase an equivalent amount of 9 1/16% Junior Subordinated Debentures (the "Debentures"). With the net proceeds of $81.6 million from the sale of the Debentures, the Company repaid its outstanding bank debt of approximately $28.7 million, terminated its bank credit agreement and invested the remainder in cash equivalents and short-term marketable securities. These investments, as well as cash flows from operations, are the Company's primary sources of liquidity. In addition, the Company has the capacity to borrow up to $5 million from a national brokerage firm against its investments in marketable securities, at an interest rate of 6.5% per annum. At April 5, 1998, the Company had cash and cash equivalents and marketable securities of $48.8 million, and working capital of $50.8 million. For the quarter ended April 5, 1998, net cash provided by operations totaled $810,000. Net cash provided by financing and investing activities was $14.8 million for the quarter ended April 5, 1998. After the issuance of the Trust Preferred Securities and the repayment of its outstanding bank debt, the Company made net purchases of short-term marketable securities of $32.5 million, and made capital investments of $4.7 million in vending machines and other equipment. STATEMENTS IN THIS REPORT THAT ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY INVOLVE RISKS AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, TRADE RELATIONS, DEPENDENCE ON CERTAIN LOCATIONS AND COMPETITION. FURTHER INFORMATION ON POTENTIAL FACTORS WHICH COULD AFFECT THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY ARE INCLUDED IN THE FILINGS OF THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING, BUT NOT LIMITED TO, THE COMPANY'S REGISTRATION STATEMENT ON FORM S-2, AS AMENDED, (FILE NO. 333-40335) AND ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JANUARY 4, 1998. 8 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. EXHIBITS Exhibit 27. 1 Financial Data Schedule. b. REPORTS ON FORM 8-K The Company filed a Report on Form 8-K/A on January 22, 1998. EXHIBITS 27.1 Financial Data Schedule 9 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. GLACIER WATER SERVICES, INC. Date: May 19, 1998 By: /s/Jerry A. Gordon ---------------------- Jerry A. Gordon President and Chief Operating Officer Date: May 19, 1998 By: /s/Brenda K. Foster ---------------------- Brenda K. Foster Vice President, Controller 10 EX-27.1 2 EXHIBIT 27.1
5 1,000 3-MOS JAN-03-1999 JAN-05-1998 APR-05-1998 15,575 33,242 928 0 3,248 54,809 76,720 (25,426) 115,486 4,000 0 0 0 34 23,274 115,486 12,814 12,814 0 12,789 0 0 763 (738) (252) (486) 0 0 0 (486) (.15) (.15)
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