-----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, LeaBU/VrAadJ8zVnmRnP5zjsxqfF8rKbh+SSoJrrzOGHLP54zLH6BEGUPCg7cR4/ bvgeBSsvO2riMBAz0NtmzA== 0001047469-98-041496.txt : 19981123 0001047469-98-041496.hdr.sgml : 19981123 ACCESSION NUMBER: 0001047469-98-041496 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981004 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLACIER WATER SERVICES INC CENTRAL INDEX KEY: 0000883505 STANDARD INDUSTRIAL CLASSIFICATION: 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: 98753891 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: October 4, 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 Identification No.) incorporation or organization) 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: 3,021,525 shares of common stock, $.01 par value, outstanding at October 30, 1998. 1 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS GLACIER WATER SERVICES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
October 4, January 4, 1998 1998* ---------- ---------- ASSETS (unaudited) Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 545 $ 13 Short-term investments, at fair value . . . . . . . . . . . . . . . 35,052 315 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 1,287 467 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,507 3,007 Prepaid commissions and other . . . . . . . . . . . . . . . . . . . 1,561 1,164 ---------- ---------- Total current assets. . . . . . . . . . . . . . . . . . . . . . . 40,952 4,966 Property and equipment, net of accumulated depreciation. . . . . . . . 54,897 48,523 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,441 5,984 ---------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105,290 $ 59,473 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,349 $ 602 Accrued commissions and other liabilities . . . . . . . . . . . . . 3,636 2,389 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . . . . . . 4,985 2,991 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 28,732 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 2,739 3,127 Company obligated mandatorily 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, 3,021,525 and 3,226,175 shares issued and outstanding, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . 35 34 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 15,801 15,548 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 12,074 12,661 Treasury stock, at cost, 408,900 and 172,600 shares, respectively. . . . . . . . . . . . . . . . . . . . . . . (9,861) (3,620) Unrealized loss on short-term investments . . . . . . . . . . . . . (5,483) - ---------- ---------- Total stockholders' equity. . . . . . . . . . . . . . . . . . . . 12,566 24,623 ---------- ---------- Total liabilities and stockholders' equity . . . . . . . . . . . . . . $105,290 $ 59,473 ---------- ---------- ---------- ----------
* Amounts derived from audited information See accompanying notes 2 GLACIER WATER SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATION (in thousands, except shares and per share data) (unaudited)
Three Months Ended Nine Months Ended October 4, October 5, October 4, October 5, 1998 1997 1998 1997 --------- --------- --------- --------- Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,916 $ 17,138 $ 44,163 $ 44,352 Operating costs and expenses: Operating expenses. . . . . . . . . . . . . . . . . . . . . . . . 10,610 10,573 28,305 27,482 Selling, general and administrative expenses. . . . . . . . . . . 2,637 1,954 7,199 5,414 Depreciation and amortization . . . . . . . . . . . . . . . . . . 2,624 2,317 7,630 6,515 Non-recurring charges . . . . . . . . . . . . . . . . . . . . . . - 1,721 - 3,062 --------- --------- --------- --------- Total operating costs and expenses . . . . . . . . . . . . . . 15,871 16,565 43,134 42,473 --------- --------- --------- --------- Income from operations . . . . . . . . . . . . . . . . . . . . . . . . 1,045 573 1,029 1,879 Interest expense, and investment gain/(loss) net . . . . . . . . . . . 493 570 1,760 1,417 --------- --------- --------- --------- Income (loss) before income taxes. . . . . . . . . . . . . . . . . . . 552 3 (731) 462 Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . 260 (29) (147) 143 --------- --------- --------- --------- Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 292 $ 32 $ (584) $ 319 --------- --------- --------- --------- --------- --------- --------- --------- Basic and diluted earnings (loss) per share. . . . . . . . . . . . . . $ .10 $ .01 $ (.18) $ .10 --------- --------- --------- --------- --------- --------- --------- ---------
See accompanying notes 3 GLACIER WATER SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended October 4, October 5, 1998 1997 -------- -------- Cash flows from operating activities: Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (584) $ 319 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . 7,630 6,515 Loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . - 195 Realized gains on sales of marketable securities . . . . . . . . . . . . . . (805) - Change in operating assets and liabilities.. . . . . . . . . . . . . . . . . . (815) (228) -------- -------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . 5,426 6,801 -------- -------- Cash flows from investing activities: Purchase of marketable securities. . . . . . . . . . . . . . . . . . . . . . . (68,379) - Proceeds from sales and maturities of marketable securities. . . . . . . . . . 28,367 - Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . (301) (241) Net investment in vending equipment. . . . . . . . . . . . . . . . . . . . . . (11,462) (7,969) Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . . - 111 Purchase of Aqua-Vend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (9,355) -------- -------- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (51,775) (17,454) -------- -------- -------- -------- Cash flows from financing activities: Issuance of company obligated mandatorily redeemable preferred securities, net of discount. . . . . . . . . . . . . . . 81,600 - Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . 950 25,140 Principal payments on long-term borrowings . . . . . . . . . . . . . . . . . . (29,682) (14,684) Proceeds from issuance of stock. . . . . . . . . . . . . . . . . . . . . . . . 254 196 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . (6,241) - -------- -------- Net cash provided by financing activities . . . . . . . . . . . . . . . . . 46,881 10,652 -------- -------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . 532 (1) Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . 13 11 -------- -------- Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . $ 545 $ 10 -------- -------- -------- -------- Supplemental disclosure of cash flow information: Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,879 $ 1,506 -------- -------- -------- -------- Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12 $ 365 -------- -------- -------- --------
See accompanying notes 4 GLACIER WATER SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS October 4, 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 nine-month period ended October 5, 1997, and accordingly was not reported separately. As a result of the change, the nine-month period ended October 5, 1997 had 278 days, compared to 273 days in the nine-month period ended October 4, 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- and nine-month periods ending October 4, 1998 and October 5, 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 October 4, 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, 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 loss for the three- and nine-month periods ended October 4, 1998 are reported as follows (in thousands):
Three Nine Months Months Ended Ended -------- -------- Income/(Loss): Net income/(loss) $ 292 $ (584) Other comprehensive loss: Unrealized loss on marketable securities (4,771) (5,483) -------- -------- Comprehensive loss $(4,479) $(6,067) -------- -------- -------- --------
5 GLACIER WATER SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) October 4, 1998 (unaudited) RECLASSIFICATION Certain prior year amounts have been reclassified to conform to the current presentation. 2. 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 October 4, 1998 and January 4, 1998, the Company considered all investments as available for use in its current operations, and therefore classified them short-term, available-for-sale investments. Available-for-sale investments are stated at fair value, with unrealized gains and losses, if any, 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. At January 4, 1998, short-term investments consisted of corporate securities and convertible securities, and cost approximated fair value. At October 4, 1998, short-term investments consisted of the following (in thousands):
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value --------- --------- --------- -------- Corporate securities. . . . . . . . . . $ 19,350 $ 75 $ (3,643) $ 15,782 Convertible securities. . . . . . . . . 4,560 - (736) 3,824 U.S. government securities. . . . . . . 2,644 - (923) 1,721 --------- --------- --------- -------- Total debt securities . . . . . . . . . 26,554 75 (5,302) 21,327 Equity securities . . . . . . . . . . . 13,981 - (256) 13,725 --------- --------- --------- -------- Total marketable securities . . . . . . $ 40,535 $ 75 $ (5,558) $ 35,052 --------- --------- --------- -------- --------- --------- --------- --------
Proceeds from sales or maturities of marketable securities for the three- and nine-month periods ended October 4, 1998 were $17,624,000 and $28,367,000, respectively. Gross realized gains on such sales or maturities for the three- and nine-month periods were $1,261,000 and $1,942,000, respectively. Gross realized losses for the three- and nine-month periods were $760,000 and $1,137,000, 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. The gross gains and losses reflected in the above table are primarily the result of this investment approach. 6 GLACIER WATER SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) October 4, 1998 (unaudited) 3. EARNINGS PER SHARE The following table sets forth the calculation of basic and diluted earnings (loss) per share:
Three Months Ended Nine Months Ended ------------------- ------------------ October 4, October 5, October 4, October 5, 1998 1997 1998 1997 ---------- ---------- ----------- ---------- Numerator: Net income (loss). . . . . . . . . . . . . . . . . . . . . $ 292,000 $ 32,000 $ (584,000) $ 319,000 ---------- ---------- ----------- ---------- Numerator - basic and diluted. . . . . . . . . . . . . . . $ 292,000 $ 32,000 $ (584,000) $ 319,000 ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- Denominator: Weighted-average shares. . . . . . . . . . . . . . . . . . 2,893,759 3,226,759 3,162,912 3,216,461 Effect of dilutive securities - Employee stock options. . . . . . . . . . . . . . . . . . 118,006 124,275 - 109,226 ---------- ---------- ----------- ---------- Weighted average common and Potential common shares . . . . . . . . . . . . . . . . . 3,011,765 3,351,034 3,162,912 3,325,687 ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- Basic earnings (loss) per share. . . . . . . . . . . . . . . $ .10 $ .01 $ (.18) $ .10 ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- Diluted earnings (loss) per share. . . . . . . . . . . . . . $ .10 $ .01 $ (.18) $ .10 ---------- ---------- ----------- ---------- ---------- ---------- ----------- ----------
7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW During the third quarter of 1998, the Company installed 230 outside machines and 119 in-store machines to finish the quarter with 13,509 machines in operation, 12,589 outside machines and 920 in-store machines. At October 5, 1997, the Company had a total of 12,170 machines in operation, 11,710 outside machines and 460 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. The transaction was accounted for under the purchase method, and the nine-month period ended October 5, 1997 includes the revenues and operating costs associated with the purchased machines from March 29, 1997. REVENUES For the quarter ended October 4, 1998, the Company's revenues decreased 1.3% to $16,916,000, from $17,138,000 in the third quarter of 1997. Average revenue per machine for the quarter decreased 9% from last year. However, this decrease was offset in part by an increase of 8.4% in the average number of machines in operation throughout the quarter. The decrease in average revenue per machine and in total revenues was primarily due to the negative effects on sales in September from extensive media coverage in the Company's southern California markets regarding a test conducted by the County of Los Angeles on a sample of water vending machines. For the nine-month period, revenues remained consistent with the same period in the prior year, at $44,163,000, compared to $44,352,000 in fiscal 1997. For the nine-month period, average revenue per machine decreased 13.1% from the same period in 1997. However, this decrease was offset by an increase of 14.4% in the average number of machines in operation throughout the period. The decrease in average revenue per machine and in total revenues was primarily due to the negative effects on sales in September from extensive media coverage of water vending machines mentioned above and due to the adverse effects on sales in the first half of the fiscal year from the El Nino weather condition, which caused unusually heavy rainfall and cool temperatures in California and the western United States. COSTS AND EXPENSES Operating expenses for the quarter ended October 4, 1998 increased to $10,610,000, or 62.7% of revenues, compared to $10,573,000, or 61.7% of revenues in the same period last year. Total commissions decreased for the quarter due to a reduction in average revenue per machine. The increase in total operating costs, and in operating costs as a percentage of revenues, is the result of increased servicing costs related to expansion. Operating expenses for the nine-month period ended October 4, 1998 increased to $28,305,000, or 64.1% of revenues, compared to $27,482,000, or 62.0% of revenues in the same period last year. Total commissions for the nine-month period remained flat, consistent with revenues for the period. The increase in total operating costs, and in operating costs as a percentage of revenues, is the result of increased servicing costs related to expansion. 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Selling, general and administrative ("SG&A") expenses for the quarter ended October 4, 1998 increased to $2,637,000, or 15.6% of revenues, compared to $1,954,000, or 11.4% of revenues in the same period last year. SG&A expenses for the nine-month period increased to $7,199,000, or 16.3% of revenues, compared to $5,414,000, or 12.2% of revenues in the same period last year. The increase in total SG&A expenses and SG&A expenses as a percentage of revenues in both the quarter and nine-month period is due primarily to increased sales and marketing activity and to legal expenses in connection with patent litigation. With respect to the increased sales and marketing activity, the Company commenced its first media advertising campaign in the test markets of San Diego and Phoenix in the second and third quarters, at a cost of approximately $800,000. Other sales and marketing activities related primarily to the Company's expansion into new market areas, including the commencement of operations in Mexico during the second quarter. Depreciation and amortization expense was $2,624,000 for the quarter ended October 4, 1998, compared to $2,317,000 in the same period last year. Depreciation and amortization expense was $7,630,000 for the nine-month period ended October 4, 1998, compared to $6,515,000 for the same period last year. The increases in each period are the result of the net addition of approximately 2,400 Aqua-Vend machines through the March 28, 1997 acquisition, and the installation of 1,339 new Glacier machines since October 5, 1997. The non-recurring charges of $1,721,000 for the quarter and $3,062,000 for the nine-month period ended October 5, 1997 represent costs incurred to close certain Glacier locations and write off obsolete assets in conjunction with the integration of Aqua-Vend into Glacier's operations. Interest expense, net, was $493,000 for the quarter ended October 4, 1998, compared to interest expense of $570,000 in the same period last year. Interest expense, net, for the nine-month period ended October 4, 1998, increased to $1,760,000, compared to interest expense of $1,417,000 for the same period last year. For the quarter, interest expense decreased from the prior year due to a higher level of interest income and realized gain on sales of short-term investments of $1,458,000, which offset a higher interest expenses incurred on the Company's $85,000,000 Trust Preferred Securities. For the nine-month period, the increase in interest expense over the prior year was offset to a lesser extent by interest income and net realized gains of $3,752,000. As a result of the foregoing, net income was $292,000, or $.10 per share for the quarter and net loss was $584,000, or ($.18) per share for the nine-month period ended October 4, 1998, compared with net income of $32,000, or $.01 per share for the quarter and $319,000, or $.10 per share for the nine-month period ended October 5, 1997. LIQUIDITY AND CAPITAL RESOURCES On January 27, 1998, the Company, through a newly created wholly-owned business trust, completed a public offering of 3.4 million 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") from the Company. 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 short-term 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 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) marketable securities, at an interest rate of 6.5% per annum. The Company had no borrowings other than the Debentures outstanding at October 4, 1998. At October 4, 1998, the Company had cash and cash equivalents and marketable securities of $35.6 million, and working capital of $36.0 million. For the nine-month period ended October 4, 1998, net cash provided by operations totaled $3.7 million. Net cash provided by financing activities was $46.9 million, and net cash used in investing activities was $51.8 million for the nine-month period ended October 4, 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 $38.3 million, and made capital investments of $11.7 million in vending machines and other equipment. The Company has the authorization to purchase up to 750,000 shares of its common stock from time to time on the open market. During the nine-month period the Company invested $6.2 million in the purchase of treasury stock and as of October 4, 1998, the Company was authorized to purchase an additional 341,100 shares, or approximately 11.2% of the Company's total shares outstanding. The Company believes that its cash flows from operations and the remaining proceeds from the issuance of the Trust Preferred Securities will be sufficient to meets its anticipated operating and capital requirements including its investment in vending machines and expansion, both domestic and international, as well as distributions related to the Trust Preferred Securities, for at least the next twelve months. 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 IS 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. 10 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In response to an allegation by Pure Fill Corporation and Dennis DiSanto that certain features of the Company's water vending machines violate their patents, on October 28, 1997, the Company filed a lawsuit in the United States District Court for the Southern District of California against Pure Fill Corporation and Dennis DiSanto, as named defendants, seeking a declaration that the patents held by them are invalid under United States patent law and that the Company's water vending machines do not infringe any valid claim of the patents. On November 17, 1997, the defendants filed an answer to the complaint and a counterclaim alleging that the Company is infringing its patents. Although the Company believes, based on advice of patent counsel, that this litigation will not have a material adverse effect on the Company's business, financial condition or operating results, there can be no assurance that the lawsuit ultimately will be resolved in favor of the Company, or that the Company will not have to make modifications to its machines. On October 28, 1998, Pure Fill Corporation commenced an action against the Company in the Superior Court for the State of California, County of Stanislaus. The lawsuit alleges, among other things, that the Company violated provisions of the California State antitrust statute, the Cartwright Act, by purportedly conspiring to monopolize the market for the sale of non-prepackaged drinking water through self-service vending machines, selling product below cost, engaging in discriminatory pricing, and exclusive dealing. The plaintiff is seeking injunctive relief and damages in unspecified amounts. The Company has not yet responded to the complaint or commenced discovery. While this lawsuit is at a preliminary stage, the Company does not believe that the lawsuit has merit and intends to defend itself vigorously. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. EXHIBITS Exhibit 27.1 Financial Data Schedule for the nine-month period ended October 4, 1998. b. REPORTS ON FORM 8-K None. INDEX TO EXHIBITS 27.1 Financial Data Schedule for the nine-month period ended October 4, 1998. 11 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: NOVEMBER 13, 1998 By: /s/ Jerry A. Gordon ------------------------------------- Jerry A. Gordon President and Chief Operating Officer 12 EX-27 2 EXHIBIT 27
5 1,000 9-MOS JAN-03-1999 JAN-05-1998 OCT-04-1998 545 35,052 1,287 0 2,507 40,952 84,158 (29,261) 105,290 4,985 0 0 0 35 12,531 105,290 44,163 44,163 0 43,134 0 0 1,760 (731) (147) (584) 0 0 0 (584) (.18) (.18)
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