<PAGE>
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: June 30, 1996
[ ] 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)
<TABLE>
<S> <C>
Delaware 33-0493559
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2261 Cosmos Court, Carlsbad, California 92009
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(Address of principal executive offices) (Zip Code)
</TABLE>
(619) 930-2420
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(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: 3,351,075 shares of
common stock, $.01 par value, outstanding at July 31, 1996.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GLACIER WATER SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995*
----------- -------------
<S> <C> <C>
ASSETS (unaudited)
- - ------
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12 $ 29
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 614
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,537 2,200
Prepaid commissions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,359 888
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,185 3,731
Property and equipment, net of accumulated depreciation . . . . . . . . . . . . . . . . . . 34,080 33,272
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,220 3,635
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,485 $40,638
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 353 $ 342
Accrued commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 998 1,289
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,973 734
------- ------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,324 2,365
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,177 11,087
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,099 3,099
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, 3,348,575 and
3,367,825 shares issued and outstanding, respectively . . . . . . . . . . . . . . 34 34
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,135 15,125
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,087 8,928
Treasury stock; 20,000 shares, at cost. . . . . . . . . . . . . . . . . . . . . . . . . . . (371) --
------- -------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,885 24,087
------- -------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . $41,485 $40,638
======= =======
* Amounts derived from audited information
</TABLE>
See accompanying notes
2
<PAGE>
GLACIER WATER SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except shares and per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,036 $ 10,470 $ 22,051 $ 19,663
Operating costs and expenses:
Operating expenses . . . . . . . . . . . . . . . . . . . . 7,368 6,371 13,633 12,087
Selling, general and administrative expenses . . . . . . . 1,499 1,425 2,821 2,677
Depreciation and amortization . . . . . . . . . . . . . . 1,653 1,365 3,287 2,665
-------- -------- -------- ---------
Total operating costs and expenses . . . . . . . . . . 10,520 9,161 19,741 17,429
-------- -------- -------- ---------
Income from operations . . . . . . . . . . . . . . . . . . . . 1,516 1,309 2,310 2,234
Interest expense (net) and other . . . . . . . . . . . . . . . 184 207 379 345
-------- -------- -------- ---------
Income before provision for income taxes . . . . . . . . . . . 1,332 1,102 1,931 1,889
Provision for income taxes . . . . . . . . . . . . . . . . . . 533 441 772 756
-------- -------- -------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 799 $ 661 $ 1,159 $ 1,133
======== ======== ======== ========
Net income per common and common equivalent share . . . . . . $ .24 $ .20 $ .34 $ .33
======== ======== ======== ========
Weighted average common and
common equivalent shares outstanding . . . . . . . . . . . 3,389,589 3,385,400 3,396,029 3,403,900
========= ========= ========= =========
</TABLE>
See accompanying notes
3
<PAGE>
GLACIER WATER SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,159 $ 1,133
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,287 2,665
Change in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 162
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (337) (126)
Prepaid commissions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (471) (386)
Payments for prepaid marketing incentives . . . . . . . . . . . . . . . . . . . . . . . (276) (457)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214) (103)
Accounts payable, accrued commissions and other accrued liabilities . . . . . . . . . . 939 42
------ ------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . 4,422 2,930
------ ------
Cash flows from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . (353) (59)
Net investment in vending equipment . . . . . . . . . . . . . . . . . . . . . . . . . . (2,815) (5,779)
------ -------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . (3,168) (5,838)
Cash flows from financing activities:
Proceeds from long-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,605 8,698
Principal payments on long-term borrowings. . . . . . . . . . . . . . . . . . . . . . . (8,515) (5,225)
Proceeds from issuance of stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 376
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (371) --
------ ------
Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . (1,271) 3,849
------ -----
Net increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) 941
Cash, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 73
-------- ------
Cash, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12 $1,014
======== ======
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 400 $ 256
======== =======
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 246 $ 234
======== =======
</TABLE>
See accompanying notes
4
<PAGE>
GLACIER WATER SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(unaudited)
1. 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 six-month periods
ending June 30, 1996 and 1995. 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 June 30, 1996 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 December 31, 1995.
2. RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the
current presentation.
3. INVENTORIES
Inventories consist of raw materials, repair and spare parts and vending
machines in process of assembly, and are stated at the lower of cost
(weighted moving average) or market. Costs associated with the assembly of
vending machines are accumulated until machines are completed, at which time
the costs are transferred to property and equipment.
At June 30, 1996 and December 31, 1995, inventories consist primarily of
raw materials and repair and spare parts.
4. SUPPLEMENTARY BALANCE SHEET INFORMATION
Included in Prepaid commissions and other are commission payments made
to certain retailers based on a percentage of estimated quarterly vending
machine revenues, as well as other prepaid expenses incurred in the normal
course of business. Prepaid commissions were $599,000 and $371,000,
respectively, at June 30, 1996 and December 31, 1995.
Included in Other assets are prepaid marketing incentives which
represent payments made to the Company's customers for the placement of the
Company's machines at retail locations. Prepaid marketing incentives, net of
accumulated amortization, were $2,701,000 and $3,180,000 at June 30, 1996 and
December 31, 1995, respectively.
5. NET INCOME PER SHARE
Net income per share of common stock is computed on the basis of the
weighted average shares of common stock outstanding plus common equivalent
shares arising from the effect of dilutive stock options, using the treasury
stock method.
5
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The Company continued to expand its operations in the second quarter of 1996,
adding 106 machines, to finish the quarter with a total of 8,809 machines
installed, compared to 7,755 at June 30, 1995.
SALES
Sales for the quarter and six months ended June 30, 1996 increased 15.0% and
12.1%, respectively, over the same periods in the prior year. The increases
are primarily a result of the installation of new machines.
COSTS AND EXPENSES
Operating expenses were 61.2% and 61.8% of sales for the quarter and six
months ended June 30, 1996, respectively, compared to 60.9% and 61.5% of
sales for the same periods in 1995. Operating expenses as a percentage of
sales remained consistent with the prior year as the Company continued to
maintain its efficiencies in route servicing while continuing to install new
machines.
Selling, general and administrative expenses were 12.5% and 12.8% of sales
for the quarter and six months ended June 30, 1996, respectively, compared to
13.6% for both the quarter and six months ended June 30, 1995. The slight
decrease as a percentage of sales is a result of the Company's continuing
effort to control costs in the adminstrative area.
Depreciation and amortization expense increased 21.1% for the quarter and
23.3% for the six months ended June 30, 1995 over the same periods in 1995,
primarily as a result of the addition of 1,054 machines since June 30, 1995.
Interest expense decreased 11.1% for the quarter ended June 30, 1996 due to
lower average outstanding balances on the Company's line of credit. Interest
expense for the six months ended June 30, 1996 increased 9.9% over the same
period in 1995, primarily as a result of significantly higher average
outstanding balances on the line of credit during the first quarter of 1996
compared to the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources are cash
flows from operations and funds available under the Company's bank credit
agreement. The Company's borrowing limit under its credit agreement was
increased from $16 million to $18 million in July 1996. The agreement
requires monthly interest payments at the bank's prime rate (8.25% per annum
at June 30, 1996) or LIBOR plus 1.75%. The credit agreement provides for a
two-year interest-only revolving period which converts to a five-year term
note due and payable July 1, 2003. The agreement is collateralized by
substantially all assets of the Company and requires, among other things,
that the Company maintain certain debt coverage and other financial ratios.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net cash provided by operations for the six months ended June 30, 1996 was
$4.4 million. As of June 30, 1996, the Company had working capital of
approximately $861,000. Approximately $10.2 million of borrowings were
outstanding and $5.8 million was available under the credit agreement.
The Company believes its cash flow generated from operations and borrowings
available under its credit agreement will be sufficient to meet its anticipated
operating and capital requirements, including its investment in vending
equipment, for at least the next twelve months. In January 1996, the Company's
Board of Directors authorized the repurchase of up to 250,000 shares of the
Company's common stock. The Company has repurchased 20,000 shares as of June
30, 1996.
This report may be deemed to contain certain forward-looking statements with
respect to the financial condition and results of operations of Glacier which
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 Glacier are included in the filings of Glacier with the Securities
and Exchange Commission, including, but not limited to, Glacier's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
None.
b. REPORTS ON FORM 8-K
None.
8
<PAGE>
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: August 7, 1996 By: /s/ Jerry A. Gordon
-------------- --------------------------------
Jerry A. Gordon
President and Chief Operating Officer
Date: August 7,1996 By: /s/ Brenda K. Foster
------------- ----------------------------------
Brenda K. Foster
Vice President, Controller
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 12
<SECURITIES> 0
<RECEIVABLES> 277
<ALLOWANCES> 0
<INVENTORY> 2,537
<CURRENT-ASSETS> 4,185
<PP&E> 49,139
<DEPRECIATION> (15,059)
<TOTAL-ASSETS> 41,485
<CURRENT-LIABILITIES> 3,324
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 24,851
<TOTAL-LIABILITY-AND-EQUITY> 41,485
<SALES> 22,051
<TOTAL-REVENUES> 22,051
<CGS> 13,633
<TOTAL-COSTS> 19,741
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 379
<INCOME-PRETAX> 1,931
<INCOME-TAX> 772
<INCOME-CONTINUING> 1,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,159
<EPS-PRIMARY> .34
<EPS-DILUTED> 0
</TABLE>
