<PAGE>
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 1, 2000
[ ] 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)
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
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: 2,840,174 shares of common
stock, $.01 par value, outstanding at October 29, 2000.
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GLACIER WATER SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
October 1, January 2,
2000 2000 *
---- ------
Assets (unaudited)
-----
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 1,836 $ 4,205
Investments, available-for-sale................................................ 7,466 9,826
Accounts receivable............................................................ 786 589
Inventories.................................................................... 2,677 3,249
Prepaid expenses and other..................................................... 1,519 1,779
-------- --------
Total current assets........................................................ 14,284 19,648
Property and equipment, net of accumulated depreciation........................... 57,192 58,936
Other assets...................................................................... 10,961 10,825
-------- --------
Total assets...................................................................... $ 82,437 $ 89,409
======== ========
Liabilities and Stockholders' Equity
----------------------------------------------------------------------------------
Current liabilities:
Accounts payable............................................................... $ 853 $ 1,272
Accrued commissions............................................................ 2,576 2,238
Accrued liabilities............................................................ 1,749 1,478
Line of credit................................................................. 6 3,300
-------- --------
Total current liabilities................................................... 5,184 8,288
Line of credit.................................................................... 6,090 --
Long-term debt.................................................................... 70,510 76,448
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,
2,840,174 and 2,834,174 respectively, shares issued and outstanding......... 35 34
Additional paid-in capital..................................................... 16,188 16,119
Retained earnings.............................................................. 1,094 4,771
Treasury stock, at cost, 598,026 shares........................................ (14,795) (14,795)
Accumulated other comprehensive loss........................................... (1,869) (1,456)
-------- --------
Total stockholders' equity.................................................. 653 4,673
-------- --------
Total liabilities and stockholders' equity........................................ $ 82,437 $ 89,409
======== ========
</TABLE>
*Amounts derived from audited information
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
GLACIER WATER SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares and per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 1, October 3, October 1, October 3,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues................................................... $ 17,214 $ 15,706 $ 45,938 $ 42,561
Operating costs and expenses:
Operating expenses.................................... 10,864 10,045 29,800 27,586
Selling, general and administrative expenses.......... 2,367 2,073 6,646 6,829
Depreciation and amortization......................... 3,068 2,685 9,179 7,867
Non-recurring and other charges 1,400 -- 1,400 --
---------- ---------- ---------- ----------
Total operating costs and expenses............... 17,699 14,803 47,025 42,282
---------- ---------- ---------- ----------
Income (loss) from operations.............................. (485) 903 (1,087) (279)
Other (income) expenses:
Interest expense...................................... 1,759 1,999 5,326 6,016
Investment (income) loss.............................. (344) (324) (885) 1,401
---------- ---------- ---------- ----------
Total other expenses....................................... 1,415 1,675 4,441 7,417
---------- ---------- ---------- ----------
Loss before income taxes and extraordinary item............ (1,900) (772) (5,528) (7,138)
Income tax benefit......................................... -- -- -- (2,060)
---------- ---------- ---------- ----------
Loss before extraordinary gain............................. (1,900) (772) (5,528) (5,078)
Extraordinary gain on early retirement of debt............. 318 336 1,851 336
---------- ---------- ---------- ----------
Net loss................................................... $ (1,582) $ (436) $ (3,677) $ (4,742)
========== ========== ========== ==========
Basic and diluted loss per share:
Loss before extraordinary item........................ $ (0.67) $ (0.27) $ (1.95) $ (1.78)
Extraordinary gain.................................... .11 .12 .65 .12
---------- ---------- ---------- ----------
Net loss.............................................. $ (0.56) $ (0.15) $ (1.30) $ (1.66)
========== ========== ========== ==========
Shares used in calculation................................. 2,840,174 2,833,000 2,836,438 2,855,580
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
Glacier Water Services, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 1, October 3, October 1, October 3,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $(1,582) $(436) $(3,677) $(4,742)
------- ------- ------- ------
Unrealized (loss) on securities:
Unrealized holding gain (loss) arising during the period (31) (429) (474) 5,455
Less: reclassification adjustment for losses (gains)
included in net gain (loss) (30) (225) (61) 2,477
------- ------- ------- ------
Net unrealized gain (loss) (1) (204) (413) 2,978
------- ----- ------- -------
Comprehensive loss $(1,583) $(640) $(4,090) $(1,764)
======= ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
GLACIER WATER SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
October 1, October 3,
2000 1999
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (3,677) $ (4,742)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 9,179 7,867
Loss on disposal of assets 831 --
Extraordinary gain on early retirement of debt (1,851) (336)
Realized (gain) loss on sales of investments (61) 2,477
Change in operating assets and liabilities:
Accounts receivable (197) 49
Inventories 572 (263)
Prepaid expenses and other 260 5
Payments for prepaid marketing incentives (2,749) (4,319)
Deferred income taxes -- (2,060)
Other assets 94 (13)
Accounts payable, accrued liabilities and accrued commissions 190 521
-------- --------
Total adjustments 6,268 3,928
-------- --------
Net cash provided by (used in) operating activities 2,591 (814)
-------- --------
Cash flows from investing activities:
Net investment in vending equipment (5,520) (9,071)
Purchase of property and equipment (448) (316)
Purchase of investments (931) (20,515)
Proceeds from sale and maturities of investments 2,878 31,914
-------- --------
Net cash (used in) provided by investing activities (4,021) 2,012
-------- --------
Cash flows from financing activities:
Early retirement of debt (3,804) (1,112)
Proceeds from borrowings on line of credit 14,606 14,880
Principal payments on line of credit (11,810) (11,790)
Proceeds from issuance of stock 69 156
Purchase of treasury stock -- (3,246)
-------- --------
Net cash used in financing activities (939) (1,112)
-------- --------
Net (decrease) increase in cash and cash equivalents (2,369) 86
Cash and cash equivalents, beginning of period 4,205 109
-------- --------
Cash and cash equivalents, end of period $ 1,836 $ 195
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
GLACIER WATER SERVICES, INC.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(in thousands)
(unaudited)
Nine Months Ended
-----------------
October 1, October 3,
2000 1999
---- ----
Cash paid for interest........................... $5,222 $5,879
====== ======
Cash paid for income taxes....................... $ 5 $ 5
====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
GLACIER WATER SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 1, 2000
(unaudited)
1. Summary of Significant Accounting Policies
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 ended October 1, 2000
and October 3, 1999. 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 three- and nine-month periods ended October 1, 2000 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 2, 2000.
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 1, 2000 and January 2, 2000, 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. Realized gains
or losses from the sale of investments, write-downs associated with investments
deemed to be permanently impaired, interest income, and dividends are included
as investment income or loss in the accompanying statements of operations.
Management reviews the carrying values of its investments and writes such
investments down to estimated fair value by a charge to operations when such
review results in management's determination that an investment impairment is
considered to be other than temporary. Included in the available-for-sale
investments are corporate securities for Grove Worldwide and Globalstar Capital
Corporation. Both of these companies appear to be having financial difficulties.
The Company will monitor these investments closely and may incur a charge in the
near term should it be determined that the decline in value of these securities
is considered to be other than temporary. As of October 1, 2000, management
believes its unrealized losses aggregating $2,477,000 to be temporary in nature.
The cost of securities sold is based on the specific identification method.
7
<PAGE>
At October 1, 2000, short-term investments consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Corporate securities $6,123 $117 $(2,477) $3,763
Mortgage backed securities 615 44 -- 659
------ ---- ------- ------
Total debt securities 6,738 161 (2,477) 4,422
Equity securities 2,597 447 -- 3,044
------ ---- ------- ------
Total marketable securities $9,335 $608 $(2,477) $7,466
====== ==== ======= ======
</TABLE>
The Company's primary market risk exposures are interest rate risk and
equity price risk. At October 1, 2000, the Company held a portfolio of
marketable securities with an estimated fair value equal to $7,466,000. Of that
amount, the estimated fair value of the Company's total debt investments
available- for-sale was $4,422,000, which included no convertible debt
securities, and the estimated fair value of the Company's total equity
securities available-for-sale was $3,044,000, including $2,011,000 in
convertible preferred securities. The Company's exposure to interest rate risk
relates primarily to the opportunity cost of fixed rate obligations. The
Company's exposure to equity price risk relates primarily to the risk that the
market price of a security may fluctuate or drop over time.
Proceeds from sales or maturities of marketable securities for the three-
and nine-month periods ended October 1, 2000 were $66,000 and $2,878,000,
respectively. Gross realized gains on such sales or maturities for the three-and
nine-month periods were $30,000 and $122,000, respectively. The Company had no
gross realized losses for the three-month period ended October 1, 2000 and had
gross realized losses of $61,000 for the nine-month period ended October 1,
2000. Corporate securities have maturity dates from February 2001 to July 2012.
Corporate debt securities have maturity dates from February 2001 to May 2008.
Mortgage backed securities have maturity dates of December 2021. The Company's
investment portfolio is managed by Kayne Anderson Investment Management, a
related party.
At January 2, 2000, investments available-for-sale consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Corporate securities $ 7,196 $117 $(1,336) $5,977
Convertible securities 318 -- (11) 307
Mortgage backed securities 721 56 -- 777
------- ---- ------- ------
Total debt securities 8,235 173 (1,347) 7,061
Equity securities 3,047 248 (530) 2,765
------- ---- ------- ------
Total investments available
for sale $11,282 $421 $(1,877) $9,826
======= ==== ======= ======
</TABLE>
During the quarters ended April 4, 1999 and July 4, 1999, the Company recognized
a write-down of approximately $1.6 million and $0.5 million, respectively, on
investments it considered to be permanently impaired. The Company subsequently
sold these securities.
8
<PAGE>
3. Non-Recurring Charges
On August 28, 2000, the Company announced the decision by the Board of
Directors of Glacier Water Services, Inc. to close its operation in Mexico.
During the quarter ended October 1, 2000, the Company incurred a non-recurring
charge of $1,400,000 for certain costs associated with the closure of its Mexico
operation of which approximately $376,000 has been accrued as exit costs. The
non-recurring charge primarily consisted of a write-down of leasehold
improvements, loss on disposal of assets, severance and other costs related to
the discontinuation of the operation in Mexico. Substantially all of the vending
machines in Mexico were returned to the United States for future deployment. For
the nine-months ended October 1, 2000 the Mexico operation had revenues of
$326,000 and an operating loss before the non-recurring charge of $824,000
compared to revenues of $131,000 and an operating loss of $518,000 for the nine-
months ended October 3, 1999 in the prior year.
4. Extraordinary Item
As of October 1, 2000, the Company's Board of Directors had authorized the
Company to purchase up to 750,000, or approximately 22% of the 3,400,000 shares,
of the Glacier Water Trust Preferred Securities (AMES: HOO_pa) issued by Glacier
Water Trust I, a wholly owned subsidiary of the Company, in the open market as
part of the Company's stock repurchase plan. During the quarter ended October 1,
2000, the Company repurchased 51,300 shares of the Trust Preferred Securities at
an average price of $17.61 per share. This resulted in a net extraordinary gain
of $318,000, which was the result of a gain of $379,000, less the write-off of
$61,000 of related deferred debt costs. For the nine-month period ended October
1, 2000, the Company repurchased 238,200 shares at an average price of $16.01,
which resulted in a net extraordinary gain of $1,851,000. The net extraordinary
gain of $1,851,000 was the result of a gain of $2,134,000 less the write-off of
$283,000 of related deferred debt costs.
5. Credit Facility
On June 23, 2000, the Company entered into a $10.0 million credit facility
with Tokai Bank of California with a maturity date of November 1, 2001. The
credit facility requires quarterly interest payments at the Bank's prime rate
(9.5% per annum at October 1, 2000) or LIBOR plus 1.90% (8.6% per annum at
October 1, 2000). As of October 1, 2000, the Company had approximately $3.9
million of funds available under the agreement.
6. Subsequent Events
On October 24, 2000, the Company announced that the Board of Directors
authorized the Company to purchase up to an additional 250,000 shares of the
Trust Preferred Securities (AMEX: HOO_PA) as part of the Company's stock
purchase plan. With the increase, the Company is authorized to purchase up to
1,000,000 shares of the Trust Preferred Securities in open market transactions
or block trades. On October 24, 2000, the Company purchased 265,000 shares of
the Trust Preferred Securities in the open market at $17.00 per share.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Overview
--------
As of October 1, 2000, the Company operated 13,454 machines compared to
13,413 machines in service last year. As of October 1, 2000, the Company had
11,208 outside machines and 2,246 in-store machines compared to 11,719 outside
machines and 1,694 in-store machines in service at the same time last year.
Revenues
--------
For the quarter ended October 1, 2000, revenues increased $1,508,000 or
9.6% to $17,214,000 from $15,706,000 for the third quarter a year ago. For the
nine-month period ended October 1, 2000, revenues increased $3,377,000 or 7.9%
to $45,938,000 from $42,561,000 for the same period in the prior year. The
increase in revenues for the three- and the nine-month period ended October 1,
2000 was due to the increase in the average number of machines in operation and
the increase in the average revenue per machine compared to the same periods
last year.
Costs and Expenses
------------------
Operating expenses for the quarter ended October 1, 2000 increased $819,000
to $10,864,000, or 63.1% of revenues, compared to $10,045,000, or 64.0% of
revenues in the same period last year. Operating expenses for the nine-month
period ended October 1, 2000 increased to $29,800,000, or 64.9% of revenues,
compared to $27,586,000, or 64.8% of revenues in the same period last year. The
increase in total operating expenses for the three- and the nine-month period
ended October 1, 2000 was the result of increased commissions due to higher
revenues and increased servicing costs resulting from the Company's expansion
into new market areas since last year.
Selling, general and administrative ("SG&A") expenses for the quarter ended
October 1, 2000 increased $294,000 to $2,367,000, or 13.8% of revenues, compared
to $2,073,000, or 13.2% of revenues in the same period last year. SG&A expenses
for the nine-month period decreased $183,000 to $6,646,000, or 14.5% of
revenues, compared to $6,829,000, or 16.0% of revenues in the same period last
year. The increase in total SG&A for the three-month period October 1, 2000 was
primarily due to an increase in SG&A expenses in connection with expansion since
last year offset by a decrease in legal expenses incurred last year in
connection with claims made against the Company that have since been dismissed.
The decrease in total SG&A expenses for the nine-month period ended October 1,
2000 was primarily due to a decrease in legal expenses incurred last year in
connection with claims made against the Company that have since been dismissed
offset by an increase in SG&A expenses in connection with expansion since last
year.
Depreciation and amortization expense was $3,068,000 for the quarter ended
October 1, 2000, compared to $2,685,000 in the same period last year.
Depreciation and amortization expense was $9,179,000 for the nine-month period
ended October 1, 2000, compared to $7,867,000 for the same period last year. The
increase in total depreciation and amortization expense was due to the increased
number of machines placed in service since last year.
On August 28, 2000, the Company announced the decision by the Board of
Directors of Glacier Water Services, Inc. to close its operation in Mexico.
During the quarter ended October 1, 2000, the Company incurred a non-recurring
charge of $1,400,000 for certain costs associated with the closure of its Mexico
operation. The non-recurring charge primarily consisted of a write-down of
10
<PAGE>
leasehold improvements, loss on disposal of assets, severance and other costs
related to the discontinuation of the operation in Mexico. For the nine-months
ended October 1, 2000 the Mexico operation had revenues of $326,000 and an
operating loss of $824,000 compared to revenues of $131,000 and an operating
loss of $518,000 for the nine-months ended October 3, 1999 in the prior year.
Substantially all of the vending machines in Mexico were returned to the United
States and will be used for future deployment. (See Note 3. Non-Recurring
Charges)
Interest expense decreased to $1,759,000, for the quarter ended October 1,
2000, compared to $1,999,000 in the same period last year. Interest expense for
the nine-month period ended October 1, 2000 decreased to $5,326,000, compared to
$6,016,000 in the same period last year. The decrease in interest expense for
both the quarter and the nine-month period was the result of lower debt levels
this year compared to last year. The lower debt levels were the result of the
Company's repurchase of a portion of the Trust Preferred Securities. The Company
had $344,000 of investment income in the quarter ended October 1, 2000 compared
to investment income of $324,000 for the same quarter last year. The Company had
$885,000 of investment income in the nine-month period ended October 1, 2000
compared to $1,401,000 of investment losses in the same period last year. The
losses last year were associated with the write-down of $2.1 million for
investments of the Company deemed to be permanently impaired.
For the quarter ended October 1, 2000, the Company reported a net
extraordinary gain of $318,000 resulting from the early retirement of debt.
During the quarter ended October 1, 2000, the Company repurchased 51,300 shares
of the Trust Preferred Securities at an average price of $17.61 per share. The
net extraordinary gain of $318,000 was the result of a gain of $379,000 less the
write-off of $61,000 of related deferred debt costs. For the nine-month period
ended October 1, 2000, the Company repurchased 238,200 shares at an average
price of $16.01, which resulted in a net extraordinary gain of $1,851,000. The
net extraordinary gain of $1,851,000 was the result of a gain of $2,134,000 less
the write-off of $283,000 of related deferred debt costs.
As a result of the foregoing, the Company incurred a loss before income
taxes and extraordinary gain on the early retirement of debt of $1,900,000, or
$0.67 per basic and diluted share for the quarter ended October 1, 2000 compared
to a loss of $772,000, or $0.27 per basic and diluted share for the quarter
ended October 2, 1999. After giving effect to the extraordinary gain, the net
loss was $1,582,000, or $0.56 per basic and diluted share for the quarter ended
October 1, 2000, compared with a loss of $436,000, or $0.15 per share for the
same quarter last year.
For the nine-months ended October 1, 2000, the Company incurred a loss
before extraordinary gain on the early retirement of debt of $5,528,000, or
$1.95 per basic and diluted share compared to a loss before extraordinary gain
of $5,078,000, or $1.78 per basic and diluted share for the same period last
year. After giving effect to the extraordinary gain, the net loss for the nine-
month period was $3,677,000, or $1.30 per basic and diluted share compared to a
net loss of $4,742,000, or $1.66 per share for the same nine-month period last
year.
Liquidity and Capital Resources
-------------------------------
The Company's primary sources of liquidity and capital resources were cash
and investments, cash flows from operations and funds available under the
Company's Credit Facility. The Company has a credit facility with Tokai Bank of
California which provides for borrowings of up to $10.0 million. The credit
facility which has a current maturity date of November 1, 2001 requires
quarterly interest payments at the Bank's prime rate (9.5% per annum at October
1, 2000) or LIBOR plus 1.90% (8.6% per annum at October 1, 2000). The new credit
facility requires the Company to maintain certain financial covenants throughout
the term of the facility. As of October 1, 2000, the Company had approximately
$3.9 million of funds available under the credit facility.
11
<PAGE>
At October 1, 2000, the Company had cash and cash equivalents and
marketable securities of $9.3 million and working capital of $9.1 million. Net
cash provided by operating activities was $2.6 million; net cash used in
investing activities was $4.0 million; and net cash provided by financing
activities was $0.9 million for the nine-month period ended October 1, 2000. The
Company's stockholders' equity as of October 1, 2000 was $653,000, which amount
is below the American Stock Exchange's minimum stockholders' equity requirement
of $4.0 million.
The Company believes that its cash and investments on hand, cash flow from
operations and availability under its Credit Facility, will be sufficient to
meet its anticipated operating and capital requirements as well as distributions
related to the Trust Preferred Securities, for at least the next twelve months.
Through October 1, 2000, the Company had repurchased 579,600 shares of
Trust Preferred Securities at an average price of $16.10. On October 24, 2000,
the Company announced that the Board of Directors increased the authorized
maximum number of Trust Preferred Securities authorized to be repurchased in the
open market as a part of the Company's repurchase plan from 750,000 shares to
1,000,000 shares. (See Subsequent Events)
ITEM 3 - QUANTITATIVE AND QUALITIVE DISCLOSURE ABOUT MARKET RISK
The Company's primary market risk exposures are interest rate risk and
equity price risk. At October 1, 2000, the Company held a portfolio of
marketable securities with an estimated fair value equal to $7,466,000. Of that
amount, the estimated fair value of the Company's total debt investments
available for sale was $4,422,000, which included no convertible debt
securities, and the estimated fair value of the Company's total equity
securities available for sale was $3,044,000, including $2,011,000 in
convertible preferred securities. The Company's exposure to interest rate risk
relates primarily to the opportunity cost of fixed rate obligations. The
Company's exposure to equity price risk relates primarily to the risk that the
market price of a security may fluctuate or drop over time.
The Company's investment portfolio is managed by Kayne Anderson Investment
Management, a related party, primarily in fixed rate corporate bonds and
mortgage-backed securities.
The table below presents principal cash flows and related weighted average
interest rates by expected maturity dates for the Company's convertible
investments:
Cash Flow (in thousands)
------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
Security
--------
Convertible
Preferred Stock
Principal $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Interest/(1)/ 0 152 152 152 152 /(2)/ /(2)/
Weighted average
Interest rate 0% 9.5% 9.5% 9.5% 9.5%
</TABLE>
/(1)/ Dividends paid-in-kind have been included (based on their cash value) in
the calculations for the convertible preferred stock.
/(2)/ Beyond 2004, interest payments on convertible preferred stock generally
continue so long as the Company continues to hold the security.
12
<PAGE>
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 2, 2000.
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
-------------------
None
EXHIBITS
--------
27.1 Financial Data Schedule
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 6, 2000 By: /s/ Jerry A. Gordon
-------------------
Jerry A. Gordon
President and Chief Executive Officer
Date: November 6, 2000 By: /s/ W. David Walters
--------------------
W. David Walters
Senior Vice President and
Chief Financial Officer
13
