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 MARCH 31, 1999
OR
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 333-29357
PACKAGED ICE, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0316492
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8572 KATY FREEWAY, SUITE 101
HOUSTON, TEXAS 77024
(Address of principal executive offices)
(713) 464-9384
(Issuer's telephone number, including area code)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
The total number of shares of common stock, par value $0.01 per share,
outstanding as of May 10, 1999 was 18,201,539.
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999
(unaudited) and December 31, 1998 ............................. 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1999 and 1998 (unaudited) ........ 4
Condensed Consolidated Statement of Shareholders' Equity
as of March 31, 1999 (unaudited) ................................. 5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 1998 (unaudited) ......... 6
Notes to the Condensed Consolidated Financial Statements ......... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................................. 17
Item 2. Changes in Securities and Use of Proceeds ......................... 17
Item 4. Submission of Matters to Vote of Security Holders ................. 18
Item 6. Exhibits and Reports on Form 8-K .................................. 18
SIGNATURES ................................................................ 19
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PACKAGED ICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....................................... $ 5,080 $ 3,427
Short-term cash investments ..................................... -- --
Accounts receivable, net ........................................ 15,642 16,692
Inventories ..................................................... 9,527 7,695
Prepaid expenses ................................................ 2,209 1,688
--------- ---------
Total current assets ......................................... 32,458 29,502
PROPERTY, net ...................................................... 170,926 169,208
GOODWILL AND OTHER INTANGIBLES, net ................................ 238,804 240,750
OTHER ASSETS ....................................................... 299 797
--------- ---------
TOTAL .............................................................. $ 442,487 $ 440,257
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term obligations ........................ $ 233 $ 231
Accounts payable ................................................ 7,070 5,714
Payable to affiliates ........................................... 601 615
Accrued expenses ................................................ 13,450 22,506
Note payable .................................................... -- --
--------- ---------
Total current liabilities .................................... 21,354 29,066
LONG TERM OBLIGATIONS .............................................. 322,080 338,150
COMMITMENTS AND CONTINGENCIES ...................................... -- --
MANDATORILY REDEEMABLE PREFERRED STOCK:
10% Exchangeable - 272,890 shares issued and outstanding at
March 31, 1999 and December 31, 1998, liquidation preference
of $100 per share .............................................. 28,418 27,745
13% Exchangeable - 423,525 shares issued and outstanding at
December 31, 1998, liquidation preference of $100 per share- . -- 38,801
PREFERRED STOCK WITH PUT REDEMPTION OPTION:
Series A Convertible - 450,000 shares issued and outstanding at
December 31, 1998 ............................................. -- 2,497
Series B Convertible - 124,831 shares issued and outstanding at
December 31, 1998 ............................................. -- 726
COMMON STOCK WITH PUT REDEMPTION OPTION:
420,000 shares issued and outstanding at December 31, 1998 ...... -- 1,972
SHAREHOLDERS' EQUITY:
Preferred stock, Series C, $0.01 par value, 100 shares authorized
and outstanding ............................................... -- --
Common stock, $0.01 par value, 50,000,000 shares authorized;
18,257,390 shares issued at March 31, 1999, and 4,925,541
shares issued at December 31, 1998 ............................ 183 49
Additional paid-in capital ...................................... 119,829 37,250
Less: 298,231 shares of treasury stock, at cost ................ (1,491) (1,491)
Accumulated deficit ............................................. (47,886) (34,508)
--------- ---------
Total shareholders' equity ................................... 70,635 1,300
--------- ---------
TOTAL .............................................................. $ 442,487 $ 440,257
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 1998
-------- --------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Revenues .................................................. $ 31,421 $ 8,401
Cost of sales ............................................. 22,096 6,394
-------- --------
Gross profit .............................................. 9,325 2,007
Operating expenses ........................................ 8,269 3,854
Depreciation and amortization expense ..................... 6,815 2,071
-------- --------
Loss from operations ...................................... (5,759) (3,918)
Other income (expense), net ............................... (2) 1
Interest expense .......................................... (7,617) (2,874)
-------- --------
Loss before income taxes .................................. (13,378) (6,791)
Income taxes .............................................. -- --
-------- --------
Loss before extraordinary item and preferred dividends .... (13,378) (6,791)
Extraordinary loss on refinancing ......................... -- (17,387)
-------- --------
Loss before preferred dividends ........................... (13,378) (24,178)
Preferred dividends ....................................... (908) (616)
-------- --------
Net loss attributable to common shareholders .............. $(14,286) $(24,794)
======== ========
Net loss per share of common stock:
Basic:
Net loss before extraordinary item
attributable to common shareholders .............. $ (1.03) $ (1.69)
Extraordinary item .................................. -- (3.95)
-------- --------
Net loss attributable to common shareholders ........ $ (1.03) $ (5.64)
======== ========
Diluted:
Net loss before extraordinary item
attributable to common shareholder ............... $ (1.03) $ (1.69)
Extraordinary item .................................. -- (3.95)
-------- --------
Net loss attributable to common shareholders ........ $ (1.03) $ (5.64)
======== ========
Weighted average common shares outstanding:
Basic .................................................. 13,810 4,395
======== ========
Diluted ................................................ 13,810 4,395
======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
NUMBER
OF PAR PAID-IN TREASURY ACCUMULATED
SHARES VALUE CAPITAL STOCK DEFICIT TOTAL
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 ........................... 4,926 $ 49 $ 37,250 $ (1,491) $ (34,508) $ 1,300
Issuance of common stock ............................... 10,750 108 91,267 -- -- 91,375
Conversion of preferred and
common stock with put
redemption option ................................ 994 10 5,185 -- -- 5,195
Conversion of warrants ................................. 1,105 11 (10) -- -- 1
Common stock issued for
redemption premium on 13%
exchangeable preferred stock ..................... 482 5 (5) -- -- --
Issuance cost of common stock .......................... -- -- (8,379) -- -- (8,379)
Dividends accumulated on
10% exchangeable
preferred stock .................................. -- -- (673) -- -- (673)
Dividends accumulated on 13%
exchangeable preferred stock ..................... -- -- (235) -- -- (235)
Net fair value of warrants issued
in connection with 13%
exchangeable preferred stock ..................... -- -- (4,571) -- -- (4,571)
Net loss ............................................... -- -- -- -- (13,378) (13,378)
--------- --------- --------- --------- --------- ---------
Balance at March 31, 1999 .............................. 18,257 $ 183 $ 119,829 $ (1,491) $ (47,886) $ 70,635
========= ========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1999 1998
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................... $(13,378) $ (24,178)
Adjustments to reconcile net loss to net cash used in
operating activities (excluding working capital from acquisitions):
Depreciation and amoritzation ............................... 6,815 2,071
Amortization of debt discount, net .......................... 10 83
Loss from disposal of assets ................................ 2 --
Extraordinary loss from refinancing ......................... -- 17,387
Change in assets and liabilities:
Accounts receivable, inventory and prepaid expenses ... (1,303) (895)
Accounts payable and accrued expenses ................. (7,714) (1,485)
-------- ---------
Net cash used in operating activities ............................. (15,568) (7,017)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions ................................................ (6,603) (4,026)
Cost of acquisitions .............................................. (130) (45,287)
Purchase of short term cash investments ........................... -- (369)
Decrease (increase) in other noncurrent assets .................... 445 (963)
Proceeds from disposition of property ............................. 196 --
-------- ---------
Net cash used in investing activities ............................. (6,092) (50,645)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common and preferred stock............... 82,996 37
Proceeds from conversion of warrants .............................. 1 --
Repurchase of common and preferred stock .......................... (43,606) --
Proceeds from debt issuance, net .................................. -- 138,393
Borrowings from lines of credit ................................... 23,435 10,000
Repayment of lines of credit ...................................... (39,500) (10,000)
Repayment of debt ................................................. (13) (75,000)
Cost of refinancing ............................................... -- (3,937)
-------- ---------
Net cash provided by financing activities ......................... 23,313 59,493
-------- ---------
NET INCREASE IN CASH AND EQUIVALENTS .................................... 1,653 1,831
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......................... 3,427 14,825
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................ $ 5,080 $ 16,656
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest ........................................ $ 14,010 $ 2,610
======== =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued in consideration for business acquisitions .... $ -- $ 10,535
======== =========
Accretion of warrants in connection with 13% exchangeable
preferred stock ............................................. $ 43 $ --
======== =========
Conversion of common and preferred stock with put redemption
options into common stock ................................... $ 5,195 $ --
======== =========
Conversion of warrants in exchange for common stock ............... $ 10 $ --
======== =========
Common stock issued for redemption premium on
13% exchangeable preferred stock ............................ $ 5 $ --
======== =========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
1. GENERAL
The condensed consolidated financial statements of Packaged Ice, Inc. and
its wholly owned subsidiaries (the "Company") included herein are unaudited,
except for the balance sheet as of December 31, 1998 that has been prepared from
the audited financial statements for that date. These financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission, and as applicable under such regulations,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. All significant intercompany balances and
transactions have been eliminated upon consolidation, and all adjustments which,
in the opinion of management, are necessary for a fair presentation of the
financial position, results of operations and cash flow for the periods covered
have been made and are of a normal and recurring nature. Accounting measurements
at interim dates inherently involve greater reliance on estimates than at year
end and are not necessarily indicative of results for the full year. The
financial statements included herein should be read in conjunction with the
consolidated financial statements and the related notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
Certain amounts from the prior year have been reclassified to conform to the
current presentation.
2. ACQUISITIONS
During the three months ended March 31, 1999, the Company acquired certain
traditional ice businesses and certain assets. The purchase prices of the
acquisitions totaled approximately $0.1 million in cash and were funded through
current operations.
The acquisitions have been accounted for using the purchase method of
accounting, and accordingly, the purchase prices have been preliminarily
allocated to the assets and liabilities acquired based on fair value at the date
of the acquisitions. The acquisitions included, at fair market value, property
plant and equipment of approximately $40,000. The excess of aggregate purchase
price over the fair market value of the net assets acquired was recognized as
goodwill and other intangibles and is being amortized over 40 years. Total
amortization expense of goodwill and other intangible assets resulting from the
Company's acquisitions was $1.5 million and $0.3 million for the three months
ended March 31, 1999 and 1998, respectively.
The operating results of the acquisitions have been included in the
Company's condensed consolidated financial statements from the date of their
respective purchases. The following unaudited pro forma information presents (i)
a summary of the consolidated results of operations for the three months ended
March 31, 1999 and 1998 as if the acquisitions during such periods had occurred
as of January 1, 1998 and (ii) a summary of the consolidated results of
operations for the three months ended March 31, 1998 as if the acquisitions
during such periods had occurred as of January 1, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
1999 and 1998 Acquisitions:
Revenues ............................................ $ 31,434 $ 11,313
Net loss attributable to common shareholders ........ (14,286) (24,961)
Basic earnings per share ............................ (1.03) (4.95)
Diluted earnings per share .......................... (1.03) (4.95)
</TABLE>
7
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (CONTINUED)
THREE MONTHS ENDED
MARCH 31, 1998
-----------------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
1998 Acquisitions:
Revenues....................................... $ 11,300
Net loss attributable to common shareholders... (24,961)
Basic earnings per share....................... (4.95)
Diluted earnings per share..................... (4.95)
3. INVENTORY
Inventories contain raw materials, supplies and finished goods. Raw
materials and supplies consist of ice packaging polyethylene bags, spare parts,
bottled water supplies and merchandiser parts. Finished goods consist of
packaged ice, bottled water and merchandisers awaiting sale. Inventories are
valued at the lower of cost or market basis. Cost is determined using the
first-in, first-out and average cost methods.
MARCH 31, DECEMBER 31,
1999 1998
------- -------
(IN THOUSANDS)
Raw materials and supplies....................... $ 7,173 $ 6,560
Finished goods................................... 2,354 1,135
------- -------
Total......................................... $ 9,527 $ 7,695
======= =======
4. EARNINGS PER SHARE
The computation of earnings per share is based on net loss, after
deducting the dividend requirement of preferred stock ($0.9 million in 1999 and
$0.6 million in 1998), divided by the weighted average number of shares
outstanding. Shares of common stock issuable under stock options have not been
included in the computation of earnings per share as their effect is
anti-dilutive. For the three months ended March 31, 1999 and 1998, all
potentially dilutive securities are anti-dilutive and, therefore, are not
included in the earnings per share calculation.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Basic and Diluted Earnings Per Share:
Weighted average common shares outstanding ......................... 13,810 4,395
======== ========
Basic and diluted loss before extraordinary item
available to common shareholders............................. $ (1.03) $ (1.69)
======== ========
Basic and diluted loss to common shareholders...................... $ (1.03) $ (5.64)
======== ========
Earnings for Basic and Diluted Computation:
Net loss before extraordinary item and preferred dividends......... $(13,378) $ (6,791)
Extraordinary item ................................................. -- (17,387)
Preferred share dividends .......................................... (908) (616)
-------- --------
Net loss to common shareholders.............................. $(14,286) $(24,794)
======== ========
</TABLE>
8
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (CONTINUED)
5. LONG TERM OBLIGATIONS
On April 30, 1998, the Company entered into an $80 million, five year
senior credit facility with Antares Capital Corporation (the "Credit Facility")
consisting of a revolving working capital facility of $15 million (the "Working
Capital Loan") and a revolving acquisition loan facility of $65 million (the
"Acquisition Loan"). On March 24, 1999, the Credit Facility was amended to
increase the availability under the Working Capital Loan to $25 million and
correspondingly to decrease the availability under the Acquisition Loan to $55
million.
The outstanding principal balance under the Credit Facility bears interest
per annum, at the Company's option, at LIBOR plus 2.75% per annum or at the
"prime" rate plus 1.0% with interest rates subject to a pricing grid.
Additionally, the Company pays a 0.5% commitment fee quarterly on the average
availability under the Credit Facility. Amounts outstanding under the Working
Capital Loan of the Credit Facility are due March 31, 2003. Amounts outstanding
under the Acquisition Loan of the Credit Facility will amortize in 12 equal
quarterly installments commencing June 30, 2000. The Credit Facility, as
amended, contains financial covenants which include limitations on capital
expenditures and the maintenance of minimum ratio levels of earnings before
interest, taxes and depreciation and amortization ("EBITDA") to fixed charges,
interest coverage and leverage, as defined in the credit agreement, and is
secured by substantially all of the Company's assets and the capital stock of
all of the Company's significant subsidiaries.
At March 31, 1999 and December 31, 1998, long term obligations consisted
of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
9 3/4% senior notes ................................... $ 270,000 $ 270,000
Less: Unamortized debt discount on 9 3/4% senior notes (233) (243)
Credit Facility ....................................... 51,435 67,500
Other ................................................. 1,111 1,124
--------- ---------
Total ................................................. 322,313 338,381
Less: Current maturities ............................. (233) (231)
--------- ---------
Long term obligations, net ...................... $ 322,080 $ 338,150
========= =========
</TABLE>
6. CAPITAL STOCK
The Company currently is authorized to issue up to 50,000,000 shares of
common stock, par value $0.01 per share, of which 17,959,159 shares were
outstanding at March 31, 1999 and up to 5,000,000 shares of preferred stock, par
value $0.01 per share, of which the board of directors has authorized the
designation of 500,100 shares. As of March 31, 1999, the two classes of
preferred stock were as follows: (i) 500,000 shares as 10% exchangeable
preferred stock, of which 272,890 shares are outstanding; and (ii) 100 shares as
Series C preferred stock, of which 100 shares are outstanding. In addition, as
of March 31, 1999, 393,700 shares and 1,000,000 shares of common stock have been
reserved for issuance upon the exercise of stock options under the 1994 and 1998
Stock Option Plans, respectively, and 2,979,423 shares have been reserved for
issuance upon the exercise of outstanding warrants.
On February 3, 1999, the Company completed an initial public offering of
10,750,000 shares of common stock, par value $0.01 per share. The net proceeds
from the sale were approximately $85 million before deducting estimated expenses
related to the offering of approximately $1.9 million. The use of proceeds was
approximately $43.6 million to repurchase the Company's 13% exchangeable
preferred stock, which included approximately $1.3 million of accrued but unpaid
dividends, and approximately $39.5 million to pay amounts outstanding under the
Credit Facility. The redemption premium on the 13% exchangeable preferred stock
of approximately $3.8 million
9
<PAGE>
PACKAGED ICE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (CONTINUED)
was paid with 481,887 shares of common stock at $7.91 per share.
In connection with this offering of common stock, the put redemption
feature on the 420,000 shares of common stock with put redemption option was
satisfied. In addition, the holders of the Series A and Series B preferred stock
with put redemption option exercised their respective conversion features to
obtain 450,000 and 124,831 shares of common stock, respectively.
7. SUBSIDIARY GUARANTORS
The Company's 9 3/4% senior notes are guaranteed, fully, jointly and
severally, and unconditionally, on a senior subordinated basis, by all of the
Company's current and future, direct and indirect, wholly owned subsidiaries
(the "Subsidiary Guarantors"). The following table sets forth the "summarized
financial information" of the Subsidiary Guarantors. Full financial statements
of the Subsidiary Guarantors are not presented because management believes they
are not material to the investors. There are currently no restrictions on the
ability of the subsidiary guarantors to transfer funds to the Company in the
form of cash dividends, loans or advances.
MARCH 31, DECEMBER 31,
1999 1998
----------- -----------
(IN THOUSANDS)
Balance Sheet Data:
Current assets ......................... $ 31,712 $ 29,373
Property and equipment ................. 170,926 169,208
Total assets ........................... 431,661 429,508
Current liabilities .................... 16,042 14,864
Long term debt ......................... 877 893
Total shareholders' equity ............. 245,716 257,722
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
----------- -----------
(IN THOUSANDS)
Operating Data:
Net revenues ........................... $ 31,421 $ 6,921
Gross profit ........................... 9,325 1,809
Net income ............................. (12,006) (4,625)
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims, lawsuits and proceedings
arising in the ordinary course of business. While there are uncertainties
inherent in the ultimate outcome of such matters and it is impossible to
presently determine the ultimate costs that may be incurred, management believes
the resolution of such uncertainties and the incurrence of such costs should not
have a material adverse effect on the Company's consolidated financial position
or results of operations.
9. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133, which is effective for all
fiscal quarters of fiscal years beginning after June 1, 1999, establishes
accounting and
10
<PAGE>
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. The Company is currently evaluating
what impact adoption of this statement will have on the Company's consolidated
financial statements.
10. SEGMENT INFORMATION
The Company has two reportable segments: (1) ice products and (2) non-ice
products and services. Ice products include the manufacture and distribution of
packaged ice products through traditional ice manufacturing and delivery and the
Ice Factory. Non-ice products and services include refrigerated warehouses,
bottled water and manufacture and leasing of ice production equipment. The
Company evaluates performance of each segment based on earnings before interest,
taxes, depreciation and amortization ("EBITDA") and does not allocate assets by
segments. Inter-segment sales are accounted for at current market prices.
For the Three Months Ended March 31, 1999:
ICE NON-ICE ELIMINATION TOTAL
-------- -------- ----------- --------
(IN THOUSANDS)
Revenues .................... $ 26,691 $ 5,237 $ (507) $ 31,421
Cost of sales ............... 19,457 3,038 (399) 22,096
-------- -------- -------- --------
Gross profit ................ 7,234 2,199 (108) 9,325
Operating expenses .......... 7,556 713 -- 8,269
Other income (expense) ...... (2) -- -- (2)
-------- -------- -------- --------
EBITDA ................ $ (324) $ 1,486 $ (108) $ 1,054
======== ======== ======== ========
For the Three Months Ended March 31, 1998:
ICE NON-ICE ELIMINATION TOTAL
------- ------- ---------------- -------
(IN THOUSANDS)
Revenues ................ $ 8,000 $ 401 $ -- $ 8,401
Cost of sales ........... 6,203 191 -- 6,394
------- ------- ---------------- -------
Gross profit ............ 1,797 210 -- 2,007
Operating expenses ...... 3,654 200 -- 3,854
Other income ............ 1 -- -- 1
------- ------- ---------------- -------
EBITDA ............ $(1,856) $ 10 $ -- $(1,846)
======= ======= ================ =======
11
<PAGE>
Reconciliation of EBITDA to loss before extraordinary item and preferred
dividends:
THREE MONTHS ENDED
MARCH 31,
-----------------------
1999 1998
-------- --------
(IN THOUSANDS)
EBITDA ........................................... $ 1,054 $ (1,846)
Depreciation and amortization .................... (6,815) (2,071)
Interest expense ................................. (7,617) (2,874)
Income taxes ..................................... -- --
Loss before extraordinary item and
preferred dividends .......................... $(13,378) $ (6,791)
======== ========
11. SUBSEQUENT EVENTS
From April 1, 1999 through May 10, 1999, the Company has acquired certain
traditional ice businesses and certain assets. The purchase prices of the
acquisitions totaled approximately $4.8 million in cash and $1.5 million in
Company's common stock (242,380 shares) valued between $5.875 and $6.125 per
share. The acquisitions will be accounted for using the purchase method of
accounting, and, accordingly, the purchase prices preliminarily will be
allocated to the assets and liabilities acquired based on fair market value at
the date of the acquisitions. The excess of the aggregate purchase price over
the fair market value of the net assets acquired will be recognized as goodwill
and will be amortized over 40 years.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the company's financial condition
and results of operations should be read in conjunction with the company's
consolidated financial statements and the notes thereto and other information
included elsewhere in this Form 10-Q and the company's Form 10-K, previously
filed with the Securities and Exchange Commission.
UNCERTAINTY OF FORWARD LOOKING STATEMENTS AND INFORMATION
Other than statements of historical facts, statements made in this Form
10-Q, statements made by us in periodic press releases or oral statements made
by our management to analysts and shareholders in the course of presentations
about our company, constitute "forward-looking statements". The words and
phrases "should be," "will be," "believe," "expect," "anticipate" and similar
expressions identify forward-looking statements. We believe the expectations
reflected in such forward-looking statements are accurate. However, we cannot
assure you that such expectations will occur. These forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
our company's actual results, performance or achievements to be materially
different from actual future results expressed or implied by the forward-looking
statements. You should not unduly rely on these forward-looking statements as
they speak only as of the date of this report. Except as required by law, we are
not obligated to publicly release any revisions to these forward looking
statements to reflect events or circumstances occurring after the date of this
report or to reflect the occurrence of unanticipated events.
GENERAL
Packaged Ice, Inc. is the largest manufacturer and distributor of packaged
ice in the United States and currently serves over 70,000 customer locations in
26 states and the District of Columbia. The company has grown significantly
since its incorporation in 1990, primarily through the implementation of a
consolidation strategy within the highly fragmented packaged ice industry,
principally in the southern half of the United States. These acquisitions have
enabled the company to enter new geographic regions, increase its presence in
established markets, gain additional production capacity, realize cost savings
from economies of scale and leverage the acquired companies' relationships with
grocery and convenience store customers.
The company predominantly operates in two business segments, ice products
and non-ice operations. Ice products accounted for approximately 93.4% of
revenues in 1998 and consists of the following two activities:
o The manufacture and delivery of traditional ice from a central
point of production to the point of sale; and
o The installation of Ice Factories, the company's proprietary machines
that produce, package, store and merchandise ice at the point of sale
through an automated, self-contained system.
The company's other business segment, non-ice, consists of refrigerated
warehousing, bottled water and the manufacturing and leasing of ice equipment.
The majority of non-ice operations was acquired through acquisitions completed
in 1998.
The company's cost of sales includes costs associated with plant
occupancy, raw materials, delivery, labor and utility related expenses. With the
Ice Factory, plant occupancy, delivery and utility costs are eliminated, but
costs associated with customer service representatives and machine technicians
are added to the cost of sales.
The company's operating expenses include costs associated with selling,
general and administrative functions. These costs include executive officers'
compensation, office and administrative salaries and costs associated with
leasing office space.
13
<PAGE>
At March 31, 1999, the company owned or operated 76 ice manufacturing
plants, four manufacturing facilities for other than ice production (such as
bottled water and manufacturing and leasing of ice equipment), 39 distribution
centers, nine refrigerated warehouses and had an installed base of 1,928 Ice
Factories.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998
REVENUES: Revenues increased $23.0 million, from $8.4 million for the
three months ended March 31, 1998 to $31.4 million for the three months ended
March 31, 1999. Revenues increased $17.5 million as a result of revenues
contributed by traditional ice companies, $1.2 million due to the placement of
Ice Factories and $4.3 due to non-ice operations. The increases in traditional
ice and non-ice operations primarily were due to acquisitions.
COST OF SALES: Cost of sales increased $15.7 million, from $6.4 million
for the three months ended March 31, 1998 to $22.1 million for the three months
ended March 31, 1999. This increase primarily resulted from acquisitions of
traditional ice companies. As a percentage of revenues, cost of sales declined
from 76.1% for the three months ended March 31, 1998 to 70.3% for the three
months ended March 31, 1999. This relative decrease primarily was due to
improvements in operating efficiencies that the company has experienced during
the integration of acquisitions and to warmer weather during the three months
ended March 31, 1999.
GROSS PROFIT: Gross profit increased $7.3 million, from $2.0 million for
the three months ended March 31, 1998 to $9.3 million for the three months ended
March 31, 1999. This increase primarily resulted from acquisitions of
traditional ice companies. As a percentage of revenues, gross profit increased
from 23.9% for the three months ended March 31, 1998 to 29.7% for the three
months ended March 31, 1999. The greater revenue volumes experienced for the
three months ended March 31, 1999 and lower cost of sales margins resulted in
increased gross profit during the period. Gross profit from ice operations
increased from 22.5% to 27.1%. Gross profit on non-ice operations was 42.0%
before intercompany elimination.
OPERATING EXPENSES: Operating expenses increased $4.4 million, from $3.9
million for the three months ended March 31, 1998 to $8.3 million for the three
months ended March 31, 1999. This increase primarily resulted from acquisitions
of traditional ice companies. As a percentage of revenues, operating expenses
decreased from 45.9% for the three months ended March 31, 1998 to 26.3% for the
three months ended March 31, 1999. This decrease was due to greater efficiencies
realized by the company as its current period general and administrative
expenses were spread over the larger base of revenues resulting primarily from
the company's acquisitions. Operating expenses from ice operations decreased
from 45.7% to 28.3%. Operating expenses on non-ice operations was 13.6% before
intercompany elimination.
DEPRECIATION AND AMORTIZATION EXPENSES: Depreciation and amoritzation
increased $4.7 million, from $2.1 million for the three months ended March 31,
1998 to $6.8 million for the three months ended March 31, 1999. This increase
was primarily due to property additions as a result of acquisitions of
traditional ice companies. As a percentage of revenues, depreciation and
amortization decreased from 24.7% for the three months ended March 31, 1998 to
21.7% for the three months ended March 31, 1999. This decrease was primarily due
to the lower historical depreciation and amortization percentages of traditional
ice and non-ice businesses the company has acquired, as compared to Ice
Factories. These percentages also reflect the longer estimated useful lives of
traditional ice and non-ice plants and equipment, as compared to Ice Factories.
INTEREST EXPENSE: Interest expense increased $4.7 million, from $2.9
million for the three months ended March 31, 1998 to $7.6 million for the three
months ended March 31, 1999. As a percentage of revenues, interest expense
decreased from 34.2% for the three months ended March 31, 1998 to 24.2% for the
three months ended March 31, 1999. The dollar increase in interest expense was a
result of higher levels of debt associated with the
14
<PAGE>
company's borrowing of $270 million through the issuance of the 9 3/4% senior
notes and borrowings under the company's credit facility, the proceeds of which
were used to consummate 1998 acquisitions and for working capital. The decrease
in interest expense as a percentage of revenues reflects higher relative sales
during the three months ended March 31, 1999 resulting from warmer weather
during the period and the use of $39.5 million of proceeds of the company's
initial public offering to reduce debt during the first quarter of 1999.
EXTRAORDINARY LOSS ON REFINANCING: During the first quarter of 1998,
simultaneously with the issuance of the 9 3/4% senior notes and in conjunction
with the repurchase of $75 million of Series B notes and Series C notes, the
company recorded an extraordinary loss on refinancing of $17.4 million for such
debt extinguishment that related to the write-off of the debt discount,
associated redemption premiums and issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
The company generates cash primarily from the sale of packaged ice through
traditional delivery methods and through Ice Factories and, to a lesser extent,
through the non-ice operations. The company's primary uses of cash are (a) cost
of sales, (b) operating expenses, (c) debt service, (d) capital expenditures
related to replacing and modernizing the company's other capital equipment and
related to the manufacturing and installation of additional Ice Factories and
(e) acquisitions.
Capital expenditures for 1999 are estimated to total an aggregate of
approximately $29.1 million, $18.9 million of which will be to maintain and
expand traditional ice facilities and, based on current installation plans,
approximately $10.2 million will be for the purchase and installation of Ice
Factories. There can be no assurance that capital expenditures will not exceed
this estimate.
During the three months ended March 31, 1999, the company continued its
acquisition strategy, acquiring two traditional ice companies at a cost of
approximately $0.1 million. These acquisitions were funded through current
operations.
The company believes that it will have adequate working capital to meet
debt service requirements and to satisfy working capital and general corporate
needs. At March 31, 1999, the company had a working capital of approximately
$11.1 million and had approximately $5.1 million of cash and cash equivalents.
In addition, the company had $13.4 million available under the working capital
loan of the credit facility and $14.1 million available under the acquisition
loan of the credit facility.
At March 31, 1999, the company had approximately $322.1 million of long
term debt, net of current maturities, outstanding as follows:
o $270 million of 9 3/4% senior notes due 2005;
o $51.4 million outstanding under the company's credit facility; and
o $0.7 million of other debt, net of debt discount.
The company's credit facility provides for a $80 million line of credit
consisting of a $25 million revolving working capital loan and a $55 million
revolving acquisition loan. At March 31, 1999, the company had $10.5 million
outstanding under the working capital loan (excluding approximately $1.1 million
of availability supporting letters of credit) and $40.9 million outstanding
under the acquisition loan. The revolving credit facility bears interest per
annum, at the company's option, at LIBOR plus 2.75% or the "prime" rate plus
1.0% with interest rates subject to a pricing grid. The amounts under the
working capital loan will be due March 31, 2003. The amounts under the
acquisition loan will be due beginning June 30, 2000 in 12 equal quarterly
installments.
Covenants contained in the credit facility and the indenture governing the
9 3/4% senior notes require the company to meet certain financial tests, anD
other restrictions limit the company's ability to pay dividends, borrow
additional funds or to acquire or dispose of assets. The credit facility is
secured by all of the company's assets and
15
<PAGE>
the capital stock of all of the company's significant subsidiaries. The 9 3/4%
senior notes are generally unsecured obligations of the company and are senior
in right of payment to all existing and future subordinated debt (as defined in
the indenture) and PARI PASSU to all senior indebtedness of the company. The 9
3/4% senior notes are effectively subordinated to the credit facility.
On February 3, 1999, the company completed its initial public offering of
10,750,000 shares of common stock at $8.50 per share. The net proceeds of the
sale of approximately $85 million were applied as follows: (i) $43.6 million to
repurchase the company's 13% exchangeable preferred stock (including repurchase
premium) plus accrued and unpaid dividends, (ii) $39.5 million to pay amounts
outstanding under the working capital loan and the acquisition loan of the
credit facility and (iii) approximately $1.9 million of estimated expenses
related to the offering.
In connection with this offering of common stock, the put redemption
feature on the 420,000 shares of common stock with put redemption option was
satisfied. In addition, the holders of the Series A and Series B preferred stock
with put redemption option exercised their respective conversion features to
obtain 450,000 and 124,831 shares of common stock, respectively.
The company expects to continue acquiring traditional ice companies using
a combination of cash and common stock. There can be no assurance that
acquisitions based upon the company's criteria can be obtained or funds will be
available in sufficient amounts to finance such acquisitions. On April 14, 1999,
the company filed an "acquisition shelf" registration statement to register the
sale of up to 5,000,000 shares of common stock that can be used in connection
with future acquisitions.
Although the company has periodically reported negative cash flows from
operations on a historical basis, the company believes that its overall treasury
management of cash on hand and available borrowings under the credit facility
will be adequate to meet debt service requirements, fund ongoing capital
requirements and satisfy working capital and general corporate needs.
The company may need to raise additional funds through public or private
debt or equity financing to take advantage of opportunities that may become
available to the company, including acquisitions and more rapid expansion. The
availability of such capital will depend upon prevailing market conditions and
other factors over which the company has no control, as well as the company's
financial condition and results of operations. There can be no assurance that
sufficient funds will be available to finance intended acquisitions or capital
expenditures to sustain the company's recent rate of growth.
YEAR 2000
The company is exposed to the risk that the year 2000 issue could cause
system failures or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities. During 1998, the
company undertook a corporate-wide initiative designed to assess the impact of
the year 2000 issue on software and hardware utilized in the company's
operations, including information technology infrastructure ("IT") and embedded
manufacturing control technology ("Non-IT").
The company's initiative is to be conducted in three phases: assessment,
implementation and testing. During the assessment phase, the company completed a
comprehensive inventory of IT and Non-IT systems and equipment. Many of the
company's IT systems include hardware and packaged software purchased from large
vendors who have represented that these systems are already year 2000 compliant.
However, the company has determined that it will be necessary to modify portions
of its financial and accounting software. The company believes that its Non-IT
systems, which include the Ice Factory, are not at risk to the year 2000 issue.
16
<PAGE>
The company believes that with modifications to its existing software, the
year 2000 issue can be mitigated. The installation of software modifications has
been completed. However, if such modifications are not adequate or do not
operate properly, the year 2000 issue could have a material impact on the
company's operations. The company plans to complete the testing of the year 2000
modifications during the third quarter of 1999. The company has not established
a contingency plan but intends to formulate one to address unavoidable risks,
and it expects to have the contingency plan formulated by mid-1999.
The company does not currently rely on the IT systems of other companies;
however, failure of the company's suppliers or its customers to become year 2000
compliant might have a material impact on the company's operations. The company
intends to continue to pursue an acquisition strategy, and as a result, there
can be no assurance that the IT systems being used by an acquired company will
be compliant with the year 2000 issue or that any such conversion or failure to
convert an acquired system would not have an adverse effect on the company.
The company's efforts with respect to the year 2000 issue have been
handled internally by management and other company employees. Costs of
developing and carrying out this initiative are being funded from the company's
operations and have not represented a material expense to the company. The
company has not completed its assessment but currently believes that the costs
of addressing the year 2000 issue should not be significant and should not have
a material adverse impact on the company's financial condition.
GENERAL ECONOMIC TRENDS AND SEASONALITY
The company's results of operations are generally affected by the economic
trends in its market area but results to date have not been impacted by
inflation. If an extended period of high inflation is encountered, the company
believes that it will be able to pass on its higher costs to its customers.
The ice business is highly seasonal. The company experiences seasonal
fluctuations in its net sales and profitability with a disproportionate amount
of the company's net sales and a majority of its net income typically realized
in its second and third calendar quarters. The company believes that over 60% of
its revenues will occur during the second and third calendar quarters when the
weather conditions are generally warmer and demand is greater, while less than
40% of its revenues will occur during the first and fourth calendar quarters
when the weather is generally cooler. As a result of seasonal revenue declines
and the lack of proportional corresponding expense decreases, the company will
most likely experience lower profit margins and possibly experience losses
during the first and fourth calendar quarters. In addition, because the
company's operating results depend significantly on sales during its peak
season, the company's quarterly results of operations may fluctuate
significantly as a result of adverse weather during this period if the weather
is unusually cool or rainy.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company is from time to time party to legal proceedings that arise in
the ordinary course of business. Management does not believe that the resolution
of any threatened or pending legal proceedings will have a material adverse
affect on the company's financial position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 29, 1999, the company issued in an initial public offering
10,750,000 shares of common stock at $8.50 per share. The net proceeds of the
sale of approximately $85 million were applied as follows: (i) $43.6 million to
repurchase the company's 13% exchangeable preferred stock (including repurchase
premium) plus
17
<PAGE>
accrued and unpaid dividends, (ii) $39.5 million to pay amounts outstanding
under the working capital loan and the acquisition loan of the revolving credit
facility and (iii) approximately $1.9 million of estimated expenses related to
the offering.
On January 29, 1999 in connection with the company's initial offering of
common stock, the put redemption feature on the 420,000 shares of common stock
with put redemption option was satisfied. In addition, the holders of the Series
A and Series B preferred stock with put redemption option exercised their
respective conversion features to obtain 450,000 and 124,831 shares of common
stock, respectively.
On February 3, 1999 in connection with the company's initial public
offering of common stock, the company issued to Ares Leveraged Investment Fund,
L.P. and Silver Brands Partners, L.P. 791,865 and 182,738 shares of common
stock, respectively, in a cashless transaction upon exercise of warrants.
Additionally, on February 3, 1999, the company issued to Ares Leveraged
Investment Fund, L.P. and Silver Brands Partners, L.P. 391,533 and 90,354 shares
of common stock, respectively, as a prepayment premium upon repurchase of the
13% exchangeable preferred stock.
On March 5, 1999, the company issued to the former holders of the
company's 12% notes 130,528 shares of common stock upon exercise of detachable
warrants.
On May 1, 1999, the company elected to pay in kind dividends on the 10%
exchangeable preferred stock, which totaled 13,532 shares of 10% exchangeable
preferred stock and 104,095 warrants to purchase company common stock at $13 per
share.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
The following is a list of exhibits filed as part of this Form 10-Q. Where
so indicated by footnote, exhibits, which were previously filed, are
incorporated by reference.
EXHIBIT NO. DESCRIPTION
- ---------- --------------------------------------------------------------------
3.1 Restated Articles of Incorporation of Packaged Ice filed with the
Secretary of State of the State of Texas on February 5, 1992.
(Exhibit 3.2)(1)
3.2 Articles of Amendment to the Restated Articles of Incorporation of
Packaged Ice filed with the Secretary of State of the State of Texas
on August 11, 1998. (Exhibit 3.2) (6)
3.3 Amended and Restated Bylaws of Packaged Ice, effective as of
January 20, 1997. (Exhibit 3.5)(1)
4.1 Certificate of Designation of Series C Preferred Stock. (Exhibit
4.1)(4)
4.2 Amended and Restated Certificate of Designation of 10%
Exchangeable Preferred Stock. (Exhibit 4.12)(5)
4.3 Indenture by and among Packaged Ice, as Issuer, the Subsidiary
Guarantors and U.S. Trust Company of Texas, N.A. as Trustee dated as
of January 28, 1998, Amended and Restated as of April 30, 1998.
(Exhibit 4.1)(5)
4.4 Registration Rights Agreement dated April 30, 1998 by and among
Packaged Ice, Ares and Silver Brands Partners, L.P. (formerly SV
Capital Partners, L.P.). (Exhibit 4.8)(5)
4.5 Common Stock Purchase Warrant, dated July 17, 1997, executed by
Packaged Ice for the benefit of Silver Brands Partners. (Exhibit
10.39)(2)
4.6 Registration Rights Agreement by and between Packaged Ice and
Ares, dated February 3, 1999. (7)
18
<PAGE>
4.7 Registration Rights Agreement by and between Packaged Ice and
Silver Brands Partners, L.P., dated February 3, 1999. (7)
4.8 Registration Rights Agreement by and among Packaged Ice, and Dale
Johnson, Alan Bernstein and Robert Miller, dated as of April 17,
1997. (Exhibit 10.9)(1)
4.9 Warrant Agreement among Packaged Ice and U.S. Trust Company of Texas,
N.A., a national banking association, as Warrant Agent, dated as of
April 17, 1997. (Exhibit 10.12)(1)
4.10 Registration Rights Agreement, dated as of July 17, 1997, by and
between Packaged Ice and Silver Brands Partners. (Exhibit 10.41)(2)
4.11 Warrant Agreement among Packaged Ice and U.S. Trust Company of Texas,
N.A., a national banking association, as Warrant Agent, dated as of
October 16, 1997. (Exhibit 10.7)(3)
4.12 Common Stock Purchase Warrant Agreement issued by Packaged Ice and
issued to Culligan Water Technologies, Inc. issuing 1,807,692 fully
paid and nonassessable shares of Packaged Ice's common stock at an
exercise price of $13.00 per share dated December 2, 1997.
(Exhibit 10.3)(4)
4.13 Registration Rights Agreement by and among Packaged Ice, Culligan
Water Technologies, Inc. and Erica Jesselson. (Exhibit 10.5)(4)
4.14 Registration Rights Agreement by and among Packaged Ice, A. J.
Lewis III and Liza B. Lewis, dated as of April 17, 1997. (Exhibit
10.5)(1)
11.1+ Computation of Earnings Per Share.
27.1+ Financial Data Schedule.
+ Filed herewith.
(1) Filed as an Exhibit to Packaged Ice's Registration Statement on Form
S-4 (File No. 333-29357), filed with the Commission on June 16,
1997.
(2) Filed as an Exhibit to the Amendment No. 1 to Packaged Ice's
Registration Statement on Form S-4 (No. 333-29357), filed with
the Commission on July 29, 1997.
(3) Filed as an Exhibit to Packaged Ice's Third Quarter Disclosure on
Form 10-Q with the Commission on November 14, 1997.
(4) Filed as an Exhibit to Form 8-K filed on behalf of Packaged Ice with
the Commission on December 15, 1997.
(5) Filed as an Exhibit to Form 8-K/A filed on behalf of Packaged Ice
with the Commission on May 12, 1998.
(6) Filed as an Exhibit to Amendment No. 1 to Packaged Ice's
Registration Statement on Form S-1 (File No. 333-60627), filed
with the Commission on October 2, 1998.
(7) Filed as an Exhibit to Form 10-K, filed with the Commission on March
30, 1999.
(B) REPORTS ON FORM 8-K: None
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, thereto duly authorized.
PACKAGED ICE, INC.
Date: May 17, 1999 By: /s/ JAMES F. STUART
-------------------
James F. Stuart
Chief Executive Officer
Date: May 17, 1999 By: /s/ JAMES C. HAZLEWOOD
----------------------
James C. Hazlewood
Chief Financial and Accounting Officer
19
EXHIBIT 11.1
PACKAGED ICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Loss before extraordinary item and preferred dividends ........................... $(13,378) $ (6,791)
Less: Extraordinary item ........................................................ -- (17,387)
Less: Dividends on 10% exchangeable and 13% exchangeable preferred stock ........ (908) (616)
-------- --------
Net loss attributable to common shareholders ..................................... $(14,286) $(24,794)
======== ========
Weighted average common shares outstanding ....................................... 13,810 4,395
Incremental shares attributable to outstanding stock options and warrants ........ 764 1,290
-------- --------
As adjusted for diluted earnings per share calculation ........................... 14,574 5,685
======== ========
Net loss per common share:
Basic:
Loss before extraordinary item attributable to common shareholders ... $ (1.03) $ (1.69)
Extraordinary item ................................................... -- (3.95)
-------- --------
Net loss attributable to common shareholders ......................... $ (1.03) $ (5.64)
======== ========
Diluted:(1)
Loss before extraordinary item attributable to common shareholder .... $ (0.98) $ (1.30)
Extraordinary item ................................................... -- (3.06)
-------- --------
Net loss attributable to common shareholders ......................... $ (0.98) $ (4.36)
======== ========
</TABLE>
- ------------
(1) This calculation is submitted in accordance with the Regulation S-K;
although it is contrary to paragraphs 13 and 27 of the Finanial Accounting
Standards Board's Statement of Financial Standard No. 128 because it
produces an antidilutive result.
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information derived from company's
financial statements and the notes thereto included in the company's Form 10-Q
for the quarterly period ended March 31, 1999, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,080
<SECURITIES> 0
<RECEIVABLES> 15,851
<ALLOWANCES> 209
<INVENTORY> 9,527
<CURRENT-ASSETS> 32,458
<PP&E> 195,356
<DEPRECIATION> 24,430
<TOTAL-ASSETS> 442,487
<CURRENT-LIABILITIES> 21,354
<BONDS> 322,080
28,418
0
<COMMON> 183
<OTHER-SE> 70,452
<TOTAL-LIABILITY-AND-EQUITY> 442,487
<SALES> 31,421
<TOTAL-REVENUES> 31,421
<CGS> 22,096
<TOTAL-COSTS> 37,180
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,617
<INCOME-PRETAX> (13,378)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,378)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,378)
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)
</TABLE>
