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: September 26, 2004

[ ]   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)



1385 Park Center Drive, Vista, California                     92081
-------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)



       (760) 560-1111 (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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES [ ] NO [x]

     Indicate the number of shares outstanding of each of issuer's class of
common stock as of the latest practicable date: 2,158,281 shares of common
stock, $.01 par value, outstanding at October 15, 2004.

                                       1
<PAGE>



                         PART 1 - FINANCIAL INFORMATION
                          ITEM 1 - FINANCIAL STATEMENTS
                          GLACIER WATER SERVICES, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)


<TABLE>
<CAPTION>

                                                                                         September 26,      December 28,
                                                                                              2004             2003 *
                                                                                        ---------------    -------------
                                        ASSETS                                            (unaudited)
                                        ------
Current assets:
<S>                                                                                     <C>                <C>
   Cash and cash equivalents                                                            $         3,589    $       1,924
   Accounts receivable, net of allowance for doubtful accounts of $163 and
      $151 as of September 26, 2004 and December 28, 2003, respectively ..........                2,589            2,118
   Repair parts ..................................................................                2,403            1,718
   Prepaid expenses and other ....................................................                  674            1,058
                                                                                        ---------------    -------------
      Total current assets .......................................................                9,255            6,818

Property and equipment, net ......................................................               48,179           45,455
Goodwill .........................................................................                6,869            6,966
Intangible assets, net ...........................................................                  532              714
Investment in Glacier Water Trust I ..............................................                2,629            2,629
Investment in Glacier Water Trust I Preferred Securities .........................                3,357            3,357
Other assets .....................................................................                5,429            5,777
                                                                                        ---------------    -------------
Total assets .....................................................................      $        76,250    $      71,716
                                                                                        ===============    =============
                        LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Accounts payable ..............................................................      $         2,340    $       1,143
   Accrued commissions ...........................................................                2,298            1,713
   Accrued liabilities ...........................................................                1,714            2,062
   Current portion of obligations under capital lease ............................                  257              244
   Current portion of long-term notes payable ....................................                  601              761
                                                                                        ---------------    -------------
      Total current liabilities ..................................................                7,210            5,923

Long-term debt ...................................................................               87,629           87,629
Long-term portion of obligations under capital lease .............................                  728              923
Long-term notes payable ..........................................................                5,380            2,000
                                                                                        ---------------    -------------
Total liabilities ................................................................              100,947           96,475

Stockholders' deficit:
  Common stock, $.01 par value; 10,000,000 shares authorized, 2,158,281 and
     2,118,841 shares issued and outstanding as of September 26, 2004 and
     December 28, 2003,
     respectively ................................................................                   38               37
   Additional paid-in capital ....................................................               18,917           18,460
   Retained deficit ..............................................................              (11,090)         (10,694)
  Treasury stock, at cost, 1,587,606 shares as of September 26, 2004 and
     December 28, 2003 ...........................................................              (32,562)         (32,562)
                                                                                        ----------------   --------------
      Total stockholders' deficit ................................................              (24,697)         (24,759)
                                                                                        ----------------   --------------
Total liabilities and stockholders' deficit ......................................      $        76,250    $      71,716
                                                                                        ===============    =============


*Amounts derived from audited information

</TABLE>



              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 share and per share data)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                    Three Months Ended                 Nine Months Ended
                                                              -----------------------------     ------------------------------
                                                              September 26,    September 28,    September 26,    September 28,
                                                                   2004             2003             2004             2003
                                                               -----------     ------------      -----------      -----------
<S>                                                            <C>              <C>              <C>              <C>
Revenues ...................................................   $    21,332      $    20,447      $    58,123      $    54,770
Operating costs and expenses:
     Operating expenses ....................................        13,080           12,223           36,913           33,869
     Depreciation and amortization .........................         2,733            3,004            7,834            8,882
                                                               -----------      -----------      -----------      -----------
          Cost of goods sold ...............................        15,813           15,227           44,747           42,751

     Selling, general and administrative expenses ..........         2,624            2,191            8,028            7,263
                                                               -----------      -----------      -----------      -----------
          Total operating costs and expenses ...............        18,437           17,418           52,775           50,014
                                                               -----------      -----------      -----------      -----------
Income from operations .....................................         2,895            3,029            5,348            4,756

Other expenses:
     Interest expense ......................................         1,909            1,855            5,744            5,093
     Investment (income) expense ...........................            --              (18)              --               34
                                                               -----------      ------------     -----------      -----------
           Total other expense .............................         1,909            1,837            5,744            5,127
                                                               -----------      -----------      -----------      -----------
Income (loss) before income taxes ..........................           986            1,192             (396)            (371)
Income tax benefit .........................................            --               --               --               --
                                                               -----------      -----------      -----------      -----------
Net income (loss) ..........................................           986            1,192             (396)            (371)
Preferred stock dividends ..................................           --                32              --                96
                                                               ----------       -----------      ----------       -----------
Net income (loss) applicable to common stockholders ........   $       986      $     1,160      $      (396)     $      (467)
                                                               ===========      ===========      ============     ============
Basic income (loss) per common share:
     Net income (loss) applicable to common stockholders ...   $      0.46      $      0.61      $     (0.19)     $     (0.21)
                                                               ===========      ===========      ===========      ===========
           Weighted average shares used in calculation .....     2,145,848        1,913,550        2,128,374        2,270,228

Diluted income (loss) per common share:
     Net income (loss) applicable to common stockholders ...   $      0.38      $      0.51      $     (0.19)     $     (0.21)
                                                               ===========      ===========      ===========      ===========
           Weighted average shares used in calculation .....     2,581,257        2,267,351        2,128,374        2,270,228
</TABLE>


                          GLACIER WATER SERVICES, INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                    Three Months Ended                Nine Months Ended
                                                               ----------------------------      ---------------------------
                                                               September 26,    September 28,    September 26,    September 28,
                                                                    2004             2003             2004            2003
                                                               ------------    ------------      -----------      -----------
<S>                                                            <C>              <C>              <C>              <C>
Net income (loss) ..........................................   $       986      $     1,192      $      (396)     $      (371)
                                                               -----------      -----------      -----------      -----------
Unrealized gain on securities:
  Unrealized holding gain arising during the period ........            --               --               --              142
  Less:  reclassification adjustment for net realized losses
        included in net loss ...............................            --               --               --               94
                                                               -----------      -----------      -----------      -----------
Net unrealized gain ........................................            --               --               --               48
                                                               -----------      -----------      -----------      -----------
Comprehensive income (loss) ................................   $       986      $     1,192      $      (396)     $      (323)
                                                               ===========       ==========      ===========      ===========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       3

<PAGE>




                          GLACIER WATER SERVICES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
                                                                                       ----------------------------------
                                                                                       September 26,        September 28,
                                                                                            2004                 2003
                                                                                          --------             -------
Cash flow from operating activities:
<S>                                                                                       <C>                  <C>
   Net loss ....................................................................          $   (396)            $   (371)
   Adjustments to reconcile net loss to net cash provided by
     operating activities:
       Depreciation and amortization ...........................................             7,834                8,882
       Loss on disposal of assets ..............................................               261                   22
       Net realized loss on sales of investments ...............................              --                     94
   Change in operating assets and liabilities:
       Accounts receivable .....................................................              (471)                 (75)
       Repair parts ............................................................              (685)                 (30)
       Prepaid expenses and other ..............................................               384                 (203)
       Other assets ............................................................              (171)                (217)
       Accounts payable, accrued commissions and accrued liabilities ...........             1,434                  479
                                                                                          --------             --------
                    Net cash provided by operating activities ..................             8,190                8,581
                                                                                          --------             --------
Cash flows from investing activities:
   Investment in vending equipment .............................................           (10,021)              (3,881)
   Proceeds from maturities of investments .....................................              --                     17
                                                                                          --------             --------
                    Net cash used in investing activities ......................           (10,021)              (3,864)
                                                                                          --------             --------
Cash flows from financing activities:
   Dividends paid ..............................................................              --                    (96)
   Principal payments on line of credit and long-term notes payable ............            (1,998)              (5,120)
   Proceeds from line of credit and long-term notes payable ....................             5,218                 --
   Payments under capital lease obligations ....................................              (182)                --
   Proceeds from issuance of stock from exercise of stock options ..............               458                  453
                                                                                          --------             --------
                     Net cash provided by (used in) financing activities .......             3,496               (4,763)
                                                                                          --------             --------
Net increase (decrease) in cash and cash equivalent ............................             1,665                  (46)
Cash and cash equivalents, beginning of period .................................             1,924                7,308
                                                                                          --------             --------
Cash and cash equivalents, end of period .......................................          $  3,589             $  7,262
                                                                                          ========             ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       4
<PAGE>



                          GLACIER WATER SERVICES, INC.
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                          -----------------
                                                                                   September 26,      September 28,
                                                                                       2004               2003
                                                                                     -------            --------
     Supplemental disclosure of cash flow information:
<S>                                                                                  <C>                <C>
Cash paid for interest ..................................................            $ 5,651            $  5,018
                                                                                     =======            ========
  Non-cash financing activities:

  Repurchase of treasury stock through the exchange of
   Trust Preferred Securities previously purchased by the Company .......            $  --              $(17,710)
                                                                                     =======            ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       5

<PAGE>



                          GLACIER WATER SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 26, 2004
                                   (unaudited)

1. BASIS OF PRESENTATION

     Glacier  Water  Services,   Inc.,  a  Delaware  corporation  ("Glacier"  or
"Company"),  is  primarily  engaged in the  operation  of  self-service  vending
machines  that  dispense  drinking  water to  consumers.  In the  opinion of the
Company's management, the accompanying consolidated financial statements reflect
all adjustments necessary for a fair presentation of the consolidated  financial
position of the Company and its  subsidiaries  and the  consolidated  results of
their  operations  and their cash flows for the  three- and  nine-month  periods
ended September 26, 2004 and September 28, 2003.  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 United States 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
September 26, 2004 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 28, 2003.

2. STOCK OPTION PLANS

     In  December  2002,  the FASB  issued  Statement  of  Financial  Accounting
Standards (SFAS) No. 148,  Accounting for Stock-Based  Compensation - Transition
and  Disclosure.  SFAS No. 148 amends SFAS No. 123,  Accounting for  Stock-Based
Compensation,  to provide  alternative  methods of  transition  for a  voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  In addition,  SFAS No. 148 amends the disclosure  requirements of
SFAS No.  123 to  require  prominent  disclosures  in both  annual  and  interim
financial  statements  about the method of accounting for  stock-based  employee
compensation and the effect of the method used on reported results.

     The  Company  has  options  outstanding  under the 1994 Stock  Compensation
Program.   The  Company  accounts  for  this  plan  under  the  recognition  and
measurement  principles  of APB Opinion No. 25,  Accounting  for Stock Issued to
Employees,  under  which no  compensation  cost has been  recognized,  since the
exercise  prices of the options  granted were not less than the market prices of
the stock on the date of grant.

     The following unaudited pro forma disclosures  represent what the Company's
net income  (loss) and income  (loss) per common  share  would have been had the
Company  recorded  compensation  cost  for  this  plan in  accordance  with  the
provisions of SFAS No. 123:



                                       6

<PAGE>



                          GLACIER WATER SERVICES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                               September 26, 2004
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        Three Months Ended                 Nine Months Ended
                                                                 ------------------------------     -----------------------------
                                                                  September 26,     September 28,     September 26,   September 28,
                                                                      2004             2003              2004              2003
                                                                 --------------    ------------     ------------     -------------
                                                                                (in thousands, except per share data )
<S>                                                              <C>               <C>              <C>              <C>
Net income (loss) applicable to common stockholders,
as reported ...................................................  $          986    $      1,160     $       (396)    $      (467)
                                                                 --------------    ------------     ------------     -----------
Deduct:  Total stock-based employee compensation
expense determined under the fair value method for
all awards ....................................................             (55)           (198)            (284)           (648)
                                                                 ---------------   -------------    ------------     -----------
Pro forma net income (loss) applicable to common stockholders    $          931    $        962     $       (680)    $    (1,115)
                                                                 ==============    ============     ============     ===========
Basic income (loss) per common share:
As reported ...................................................  $         0.46    $       0.61     $      (0.19)    $     (0.21)
                                                                 ==============    ============     ============     ===========
Pro forma .....................................................  $         0.43    $       0.50     $      (0.32)    $     (0.49)
                                                                 ==============    ============     ============     ===========
Diluted income (loss) per common share:
As reported ...................................................  $         0.38    $       0.51     $      (0.19)    $     (0.21)
                                                                 ==============    ============     ============     ===========
Pro forma .....................................................  $         0.36    $       0.42     $      (0.32)    $     (0.49)
                                                                 ==============    ============     ============     ===========
</TABLE>


         The fair value of the stock options was estimated at the date of grant
using the "Black-Scholes" method for option pricing and the following weighted
average assumptions were used for grants made during the three- and nine-month
periods ended September 28, 2003. The Company's Stock Option Program expired in
March 2004 and no options were issued during the three- and nine-month periods
ended September 26, 2004.


<TABLE>
<CAPTION>

                                                                      Three Months Ended       Nine Months Ended
                                                                      September 28, 2003      September 28, 2003
                                                                      ------------------      ------------------
<S>                                                                                 <C>                    <C>
Risk free interest rate                                                             0.93%                  1.04%
Dividend yield                                                                         0%                     0%
Expected volatility of the company's stock                                          28.8%                  25.1%
Weighted average expected life (in years)                                           10.0                    9.2
</TABLE>


3. EARNINGS PER SHARE

         Basic net earnings per common share is computed based on the weighted
average number of common shares outstanding during the period. Diluted net
earnings per common share is computed based on the weighted average number of
common shares outstanding during the period increased by the effect of dilutive
stock options and warrants, using the treasury stock method. The computations
for basic and diluted earnings per share are as follows:

                                       7

<PAGE>

<TABLE>
<CAPTION>
                                                                      Three Months Ended               Nine Months Ended
                                                               ------------------------------     ------------------------------
                                                               September 26,     September 28,    September 26,    September 28,
                                                                   2004              2003             2004             2003
                                                               --------------     ------------     ------------     ---------
                                                                          (in thousands except share and per share data)
<S>                                                            <C>                <C>              <C>              <C>
Numerator for basic earnings per share - net income (loss)
applicable to common shareholders ............................ $          986     $      1,160     $       (396)    $    (467)
                                                               --------------     ------------     ------------     ----------
Denominator - shares:
     Weighted average common shares for basic
       earnings per share ....................................      2,145,848        1,913,550        2,128,374     2,270,228
     Effect of dilutive securities ...........................        435,409          353,801              --             --
                                                               --------------     ------------     ------------     ---------
Dilutive potential shares for diluted earnings per share .....      2,581,257        2,267,351        2,128,374     2,270,228
                                                               ==============     ============     ============     =========
Income (loss) per share:
     Basic income (loss) applicable to
     common shareholders ..................................... $         0.46     $       0.61     $      (0.19)    $   (0.21)
                                                               ==============     ============     ============     =========
     Dilutive income (loss) applicable to
     common shareholders ..................................... $         0.38     $       0.51     $      (0.19)    $   (0.21)
                                                               ==============     ============     ============     =========
Potentially dilutive securities not included above since
they are antidilutive ........................................             --               --          406,832       612,673
                                                               ==============     ============     ============     =========
</TABLE>

4. ACQUISITIONS

     On October 7, 2003,  Glacier  acquired Water Island,  Inc. ("Water Island")
for a  purchase  price of  $6,068,000,  including  $702,000  which is payable in
installments over two years. The Company incurred transaction costs of $202,000,
of which none  remained  accrued at September  26, 2004.  This  acquisition  was
consummated  principally  to expand the Company's  water vending  operations and
customer base. The transaction was accounted for as a purchase, and accordingly,
the results of operations  have been included in the  consolidated  statement of
operations from the date of acquisition. The allocation of fair values of assets
and liabilities was based upon a third party  appraisal.  The excess of purchase
price over acquired net assets was $2,739,000 and is classified as goodwill.

     Intangible  assets of $333,000 and $100,000  were assigned to contracts and
non-compete  agreements,  respectively  (collectively,  "Water Island Intangible
Assets").  The Water Island  Intangible  Assets are subject to amortization  and
have an average useful life of  approximately 3 and 5 years. For the three month
period ended September 26, 2004, the Company  recorded  amortization  related to
the Water Island Intangible Assets of approximately $33,000.

     The following  unaudited pro forma information assumes that the acquisition
of Water Island  occurred on December 30, 2002.  The unaudited pro forma results
have been  prepared  for  comparative  purposes  only and do not  purport  to be
indicative of the results of operations  which would have actually  resulted had
the combination  been in effect as of December 30, 2002, or of future results of
operations.

     The table below  presents the actual  results for the three- and nine-month
periods  ended  September  26, 2004 and the  unaudited pro forma results for the
three- and nine-month periods ended September 28, 2003 respectively:


                                        8
<PAGE>


<TABLE>
<CAPTION>
                                                                            Three Months Ended            Nine Months Ended
                                                                   ------------------------------  -----------------------------
                                                                   September 26,     September 28, September 26,   September 28,
                                                                       2004              2003          2004            2003
                                                                   -------------     ------------  ------------     -----------
                                                                                        Proforma                      Proforma
                                                                          (in thousands, except share and per share data)
<S>                                                                <C>               <C>           <C>              <C>
Revenues ......................................................    $      21,332     $     23,454  $     58,123     $    62,795
                                                                   -------------     ------------  ------------     -----------
Net income (loss) .............................................    $         986     $      1,157  $       (396)    $      (448)
                                                                   -------------     ------------  -------------    -----------
Pro forma net loss applicable to common stockholders ..........    $         986     $      1,125  $       (396)    $      (544)
                                                                   =============     ============  =============    ===========
Basic income (loss) per common share:
     Net income (loss) applicable to common stockholders ......    $        0.46     $       0.59  $      (0.19)    $     (0.24)
                                                                   =============     ============  ============     ===========
     Weighted average shares used in per common
          share calculation ...................................        2,145,848        1,913,550     2,128,374       2,270,228
Diluted income (loss) per common share:
     Net income (loss) applicable to common stockholders ......    $        0.38     $       0.50         (0.19)          (0.24)
                                                                   =============     ============  ============     ==========
     Weighted average shares used in per common
          share calculation ...................................        2,581,257        2,267,351     2,128,374       2,270,228
</TABLE>


5. LONG-TERM DEBT AND LINE OF CREDIT

         Company Obligated Mandatorily Redeemable Preferred Securities

     On January 27, 1998,  Glacier Water Trust I (the "Trust"),  a newly created
Delaware  business  trust and a wholly-owned  subsidiary of the Company,  issued
105,154  common  securities  to the Company and  completed a public  offering of
3,400,000 of 9.0625% Cumulative Trust Preferred Securities, which are guaranteed
by the Company,  with a  liquidation  amount of $25.00 per security  (the "Trust
Preferred  Securities"  and  together  with the  common  securities  the  "Trust
Securities").  The Trust exists for the sole purpose of issuing Trust Securities
and purchasing  Subordinated  Debentures.  Concurrent  with the issuance of such
securities,  the Trust invested the proceeds therefrom in an aggregate principal
amount  of   $87,629,000  of  9.0625%  Junior   Subordinated   Debentures   (the
"Subordinated  Debentures") issued by the Company. As of September 26, 2004, the
Company owned 105,154  common  securities of the Trust with a carrying  value of
$2,629,000.

     The Trust is considered a variable  interest entity under FIN 46R. Prior to
FIN 46R, variable interest entities were generally consolidated by an enterprise
when the enterprise had a controlling  financial interest through ownership of a
majority  voting  interest  in the  entity.  Under FIN 46R, a variable  interest
entity should be consolidated by its primary beneficiary. Because the Company is
not the primary beneficiary of the Trust, the financial  statements of the Trust
are no longer included in the consolidated  financial statements of the Company.
FIN 46R may be adopted either by recording a cumulative  effect adjustment as of
the date of the adoption,  or restating prior period financial  statements.  The
Company opted to restate prior period financial  statements.  As a result of the
de-consolidation,  the Company has recorded its  ownership of 105,154  shares of
common  securities of the Trust and its  ownership of 134,295  shares of Glacier
Water Trust I Preferred  Securities  as  long-term  assets and has  recorded the
Junior Subordinated Debentures at a face value of $87,629,000.

                                       9
<PAGE>


     The  Subordinated  Debentures are unsecured  obligations of the Company and
are subordinate and junior in right of payment to certain other  indebtedness of
the Company. The Subordinated  Debentures have a carrying value of approximately
$87,629,000 and mature on January 31, 2028, but may be redeemed at the option of
the  Company at any time since  January  31,  2003.  Upon the  repayment  of the
Subordinated Debentures, the Trust Preferred Securities are subject to mandatory
redemption at the redemption price equal to the aggregate  liquidation amount of
the  Securities  plus any  accumulated  and unpaid  distributions.  The  Company
effectively  provides  a  full  and  unconditional   guarantee  of  the  Trust's
obligations under the Trust Securities. The Company may cause the Trust to defer
the payment of distributions  for a period not to exceed 60 consecutive  months.
Distributions  on the Trust Preferred  Securities are payable monthly in arrears
by the Trust.  During any such deferral  period,  distributions  will accrue and
compound quarterly,  and the Company may not declare or pay distributions on its
common or preferred  stock or debt  securities  that rank equal or junior to the
Subordinated Debentures. To date, the Company is current on all distributions.

     The Company's Board of Directors authorized the purchase of up to 1,250,000
of the Trust  Preferred  Securities.  As of December 29,  2002,  the Company had
repurchased  921,400 of the Trust  Preferred  Securities  at an average  cost of
$16.40 per share.  The Company did not repurchase any shares of Trust  Preferred
Securities  during  fiscal  years 2003 or 2004.  As of December  29,  2002,  the
Company had used $15,118,000 in cash to repurchase $23,035,000 face value of the
Trust  Preferred  Securities less $1,098,000 of deferred  financing  costs.  The
Company  may  continue to make such  purchases  from time to time in open market
transactions or block trades.  Pursuant to an Exchange Offer, which commenced on
February  26,  2003 and  expired  on April 11,  2003,  a total of  983,880  then
outstanding  shares of Common Stock were acquired by the Company in exchange for
a total of 787,105 Trust  Preferred  Securities  then held by the Company,  at a
ratio  of one  share of  Common  Stock  for  eight-tenths  of a Trust  Preferred
Security.  As of September 26, 2004,  the Company owned 134,295 Trust  Preferred
Securities, which have a carrying amount of $3,357,000.

Line of Credit and Notes Payable

     On October 7, 2003, the Company  restructured its credit facility with City
National Bank. The new $12,000,000 revolving credit facility has a maturity date
of  February 1, 2009.  The credit  availability  of this  facility is reduced by
$400,000  every three  months  beginning  February 7, 2004 until its maturity in
February 2009. The revolving credit facility initially required monthly interest
payments at the City National  Bank's prime rate plus 1.00%.  On March 26, 2004,
the City  National  Bank  revised  the  interest  rate of the  revolving  credit
facility to City  National  Bank's prime rate (4.75% per annum at September  26,
2004). The revolving credit facility requires a quarterly unused facility fee of
0.50% per annum.  The  credit  facility  contains  certain  customary  financial
covenants,  which restrict  indebtedness and capital  expenditures.  The Company
pledged  certain assets such as repair parts and equipment as collateral for its
obligations  under  the  credit  facility.  The  Company  was in  compliance  at
September 26, 2004 with all such covenants.  As of September 26, 2004, there was
$5,000,000  outstanding  on the  new  credit  facility,  which  is  included  in
long-term notes payable.  Availability  under the $12,000,000  revolving  credit
facility was $5,800,000 as of September 26, 2004.

     As of  September  26,  2004,  there was  $981,000  outstanding  under notes
payable associated with previous acquisitions.  In connection with the 2002 Pure
Fill  acquisition  the company  issued a note that was  payable  over 4 years in
equal  quarterly  payments.  As of September 26, 2004, the Pure Fill note had an
outstanding balance of $240,000.  The Water Island acquisition  occurred in 2003
and the Company issued a note that was payable  periodically  over two years. As
of September 26, 2004, the note had a balance of $741,000,  with $441,000 due by
October  2004 and the  remaining  $300,000  due on the  anniversary  date of the
acquisition  in October  2005.  Amounts due after  September  26, 2004 under the
Company's  credit  facility and notes  payable are  included in long-term  notes
payable.  Both the Pure Fill and the Water Island notes payable accrue  interest
at the prime rate published in the Wall Street Journal (4.75% and 4.0% per annum
at September 26, 2004 and September 28, 2003, respectively).


                                       10
<PAGE>


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS


     This report contains "forward-looking" information, as that term is defined
by the  federal  securities  laws,  about our  financial  condition,  results of
operations  and business.  You can find many of these  statements by looking for
words such as "may", "will", "expect", "anticipate",  "believe", "estimate", and
similar words used in this report. The forward-looking statements in this report
are intended to be subject to the safe harbor protection provided by the federal
securities laws.

     These forward-looking statements are subject to numerous assumptions, risks
and uncertainties (including trade relations and competition) that may cause our
actual results to be materially  different from any future results  expressed or
implied in those statements.

     Because  the  statements  are  subject to risks and  uncertainties,  actual
results  may  differ   materially   from  those  expressed  or  implied  by  the
forward-looking  statements.  We caution  readers not to place undue reliance on
these statements, which speak only as of the date of this report.

     The  cautionary   statements  set  forth  above  should  be  considered  in
connection with any subsequent written or oral  forward-looking  statements that
we or persons acting on our behalf may issue. We do not undertake any obligation
to review or confirm analysts'  expectations or estimates or to release publicly
any  revisions  to  any   forward-looking   statements  to  reflect   events  or
circumstances  after the date of this  report or to reflect  the  occurrence  of
unanticipated events.


Results of Operations

Overview

     Since its inception in 1983,  the Company has created an extensive  network
of water vending  machines located  throughout the United States.  The Company's
water vending  machines are placed at supermarkets and other retail locations in
order to take advantage of the regular customer traffic at such locations.

     Currently  operating  in 39  states,  the  Company  continually  looks  for
opportunities  to  expand  its  presence  in  existing  markets  as  well as new
high-potential  markets.  The  Company  also looks for ways to reduce  operating
costs in all areas. The Company explores  opportunities to implement  technology
to improve  efficiency of servicing the vending  machines to lower its operating
costs.  The Company  continues to monitor  selling,  general and  administrative
expenses and reduce costs where possible.

     The Company looks for  acquisition  opportunities  that will strengthen the
Company and improve its operating results.  On October 7, 2003, Glacier acquired
100% of the  outstanding  common stock of Water Island,  Inc., a privately  held
water vending company headquartered in Indianapolis,  Indiana. Immediately after
the acquisition,  Glacier  integrated  Water Island into the Glacier  operations
(see Note 4 of the financial statements).

     During  the  nine-month  period  ended  September  26,  2004,  the  Company
initiated a major initiative to upgrade its outside water vending machines.  The
upgrade  results  in the  next  generation  machine  ("G-2")  with a new  modern
appearance  and  increased   functionality   such  as  dollar  bill  validators,
multi-vend   capability,   a  replaceable   stainless  steel  vend  chamber  and
replaceable  Lexan  panels.  The  Company  plans  to  complete  the  upgrade  of
approximately  11,000  outside  machines  over the next 12 months.  The  Company
expects that it will expend a total of  approximately  $22,000,000 in connection
with this major upgrade initiative.  The initiative is such that the Company has
the ability to time these  expenditures  with the availability of its cash flows
from operations and availability under its credit facility.  As of September 26,
2004, the Company had upgraded approximately 3,300 machines.


                                       12
<PAGE>


Revenues

     Revenues for the quarter ended  September 26, 2004 increased  $885,000,  or
4.3%, to $21,332,000  from  $20,447,000 for the same period last year.  Revenues
for the  nine-month  period ended  September 26, 2004 increased  $3,353,000,  or
6.1%,  to  $58,123,000  from  $54,770,000  for the same period last year.  As of
September 26, 2004, the Company had approximately  15,200 machines in operation,
compared to 14,000  machines as of September 28, 2003.  The increase in revenues
for the three- and nine-month  periods was due primarily to additional  revenues
as a result of the Water  Island  acquisition  in the  fourth  quarter  of 2003,
offset  partially by the impact of the cooler than normal  summer in  California
and the negative impact of hurricanes Charley,  Frances, Ivan, and Jeanne, which
temporarily  shut down several hundred of the Company's  machines.  All machines
have since been put back into  service.  The Company is unable to calculate  the
exact impact the hurricanes had on current year revenues.

Costs and Expenses

     Operating  expenses,  excluding  depreciation  and  amortization,  for  the
quarter ended September 26, 2004 increased to $13,080,000, or 61.3% of revenues,
compared to  $12,223,000,  or 59.8% of revenues,  for the same period last year.
Operating expenses, excluding depreciation and amortization,  for the nine-month
period ended September 26, 2004 increased to $36,913,000,  or 63.5% of revenues,
compared to  $33,869,000,  or 61.8% of revenues,  for the same period last year.
The increase in operating  expenses for the three- and nine-month  periods ended
September  26,  2004 was due  primarily  to the  increased  costs to service the
additional  locations  acquired from Water Island during the fourth quarter last
year. The Company's  operating  costs are not  completely  linear or variable to
sales and as such,  significant  fluctuations in revenues  impacts the operating
costs as a percentage of revenues.

     Depreciation and amortization  expense was $2,733,000 for the quarter ended
September  26,  2004,  compared  to  $3,004,000  for the same  period last year.
Depreciation  and  amortization  expense includes the amortization of intangible
assets and prepaid  contract rights of  approximately  $271,000 and $524,000 for
the  three-month  period  ended  September  26,  2004 and  September  28,  2003,
respectively.  Depreciation  and  amortization  expense was  $7,834,000  for the
nine-month period ended September 26, 2004,  compared to $8,882,000 for the same
period  last  year.   Depreciation   and   amortization   expense  includes  the
amortization of intangible  assets and prepaid  contract rights of approximately
$810,000 and $1,710,000 for the nine-month  period ended  September 26, 2004 and
September 28, 2003, respectively.  The decrease in depreciation and amortization
expense  was  due  primarily  to  some  assets  becoming  fully  depreciated  or
amortized,  offset  partially by the addition of the Water Island assets,  which
were acquired in the fourth quarter of 2003, and new capital expenditures in the
current  year.  The Water  Island  assets  generated  approximately  $193,000 of
depreciation  and  amortization  expense for the quarter  and  $771,000  for the
nine-month period ended September 26, 2004. The Company currently has sufficient
machines in storage available for deployment in fiscal 2004.  Machines that have
been previously installed and are in storage awaiting redeployment are currently
being depreciated.

     SG&A  expenses  for the  quarter  ended  September  26, 2004  increased  to
$2,624,000, or 12.3% of revenues,  compared to $2,191,000, or 10.7% of revenues,
for the same period last year.  SG&A  expenses for the  nine-month  period ended
September 26, 2004  increased to $8,028,000,  or 13.8% of revenues,  compared to
$7,263,000, or 13.3% of revenues, for the same period last year. The increase in
SG&A expenses for both the three- and  nine-month  periods  ended  September 26,
2004 was the  result  of  additional  costs  associated  with the  Water  Island
operations offset by a $263,000 reduction in legal expenses primarily associated
with the settlement of certain claims against the Company last year.



                                       13
<PAGE>


     Interest expense for the quarter ended September 26, 2004 increased $54,000
to  $1,909,000,  compared  to  $1,855,000  for the same  period  last year.  The
increase in interest expense was primarily due to additional interest associated
with higher outstanding  borrowing on the credit facility compared to last year.
Interest  expense for the nine-month  period ended  September 26, 2004 increased
$651,000 to  $5,744,000,  compared to $5,093,000  for the same period last year.
The  increase  in  interest  expense was  attributed  to $500,000 of  additional
interest  associated  with  the  Exchange  Offer  (see  Note 5 of the  financial
statements)  and  $151,000  of  additional   interest   associated  with  higher
outstanding borrowing on the credit facility compared to last year.

     For the quarter  ended  September  26, 2004,  the Company had no investment
income,  compared to net investment  income totaling $18,000 for the same period
last year. For the nine-month  period ended  September 26, 2004, the Company had
no investment  income,  compared to net investment  expense totaling $34,000 for
the same period last year.

     As a result of the foregoing,  the Company had income  applicable to common
stockholders  of $986,000 for the  three-month  period ended  September 26, 2004
compared to $1,160,000 for the same period last year. For the nine-month  period
ended  September  26,  2004,  the  Company  had  a  loss  applicable  to  common
stockholders of $396,000 compared to a loss applicable to common stockholders of
$467,000 for the same period last year.

Liquidity and Capital Resources

     The Company's  primary sources of liquidity and capital  resources are cash
and cash  equivalents,  cash flows from operations and funds available under the
Company's  credit  facility.  On October 7, 2003, the Company  restructured  its
credit  facility with City National Bank. The new $12,000,000  revolving  credit
facility has a maturity  date of February 1, 2009.  The credit  availability  of
this facility is reduced by $400,000  every three months  beginning  February 7,
2004 until its maturity in February 2009. The revolving credit facility required
monthly interest  payments at the City National Bank's prime rate plus 1.00%. On
March  26,  2004,  the City  National  Bank  revised  the  interest  rate of the
revolving credit facility to City National Bank's prime rate (4.75% per annum at
September 26, 2004). The revolving  credit facility  requires a quarterly unused
facility fee of 0.50% per annum. The credit facility  contains certain customary
financial covenants,  which restrict indebtedness and capital expenditures.  The
Company  pledged  certain  assets,  such  as  repair  parts  and  equipment,  as
collateral for its  obligations  under the credit  facility.  The Company was in
compliance as of September 26, 2004 with all such covenants. As of September 26,
2004,  there was  $5,000,000  outstanding on the new credit  facility,  which is
included in long-term  notes payable.  Availability  under the revolving  credit
facility was $5,800,000 as of September 26, 2004.

     As of September  26,  2004,  the Company had cash and cash  equivalents  of
$3,589,000 and net working capital of $2,045,000. Net cash provided by operating
activities  was   $8,190,000;   net  cash  used  in  investing   activities  was
$10,021,000;  and net cash provided by financing  activities  was $3,495,000 for
the  nine-month  period ended  September 26, 2004.  The Company's  stockholders'
deficit as of September 26, 2004 was  $24,697,000,  which amount continues to be
below the American Stock Exchange's listing guidelines. Although no actions have
been taken to date, it is possible that the American Stock Exchange could delist
the Company's stock.

     The Company  believes  that its cash and cash  equivalents,  cash flow from
operations and the availability  under its credit facility will be sufficient to
meet its  anticipated  amounts  due under its  credit  facility,  operating  and
capital  requirements,  as well as distributions  related to the Trust Preferred
Securities, for at least the next twelve months.



                                       14
<PAGE>

Exchange Offer

     Pursuant to an Exchange  Offer,  which  commenced  on February 26, 2003 and
expired on April 11, 2003, a total of 983,880 then outstanding  shares of Common
Stock were exchanged for a total of 787,105 Trust Preferred Securities then held
by the Company,  at a ratio of one share of Common Stock for  eight-tenths  of a
Trust Preferred Security.

Acquisitions

     On October 7, 2003,  Glacier  acquired Water Island for a purchase price of
$6,068,000,  including $702,000 which is payable in installments over two years.
The Company  incurred  transaction  costs of  $202,000,  of which none  remained
accrued at September 26, 2004. This  acquisition was consummated  principally to
expand the Company's water vending operations and customer base. The transaction
was accounted for as a purchase, and accordingly, the results of operations have
been  included in the  consolidated  statement  of  operations  from the date of
acquisition.  The allocation of fair values of assets and  liabilities was based
upon a third party  appraisal.  The excess of purchase  price over  acquired net
assets was $2,739,000 and is classified as goodwill.

     Intangible  assets of $333,000 and $100,000  were assigned to contracts and
non-compete  agreements,  respectively  (collectively,  "Water Island Intangible
Assets").  The Water Island  Intangible  Assets are subject to amortization  and
have an average useful life of  approximately 3 and 5 years.  For the three- and
nine-month  periods ended September 26, 2004, the Company recorded  amortization
of $33,000 and $99,000 related to the Water Island Intangible Assets.

Recent Accounting Pronouncements

     In January 2003, the FASB issued  Interpretation  No. 46,  Consolidation of
Variable  Interest  Entities,  an  Interpretation of ARB No. 51 ("FIN 46"). This
Interpretation  addresses the consolidation by business  enterprises of variable
interest entities as defined in the Interpretation. The primary beneficiary of a
variable  interest  entity is the entity that absorbs a majority of the variable
interest entity's expected losses,  receives a majority of the variable interest
entity's  expected  residual  returns,  or  both,  as  a  result  of  ownership,
controlling  interest,  contractual  relationship or other business relationship
with a variable interest entity. Prior to the implementation of FIN 46, variable
interest  entities  were  generally  consolidated  by  an  enterprise  when  the
enterprise had a controlling  financial interest through ownership of a majority
of voting interests in the entity.  The  interpretation  applies  immediately to
variable interests in variable interest entities created after January 31, 2003,
and to variable  interests in variable interests entities obtained after January
31,  2003.  The  Interpretation   requires  certain   disclosures  in  financial
statements  issued after January 31, 2003 if it is reasonably  possible that the
Company  will  consolidate  or  disclose  information  about  variable  interest
entities when the  Interpretation  becomes  effective.  The  application of this
interpretation  did not have a  material  effect on the  consolidated  financial
statements.

     The Company  adopted FIN 46, as revised  ("FIN  46R"),  which  required the
Company  to  de-consolidate  its  investment  in  Glacier  Water  Trust  I.  The
application  of this  interpretation  resulted  in the  Company  reflecting  its
ownership of the Trust and its  ownership of 134,295  shares of Trust  Preferred
Securities as long-term assets and increasing  long-term debt by the same amount
of $5,986,000.

     FASB Statement No. 132 (revised), Employers' Disclosures about Pensions and
Other  Postretirement  Benefits  ("FASB  132").  FASB  132  (revised),   revises
employers'  disclosures  about  pension plans and other  postretirement  benefit
plans.  It does not change the  measurement or recognition of those plans.  FASB
132 (revised)  will retain and revise the disclosure  requirements  contained in
the original FASB 132. It also requires additional disclosures about the assets,
obligations,  cash  flows,  and net  periodic  benefit  cost of defined  benefit
pension  plans and other  postretirement  benefit  plans.  FASB 132 generally is
effective for fiscal years ending after  December 15, 2003.  The  application of
FASB  132  did  not  have  a  material  effect  on  the  consolidated  financial
statements.

                                       15

<PAGE>




ITEM 3 - QUANTITATIVE AND QUALITIVE DISCLOSURE ABOUT MARKET RISK

     The  Company's  primary  market risk  exposure is interest  rate risk.  The
principal  objectives  of  our  asset/liability  management  activities  are  to
minimize debt and maximize net investment income,  while maintaining  acceptable
levels of  interest  rate  risk and  facilitating  our  funding  needs.  Our net
investment  income and interest expense are subject to the risk of interest rate
fluctuations.  The Company's  outstanding  bank debt is tied to the bank's prime
lending  rate and as such,  the  Company is at risk due to  increases  in market
rates.  A 10% change in the bank's  lending  rate  would have the  potential  of
increasing the annual  interest on the  outstanding  borrowings of the bank debt
and impacting the future earnings of the Company by less than $25,000  annually.
The  Company's   exposure  to  interest  rate  risk  relates  primarily  to  the
opportunity cost of fixed-rate  obligations  associated with the Trust Preferred
Securities.  The  Company  believes  that the fixed rate of the Trust  Preferred
Securities approximates the Company's long-term market rate. As of September 26,
2004, the Company held no marketable securities available-for-sale.

ITEM 4 - CONTROLS AND PROCEDURES

     Since September 26, 2004, the Company carried out an evaluation,  under the
supervision and with the  participation of our Chief Executive Officer and Chief
Financial  Officer,   of  the  effectiveness  of  our  disclosure  controls  and
procedures,  as such term is defined  in Rule  13a-15(e)  promulgated  under the
Securities and Exchange Act of 1934, as amended.  Based on that evaluation,  the
Chief  Executive  Officer and the Chief  Financial  Officer  concluded  that the
disclosure  controls and  procedures  were effective as of September 26, 2004 to
ensure that  information  required to be  disclosed in reports that are filed or
submitted under the Securities and Exchange Act of 1934 is recorded,  processed,
summarized  and reported  within the time periods  specified in  Securities  and
Exchange  Commission  rules and forms.  There has been no change in our internal
controls over  financial  reporting  during the latest  fiscal  quarter that has
materially affected,  or is reasonably likely to materially affect, our internal
controls over financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

     From time to time,  claims are made  against  the  Company in the  ordinary
course of business.  With the assistance from legal counsel,  estimated  amounts
for such claims that are probable and can  reasonably  be estimated are recorded
as liabilities in the consolidated  balance sheets. The likelihood of a material
change in these  estimated  accruals  would be  dependent  on new claims as they
arise and the favorable or unfavorable outcome of the particular litigation.  As
of September 26, 2004, the Company was not a party to any legal  proceeding that
is likely to reasonably  have a material  impact on the results of operations or
financial condition of the Company.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECUITY HOLDERS

     There were no matters  submitted to a vote of the security  holders  during
the quarter ended September 26, 2004.

                                       16

<PAGE>



ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits
   --------
31.1 Certification of Brian H. McInerney, Chief Executive Officer, under Section
     302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of W. David Walters,  Chief Financial Officer,  under Section
     302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Brian H. McInerney, Chief Executive Officer, under Section
     906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of W. David Walters,  Chief Financial Officer,  under Section
     906 of the Sarbanes-Oxley Act of 2002.

b. Reports on Form 8-K
   -------------------

     On August 6, 2004, the Company filed a current report on Form 8-K reporting
under Item 12, the issuance of a press release  disclosing  the earnings for the
quarter ended June 27, 2004.




                                   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:  October 27, 2004        By: /s/  Brian H. McInerney
                                   ------------------------------------------
                                     Brian H. McInerney
                                     President and Chief Executive Officer


Date:  October 27, 2004        By: /s/  W. David Walters
                                   ------------------------------------------
                                     W. David Walters
                                     Senior Vice President and
                                     Chief Financial Officer

                                       17