Primo Water Announces Results for the Third Quarter Ended September 30, 2012

Primo Water Announces Results for the Third Quarter Ended September 30, 2012

WINSTON-SALEM, N.C., Nov. 7, 2012 (GLOBE NEWSWIRE) -- Primo Water Corporation
(Nasdaq:PRMW), a leading provider of multi-gallon purified bottled water,
self-serve filtered drinking water and water dispensers, today announced
financial results for the third quarter ended September 30, 2012.

Business Highlights:

  oQ3 sales increased 8.6% to a record $26.2 million compared to the prior
    year.

  oWater dispenser unit sell-thru to consumers increased 29.8% to a record
    114,200 units compared to Q3 of the prior year.

  oTotal locations increased to 24,600 that offer water and/or appliances at
    the end of Q3.

  oWater segment operating income increased 21.8% to $4.5 million compared to
    Q3 of the prior year.

  oCompany signs agreement with Cuisinart to market Flavorstation appliances
    and the Company will provide CO2 cylinders for all Cuisinart and
    Flavorstation sparkling beverage appliances.

"We are pleased with the continued positive trends in revenue, gross margin
and cash flow from operations, locations and households that use our water,"
commented Billy D. Prim, Primo Water's President and Chief Executive Officer.
"We entered into an agreement with Cuisinart, a premier appliance company,
under which Cuisinart will market our Flavorstation appliances. Under this
arrangement Primo will receive a revenue stream from Cuisinart's sale of
flavors and Primo's provision of CO2 services. This alliance leverages the
strengths of Cuisinart and Primo to provide a complete soda appliance solution
to retailers. Additionally, we are now able to focus on growing our core water
and dispenser businesses, which we believe have significant future growth
opportunities as demonstrated by increased consumer purchases of our
dispensers in the third quarter of 2012."

Third Quarter Results

Total net sales increased 8.6% to $26.2 million from $24.1 million in the
third quarter of 2011. This increase was due to growth in both Water and
Dispenser sales.

Dispenser segment sales for the third quarter of 2012 increased 21.6% to $8.9
million compared to $7.3 million in the third quarter of 2011. The increase
was due primarily to a favorable mix of higher priced bottom load dispenser
sales and price increases to customers offset somewhat by a decrease in units
sold into retail of 7.8%. Sell-thru to consumers increased 29.8% compared to
the third quarter of 2011 to a record 114,200 units, driven by increased
locations and higher sales price per dispenser. The Company believes that
increased water dispenser penetration will lead to increased recurring Water
sales.

Water segment sales for the third quarter of 2012 increased 2.8% to $17.3
million compared to $16.8 million in the third quarter of 2011. Sales in the
Water segment consist of sales of multi-gallon purified bottled water
("Exchange") and self-serve filtered drinking water vending services
("Refill"). The Water segment sales increase was primarily due a 7.9% increase
in Exchange sales that resulted from U.S. Exchange same-store unit growth of
13.0% for the third quarter compared to 5.3% in the first half of 2012 and
3.4% in the prior year's third quarter. The increase in U.S. Exchange sales
was partially offset by a reduction of 3.4% in Refill sales, primarily due to
the positive impact of hurricane demand in the prior year's third quarter as
compared to the current year.

The following table sets forth information regarding locations where the
Company's dispensers and water are sold as well as certain sales information.

                                             3Q12  3Q11  % Change
Total locations (thousands)                   24.6  22.6  8.8%
Dispenser locations (thousands)               8.1   6.2   30.6%
Dispenser units sell-in to retail (thousands) 106.4 111.0 (4.1)%
Dispenser units sell-thru (thousands)         114.2 87.9  29.8%
Water Locations (thousands)                   16.5  16.4  0.6%

Gross margin increased to 24.0% for the third quarter from 22.3% for the third
quarter of 2011.Gross margin in the Water segment increased to 32.3% compared
to 31.9% in the same period in the prior year primarily due to an improvement
in Exchange margin partially offset by a decrease in Refill margin.The
decrease in Refill margin was primarily due to costs related to Refill system
upgrades by new service providers.Gross margin for the Dispenser segment
increased to 8.0% from 0.5% in the prior year, primarily due to retail price
increases that were implemented during the third quarter of 2012.

The GAAP net loss from continuing operations for the third quarter of 2012 was
$(2.5) million or $(0.10) per share, which was essentially flat with the prior
year.Non-GAAP pro forma fully-taxed net loss from continuing operations was
essentially flat at $(1.0) million or $(0.04) per share for the third quarter
of 2012. The primary differences in GAAP and non-GAAP earnings are the $0.6
million and $0.5 million in the pro forma effect of full income taxes for 2012
and 2011, respectively. The Company does not expect to pay U.S. income taxes
in the near future as it has sufficient net operating loss carryforwards to
offset taxable income.

The Company's Water segment continues to perform well experiencing sales
growth and profitability. The Water segment's operating income for the third
quarter of 2012 increased 21.8% to $4.5 million compared to $3.7 million in
the third quarter of 2011.The Dispenser segment generated increased sales and
improved gross margin; however, the segment realized operating losses of
approximately $0.4 million in the third quarter for both 2012 and 2011.The
Dispenser segment incurred non-recurring costs associated with a new store
rollout of approximately $0.4 million during the quarter.The Company expects
to achieve positive operating income going forward in the Dispenser segment as
a result of the full impact of price increases.

"Our core Water and Dispenser businesses continue to experience positive
trends. While we believe these trends will continue, we have reduced our focus
on short term guidance to concentrate on achieving profitability in fiscal
2013," added Prim.

The Company is focused on executing three long-term strategies:

  *Increasing total retail locations to 50,000 - 60,000;
  *Increasing sales of innovative Dispensers, which the Company believes will
    lead to greater household penetration and Water sales; and
  *Achieving profitability

Debt Amendment

The Company amended its credit agreement to reflect Flavorstation segment as a
discontinued operation.The changes to the credit facility allows for the sale
of inventory and other assets related to the Flavorstation business outside
the ordinary course of business as well as revises the financial covenants to
reflect the Company's continuing business.In connection with the amendment,
the Company paid a $0.15 million fee, increased the prepayment penalty and
amended warrants to purchase 1.6 million shares of the Company's common stock
to revise the warrant exercise price from $2.30 to $1.20 per share.The
revised warrant exercise price was set at 150% of the 30 day trailing average
stock price.

Conference Call and Webcast

The Company will host a conference call to discuss these results at 4:30 p.m.
ET today, November 7, 2012.Participants from the Company will be Billy D.
Prim, Chief Executive Officer, and Mark Castaneda, Chief Financial Officer.
The call will be broadcast live over the Internet hosted at the Investor
Relations section of Primo Water's website at www.primowater.com, and will be
archived online through November 21, 2012.In addition, listeners may dial
(866) 712-2329in North America, and international listeners may dial (253)
237-1244.

About Primo Water Corporation

Primo Water Corporation (Nasdaq:PRMW) is a leading provider of multi-gallon
purified bottled water, self-serve filtered drinking water and water
dispensers sold through major retailers throughout the United States and
Canada. Learn more about Primo Water at www.primowater.com.

The Primo Water Corporation logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=11942

Forward-Looking Statements

Certain statements contained herein are not based on historical fact and are
"forward-looking statements" within the meaning of the applicable securities
laws and regulations. Generally, these statements can be identified by the use
of words such as "anticipate," "believe," "could," "estimate," "expect,"
"feel," "forecast," "intend," "may," "plan," "potential," "project," "should,"
"would," "will," and similar expressions intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. Owing to the uncertainties inherent in forward-looking
statements, actual results could differ materially from those stated here.
Factors that could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, the loss of major
retail customers of the Company or the reduction in volume or change in timing
of purchases by major retail customers, lower than anticipated consumer and
retailer acceptance of the Company's Exchange and Refill services and its
water dispensers, changes in the Company's relationships with its independent
bottlers, distributors and suppliers, the entry of a competitor with greater
resources into the marketplace and competition and other business conditions
in the water, water dispenser and carbonating appliance industries in general,
the Company's experiencing product liability, product recall and higher than
anticipated rates of warranty expense or sales returns associated with a
product quality or safety issues, the loss of key Company personnel, changes
in the regulatory framework governing the Company's business, the Company's
inability to efficiently and effectively integrate the recently acquired
businesses with the Company's historical business, the Company's inability to
efficiently expand operations and capacity to meet growth, the Company's
inability to develop, introduce and produce new product offerings within the
anticipated timeframe or at all, the Company's inability to comply with its
covenants in its credit facilities, the failure of lenders to honor their
commitments under the Company's credit facilities, the failure to realize
benefits from the arrangement with Cuisinart with respect to the Company's
Flavorstation business, as well as other risks described more fully in the
Company's filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K filed on March 15, 2012 and its subsequent filings
under the Securities Exchange Act of 1934. Forward-looking statements reflect
management's analysis as of the date of this press release. The Company does
not undertake to revise these statements to reflect subsequent developments,
other than in its regular, quarterly earnings releases.

Use of Non-GAAP Financial Measures

To supplement its financial statements, the Company also provides investors
with information related to non-GAAP pro forma fully-taxed net income (loss)
per basic and diluted share, which are non-GAAP financial measures.The
Company believes these non-GAAP measures provide useful information to
management and investors regarding certain financial and business trends
relating to its financial condition and results of operations.Management uses
these non-GAAP measures to compare the Company's performance to that of prior
periods for trend analyses and planning purposes. These measures are also
presented to the Company's board of directors.

Non-GAAP pro forma fully-taxed net loss from continuing operations consists of
net loss plus the provision for income taxes, non-cash impairment charges,
non-cash stock-based compensation expense, debt restructuring costs, and
acquisition-related costs, amortization of intangible assets and the pro forma
effect of applying full income tax rates divided by the weighted average
number of shares of common stock outstanding during each period.Primo
believes non-GAAP pro forma fully-taxed net loss from continuing operation is
useful to an investor because it is widely used to measure a Company's
operating performance.

These non-GAAP measures should not be considered a substitute for, or superior
to, financial measures calculated in accordance with generally accepted
accounting principles in the United States ("GAAP").These non-GAAP financial
measures exclude significant expenses and income that are required by GAAP to
be recorded in the Company's financial statements and are subject to inherent
limitations.

                                                                
                                                                
Primo Water Corporation
Condensed Consolidated Balance Sheets
(in thousands, except par value data)
                                                                
                                                   September 30, December 31,
                                                   2012          2011
                                                   (unaudited)   
ASSETS                                                           
Current assets:                                                  
Cash                                                $632        $751
Accounts receivable, net                            14,397       13,459
Inventories                                         8,080        7,404
Prepaid expenses and other current assets           3,024        2,644
Curent assets of disposal group held for sale       3,625        2,670
Total current assets                                29,758       26,928
                                                                
Bottles, net                                        4,180        3,704
Property and equipment, net                         43,568       45,838
Intangible assets, net                              12,836       13,107
Goodwill                                            67,740       78,823
Other assets                                        1,900        1,086
Assets of disposal group held for sale, net of      –            14,963
current portion
Total assets                                        $159,982    $184,449
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                             
Accounts payable                                    $14,043     $9,369
Accrued expenses and other current liabilities      3,354        2,838
Current portion of capital leases and notes payable 15           14,514
Current liabilities of disposal group held for sale 2,891        3,345
Total current liabilities                           20,303       30,066
                                                                
Long-term debt, capital leases and notes payable,   20,889       44
net of current portion
Other long-term liabilities                         352          1,710
Liabilities of disposal group held for sale, net of –            3,000
current portion
Total liabilities                                   41,544       34,820
                                                                
Commitments and contingencies                                    
                                                                
Stockholders' equity:                                            
Preferred stock, $0.001 par value - 10,000 shares   –            –
authorized, none issued and outstanding
Common stock, $0.001 par value - 70,000 shares
authorized, 23,751 and 23,658 shares issued and     24           24
outstanding at September 30, 2012 and December 31,
2011, respectively
Additional paid-in capital                          272,277      271,220
Common stock warrants                               8,116        7,007
Accumulated deficit                                 (162,108)    (128,102)
Accumulated other comprehensive income (loss)       129          (520)
Total stockholders' equity                          118,438      149,629
Total liabilities and stockholders' equity          $159,982    $184,449

                                                                
                                                                
Primo Water Corporation
Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
                                                                
                                 Three months ended    Nine months ended
                                 September 30,         September 30,
                                 2012       2011       2012        2011
                                                                
Net sales                         $26,185  $24,110  $70,710   $61,950
Operating costs and expenses:                                    
Cost of sales                     19,897    18,727    54,145     45,925
Selling, general and              4,783     4,952     13,667     13,210
administrative expenses
Non-recurring and                 170       249       565        1,167
acquisition-related costs
Depreciation and amortization     2,898     2,349     7,929      6,406
Goodwill impairment               –         –         11,488     –
Total operating costs and         27,748    26,277    87,794     66,708
expenses
Loss from operations              (1,563)   (2,167)   (17,084)   (4,758)
Interest expense and other, net   905       190       3,082      956
Loss from continuing operations   (2,468)   (2,357)   (20,166)   (5,714)
before income taxes
Income tax (benefit) provision    --       166       (960)      509
Loss from continuing operations   (2,468)   (2,523)   (19,206)   (6,223)
Loss from discontinued            (1,367)   (774)     (14,799)   (1,163)
operations, net of income taxes
Net loss                          $(3,835) $(3,297) $(34,005) $(7,386)
                                                                
Basic and diluted loss per common                                
share:
Loss from continuing operations   $(0.10)  $(0.11)  $(0.81)   $(0.29)
Loss from discontinued            (0.06)    (0.03)    (0.62)     (0.06)
operations, net of income taxes
Net loss                          $(0.16)  $(0.14)  $(1.43)   $(0.35)
                                                                
Basic and diluted weighted        23,752    23,645    23,715     20,981
average common shares outstanding

                                                                
                                                                
Primo Water Corporation
Non-GAAP Reconciliation
(Unaudited; in thousands, except per share amounts)
                                                                
                                 Three months ended    Nine months ended
                                 September 30,         September 30,
                                 2012       2011       2012        2011
                                                                
Loss from continuing operations   $(2,468) $(2,523) $(19,206) $(6,223)
Income tax (benefit) provision    --       166       (960)      509
Loss from continuing operations   (2,468)   (2,357)   (20,166)   (5,714)
before income taxes
Goodwill impairment               –         –         11,488     –
Debt restructuring costs          –         –         1,061      –
Amortization of intangible assets 353       535       1,020      1,194
Non-cash, stock-based             256       231       1,043      658
compensation expense
Non-recurring and                 170       249       565        1,167
acquisition-related costs
Pro forma effect of full income   642       510       1,896      1,024
tax
Non-GAAP net loss                 $(1,047) $(832)   $(3,093)  $(1,671)
                                                                
                                                                
Basic and Diluted non-GAAP net    $(0.04)  $(0.04)  $(0.13)   $(0.08)
loss per share
                                                                
Basic and diluted shares used to
compute non-GAAP net loss per     23,752    23,645    23,715     20,981
share



Primo Water Corporation
Segment Information
(Unaudited; in thousands)
                                                                
                                 Three months ended    Nine months ended
                                 September 30,         September 30,
                                 2012       2011       2012        2011
Segment income (loss) from                                       
operations
Water                             $4,549     $3,733     $12,335     $10,913
Dispensers                        (441)     (458)     (1,223)    (402)
Other                             (2)       (12)      42         (12)
Corporate                         (2,601)   (2,832)   (8,256)    (7,684)
Non-recurring and                 (170)     (249)     (565)      (1,167)
acquisition-related costs
Depreciation and amortization     (2,898)   (2,349)   (7,929)    (6,406)
Goodwill impairment               –         –         (11,488)   –
                                 $(1,563) $(2,167) $(17,084) $(4,758)

                                                                

Primo Water Corporation
Non-GAAP EBITDA and Adjusted EBITDA Reconciliation
(Unaudited; in thousands, except per share amounts)
                                                                
                                 Three months ended    Nine months ended
                                 September 30,         September 30,
                                 2012       2011       2012        2011
                                                                
Loss from continuing operations   $(2,468) $(2,523) $(19,206) $(6,223)
Depreciation and amortization     2,898     2,349     7,929      6,406
Interest expense and other, net   905       190       3,082      956
Income tax (benefit) provision    –         166       (960)      509
EBITDA                            1,335     182       (9,155)    1,648
Goodwill impairment               –         --       11,488     –
Non-cash, stock-based             256       231       1,043      658
compensation expense
Non-recurring and                 170       249       565        1,167
acquisition-related costs
Adjusted EBITDA                   $1,761   $662     $3,941    $3,473

                                                                  
                                                                  
Primo Water Corporation
                                                                  
Consolidated Statements of Cash Flows
(Unaudited; in thousands)
                                                                  
                                             Nine months ended September 30,
                                             2012                  2011
Cash flows from operating activities:                              
Net loss                                      $(34,005)           $(7,386)
Less: Loss from discontinued operations       (14,799)             (1,163)
Loss from continuing operations               (19,206)             (6,223)
Adjustments to reconcile net loss to net cash provided by (used in) 
operating activities:
Depreciation and amortization                 7,929                6,406
Stock-based compensation expense              1,043                658
Non-cash interest expense                     1,708                411
Deferred income tax expense (benefit)         (960)                509
Bad debt expense                              161                  436
Goodwill impairment                           11,488               –
Other                                         (133)                59
Changes in operating assets and liabilities:                       
Accounts receivable                           (1,031)              (6,483)
Inventories                                   (676)                (6,363)
Prepaid expenses and other assets             (597)                (918)
Accounts payable                              3,099                10,645
Accrued expenses and other liabilities        806                  (268)
Net cash provided by (used in) operating      3,631                (1,131)
activities
                                                                  
Cash flows from investing activities:                              
Purchases of property and equipment           (3,121)              (14,175)
Purchases of bottles, net of disposals        (683)                (1,785)
Proceeds from the sale of property and        42                   18
equipment
Business acquisitions                         –                    (1,576)
Additions to and acquisitions of intangible   (688)                (219)
assets
Net cash used in investing activities         (4,450)              (17,737)
                                                                  
Cash flows from financing activities:                              
Borrowings under prior revolving credit       500                  23,126
facility
Payments under prior revolving credit         (15,000)             (39,538)
facility
Borrowings under revolving credit facility    23,996               –
Payments under revolving credit facility      (17,426)             –
Borrowings under term loan                    15,150               –
Note payable and capital lease payments       (11)                 (10)
Debt issuance costs                           (2,049)              (517)
Proceeds from sale of common stock, net of    (214)                39,445
issuance costs
Stock option and employee stock purchase      15                   352
activity, net
Net cash provided by financing activities     4,961                22,858
                                                                  
Net increase in cash                          4,142                3,990
Cash, beginning of year                       751                  443
Effect of exchange rate changes on cash       (16)                 (131)
Cash used in discontinued operations from:                         
Operating activities                          (3,850)              (861)
Investing activities                          (395)                (2,250)
Financing activities                          –                    –
Cash used in discontinued operations          (4,245)              (3,111)
Cash, end of period                           $632                $1,191

CONTACT: Primo Water Corporation
         Mark Castaneda, Chief Financial Officer
         (336) 331-4000
        
         ICR Inc.
         John Mills
         Katie Turner
         (646) 277-1228

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