Primo Water Announces First Quarter Results

Primo Water Announces First Quarter Results

WINSTON-SALEM, N.C., May 7, 2014 (GLOBE NEWSWIRE) -- Primo Water Corporation
(Nasdaq:PRMW), a leading provider of multi-gallon purified bottled water,
self-service refill water and water dispensers, today announced financial
results for the first quarter ended March 31, 2014.

First Quarter Business Highlights:

  oAdjusted EBITDA increased 41.8% to $2.7 million compared to $1.9 million

  oWater segment net sales increased 6.6% to $15.9 million driven by 12.1%
    U.S. Exchange same-store unit growth

  oWater segment gross margin percentage improved to 35.6% from 32.3% driven
    by lower supply chain costs

(All comparisons above are compared to the first quarter of 2013.)

"We are pleased with our first quarter results with strong same-store sales
growth and gross margin expansion driven by lower supply chain costs in our
U.S. Exchange business," commented Billy D. Prim, Primo Water's Chief
Executive Officer. "We continue to see strength in the trend of consumers
adding water dispensers to their homes and choosing to purchase Primo Water at
our customers' retail locations. We believe these trends will lead to
continued top-line growth which should drive even stronger adjusted EBITDA
improvements as we leverage our cost structure."

First Quarter Results

Net sales increased 5.4% to $23.5 million for the first quarter from $22.3
million for the first quarter of 2013. The improvement in net sales was due to
increased sales for Water and Dispensers of $1.0 million and $0.2 million,
respectively.

Water segment net sales increased 6.6% to $15.9 million for the first quarter
compared to $14.9 million for the first quarter of 2013. Sales in the Water
segment consist of the sale of multi-gallon purified bottled water
("Exchange") and self-service refill water service ("Refill"). The increase in
Water net sales was primarily due to a 10.0% increase for U.S. Exchange sales
driven by same-store unit growth of 12.1% for U.S. Exchange compared to the
first quarter of 2013. In addition, Refill net sales improved 3.0% due
primarily to strong bottle sales.

The increase in Dispenser segment net sales is due primarily to the timing of
shipments to major retailers as they replenished inventory associated with
consumer sell-thru.Dispenser unit sell-thru to end consumers increased 3.9%
to approximately 112,000 for the first quarter of 2014.

Gross margin percentage increased to 26.3% for the first quarter from 23.7%
for the first quarter of 2013 primarily due to the 330 basis point improvement
in Water gross margin percentage, driven by the higher U.S. Exchange gross
margin resulting from the strategic alliance agreement (the "DS Waters
Agreement") with DS Waters of America, Inc. ("DS Waters").Dispenser gross
margin percentage also improved primarily due to a shift in sales mix to
higher margin dispenser models.

Selling, general and administrative ("SG&A") expenses increased 3.6% to $4.0
million for the first quarter of 2014 from $3.8 million for the first quarter
of 2013. As a percentage of net sales, however, SG&A decreased to 16.9% for
the first quarter of 2014 from 17.2% for the first quarter of 2013.

Adjusted EBITDA increased 41.8% to $2.7 million from $1.9 million for the
first quarter of 2013 driven by the net sales and gross margin improvements
previously mentioned. The U.S. GAAP net loss from continuing operations for
the first quarter of 2014 was ($3.6) million or ($0.15) per share, compared to
($2.4) million or ($0.10) per share for the first quarter of the prior year,
due primarily to $1.8 million in non-recurring costs associated with the DS
Waters Agreement, including a $0.6 million non-cash expense related to the
common stock warrants issued to DS Waters.

Update on Strategic Alliance Agreement with DS Waters

As announced in November 2013, Primo has entered into an agreement with DS
Waters, one of the nation's leading operators in the Home and Office Beverage
Delivery market. Under the DS Waters Agreement, the responsibility for DS
Waters' current five-gallon retail exchange customers, including account
management, billing and collections will transition to Primo. 

Over time DS Waters will become the primary bottling and distribution partner
in the U.S. for Primo's Exchange services. Activities under the DS Waters
Agreement are being phased in on a region-by-region basis.The transition of
bottling and distribution responsibilities to DS Waters began on January 1,
2014 and is expected to be completed by December 31, 2015.

Guidance Increased

The Company reiterated its full year 2014 guidance for net sales of $98.0 to
$102.0 million and increased its full year 2014 guidance for adjusted EBITDA
of $10.9 to $11.4 million compared to its prior guidance of $10.6 to $11.1
million.

The Company expects second quarter 2014 net sales of $24.5 to $25.5 million
and second quarter 2014 adjusted EBITDA of $2.7 to $2.9 million.

Conference Call and Webcast

The Company will host a conference call to discuss these matters at 4:30 p.m.
ET today, May 7, 2014.Participants from the Company will be Billy D. Prim,
Chief Executive Officer, Mark Castaneda, Chief Financial Officer, and Matt
Sheehan, President and Chief Operating 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 May
21, 2014.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-service refill water and water dispensers sold
through major retailers throughout the United States and Canada. Learn more
about Primo Water at www.primowater.com.

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 include our financial
guidance, our future financial and operating performance and our expectations
related to the DS Waters Agreement, the transition of our bottling and
distribution responsibilities to DS Waters and the conversion of the DS
Waters' retail customers to Primo.These statements can otherwise 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 herein. Factors that could cause actual
results to differ materially from those in the forward-looking statements
include, but are not limited to, the failure to achieve the incremental net
sales or reduced distribution costs associated with the DS Waters Agreement,
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 and demand for the Company's
Exchange and Refill services and its water dispensers, adverse changes in the
Company's relationships with its independent bottlers, distributors and
suppliers (including as a result of the Company's entering into the strategic
alliance agreement with DS Waters), the entry of a competitor with greater
resources into the marketplace and competition and other business conditions
in the water and water dispenser industries in general, the Company's
experiencing product liability, product recall or higher than anticipated
rates of warranty expense or sales returns associated with 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 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, 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 17, 2014 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 or as otherwise
required by applicable securities laws.

Use of Non-U.S. GAAP Financial Measures

To supplement its financial statements, the Company provides investors with
information related to adjusted EBITDA and pro forma fully taxed net loss from
continuing operations, which are not financial measures calculated in
accordance with generally accepted accounting principles in the United States
("U.S. GAAP").Adjusted EBITDA is calculated as loss from continuing
operations before depreciation and amortization; interest expense and other,
net; non-cash, stock-based compensation expense; non-recurring costs; and loss
on disposal of assets and other.Pro forma fully taxed net loss from
continuing operations is defined as loss from continuing operations before
income taxes lessnon-cash, stock-based compensation expense and non-recurring
costs as adjusted on a pro forma basis for the full effect of income taxes.
The Company believes these non-U.S. GAAP financial measures provide useful
information to management and investors regarding certain financial and
business trends relating to the Company's financial condition and results of
operations.Management uses these non-U.S. GAAP financial measures to compare
the Company's performance to that of prior periods for trend analyses and
planning purposes.These non-U.S. GAAP financial measures are also presented
to the Company's board of directors and adjusted EBITDA is used in its credit
agreements.

Non-U.S. GAAP measures should not be considered a substitute for, or superior
to, financial measures calculated in accordance with U.S. GAAP. Adjusted
EBITDA excludes significant expenses that are required by U.S. GAAP to be
recorded in the Company's financial statements and is subject to inherent
limitations.


Primo Water Corporation
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
                                                               
                                                 Three months ended March 31,
                                                 2014           2013
                                                               
Net sales                                         $23,528      $22,328
Operating costs and expenses:                                   
Cost of sales                                     17,342        17,039
Selling, general and administrative expenses      3,975         3,836
Non-recurring costs                               1,825         13
Depreciation and amortization                     2,744         2,765
Total operating costs and expenses                25,886        23,653
Loss from operations                              (2,358)       (1,325)
Interest expense and other, net                   1,276         1,043
Loss from continuing operations                  (3,634)       (2,368)
Loss from discontinued operations                 (119)         (225)
Net loss                                          $(3,753)     $(2,593)
                                                               
Basic and diluted loss per common share:                        
Loss from continuing operations                   $(0.15)      $(0.10)
Loss from discontinued operations                 (0.01)        (0.01)
Net loss                                          $(0.16)      $(0.11)
                                                               
Basic and diluted weighted average common shares  24,076        23,789
outstanding
                                                               
                                                               
                                                               
Primo Water Corporation
Segment Information
(Unaudited; in thousands)
                                                               
                                                 Three months ended March 31,
                                                 2014           2013
Segment net sales                                               
Water                                             $15,891        $14,910
Dispensers                                        7,637         7,418
Total net sales                                   $23,528      $22,328
                                                               
Segment income (loss) from operations                           
Water                                             4,804         4,033
Dispensers                                        328           165
Corporate                                         (2,921)       (2,745)
Non-recurring costs                               (1,825)       (13)
Depreciation and amortization                     (2,744)       (2,765)
                                                 $(2,358)     $(1,325)


Primo Water Corporation
Condensed Consolidated Balance Sheets
(in thousands, except par value data)
                                                                
                                                     March 31, December 31,
                                                     2014        2013
                                                     (unaudited) 
ASSETS                                                           
Current assets:                                                  
Cash                                                  $1,296    $394
Accounts receivable, net                              7,766      7,614
Inventories                                           6,013      6,346
Prepaid expenses and other current assets             1,549      1,274
Current assets of disposal group held for sale        196        225
Total current assets                                  16,820     15,853
                                                                
Bottles, net                                          4,373      4,104
Property and equipment, net                           37,973     38,634
Intangible assets, net                                10,442     10,872
Other assets                                          1,373      1,508
Total assets                                          $70,981   $70,971
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                             
Accounts payable                                      $14,341   $10,943
Accrued expenses and other current liabilities        3,611      3,380
Current portion of capital leases and notes payable   42         16
Current liabilities of disposal group held for sale   85         92
Total current liabilities                             18,079     14,431
                                                                
Long-term debt, capital leases and notes payable, net 22,169     22,654
of current portion
Other long-term liabilities                           329        330
Liabilities of disposal group held for sale, net of   2,000      2,000
current portion
Total liabilities                                     42,577     39,415
                                                                
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, 24,091 and 24,076 shares issued and       24         24
outstandingat March 31, 2014 and December 31, 2013,
respectively
Additional paid-in capital                            273,558    273,379
Common stock warrants                                 9,009      8,420
Accumulated deficit                                   (253,590)  (249,837)
Accumulated other comprehensive loss                  (597)      (430)
Total stockholders' equity                           28,404     31,556
Total liabilities and stockholders' equity            $70,981   $70,971


Primo Water Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)
                                                               
                                                 Three months ended March 31,
                                                 2014           2013
Cash flows from operating activities:                           
Net loss                                          $(3,753)     $(2,593)
Less: Loss from discontinued operations           (119)         (225)
Loss from continuing operations                   (3,634)       (2,368)
Adjustments to reconcile net loss to net cash     
provided by operating activities:
Depreciation and amortization                     2,744         2,765
Stock-based compensation expense                  289           325
Non-cash interest expense                         306           305
Issuance of DS Waters' common stock warrant       589           –
Other                                             84            (94)
Changes in operating assets and liabilities:                    
Accounts receivable                               (86)          632
Inventories                                       321           1,818
Prepaid expenses and other assets                 (276)         128
Accounts payable                                  3,946         443
Accrued expenses and other liabilities            164           36
Net cash provided by operating activities         4,447         3,990
                                                               
Cash flows from investing activities:                           
Purchases of property and equipment               (1,501)       (687)
Purchases of bottles, net of disposals            (1,202)       (709)
Proceeds from the sale of property and equipment  41            1
Additions to and acquisitions of intangible       (7)           (25)
assets
Net cash used in investing activities             (2,669)       (1,420)
                                                               
Cash flows from financing activities:                           
Borrowings under Senior Revolving Credit Facility 18,809        19,955
Payments under Senior Revolving Credit Facility   (21,955)      (21,987)
Borrowings under Comvest Term loans               2,500         –
Note payable and capital lease payments           (26)          (4)
Debt issuance costs                               (78)          (11)
Stock option and employee stock purchase          (14)          (12)
activity, net
Net cash used in financing activities             (764)         (2,059)
                                                               
Net increase in cash                              1,014         511
Cash, beginning of year                           394           234
Effect of exchange rate changes on cash           (16)          (20)
Cash used in discontinued operations from:                      
Operating activities                              (96)          (510)
Cash used in discontinued operations              (96)          (510)
Cash, end of period                               $1,296       $215


Primo Water Corporation
Non-GAAP EBITDA and Adjusted EBITDA Reconciliation
(Unaudited; in thousands)
                                                        
                                          Three months ended March 31,
                                          2014           2013
Loss from continuing operations            $(3,634)     $(2,368)
Depreciation and amortization              2,744         2,765
Interest expense and other, net            1,276         1,043
EBITDA                                     386           1,440
Non-cash, stock-based compensation expense 289           325
Non-recurring costs                        1,825         13
Loss on disposal of assets and other       185           115
Adjusted EBITDA                            $2,685       $1,893



Primo Water Corporation
Pro forma fully taxed net loss from continuing operations
(Unaudited; in thousands, except per share amounts)
                                                               
                                                 Three months ended March 31,
                                                 2014           2013
                                                               
Loss from continuing operations                   $(3,634)     $(2,368)
Non-cash, stock-based compensation expense        289           325
Non-recurring costs                               1,825         13
Pro forma effect of full income tax               578           771
Non-GAAP net loss                                 $(942)       $(1,259)
                                                               
Basic and diluted non-GAAP net loss per share     $(0.04)      $(0.05)
                                                               
Basic and diluted shares used to compute non-GAAP 24,076        23,789
net loss per share

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

Primo Water Corporation Logo
 
Press spacebar to pause and continue. Press esc to stop.