Primo Water Announces Second Quarter Results

Primo Water Announces Second Quarter Results

Company Raises Fiscal 2014 Adjusted EBITDA Guidance

WINSTON-SALEM, N.C., Aug. 5, 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 second quarter ended June 30, 2014.

Second Quarter Business Highlights:

  *Sales increased 12.6% to $26.9 million driven by a 5.3% increase in Water
    segment sales and a 28.0% increase in Dispensers segment sales
  *Water segment net sales increase driven by 9.7% U.S. Exchange same-store
    unit growth
  *Water segment gross margin percentage improved to 35.9% from 34.1% driven
    by our efforts to lower supply chain costs
  *Adjusted EBITDA increased 29.4% to $3.0 million from $2.3 million
  *Entered into new $35.0 million credit facility that is expected to result
    in decreased annual interest expense of approximately $2.0 million

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

"Our second quarter results demonstrated continued strength and leverage in
our business as adjusted EBITDA exceeded our expectations and continues to
grow at a faster rate than our revenues. The improvement was driven by
increased revenues and gross margins across both business segments," commented
Billy D. Prim, Primo Water's Chief Executive Officer. "In addition, we were
able to enter into a new credit facility that reduced our cost of capital and
should allow for future growth."

Second Quarter Results

Net sales increased 12.6% to $26.9 million for the second quarter from $23.8
million for the second quarter of 2013, driven by the increases of $0.9
million and $2.2 million for the Water segment and the Dispensers segment,
respectively.

Water segment net sales increased 5.3% to $17.1 million for the second quarter
compared to $16.2 million for the second 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 an 11.1% increase for U.S. Exchange sales
driven by same-store unit growth of 9.7% for U.S. Exchange compared to the
second quarter of 2013.

The increase in Dispensers segment net sales is due primarily to the timing of
shipments to major retailers as they replenished inventory associated with
consumer sell-thru. Dispensers unit sell-thru to end consumers increased 5.6%
to approximately 126,000 for the second quarter of 2014.

Gross margin percentage increased to 25.2% for the second quarter from 24.7%
for the second quarter of 2013 primarily due to the 180 basis point
improvement in Water segment gross margin percentage, driven by lower supply
chain costs resulting from the strategic alliance agreement with DS Services
of America, Inc. ("DS Services"). Dispensers segment gross margin percentage
also improved due to a shift in sales mix to higher-margin dispenser models.

Selling, general and administrative ("SG&A") expenses increased 11.2% to $4.4
million for the second quarter of 2014 from $4.0 million for the second
quarter of 2013. However, as a percentage of net sales, SG&A decreased to
16.4% for the second quarter of 2014 from 16.7% for the second quarter of
2013.

Adjusted EBITDA increased 29.4% to $3.0 million from $2.3 million for the
second 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 second quarter of 2014 was ($6.2) million, or ($0.25) per share, compared
to ($2.1) million, or ($0.09) per share, for the second quarter of the prior
year.The loss from continuing operations includes one-time charges of $2.8
million related to refinancing of debt, $0.9 million in transitions of the
Company's Exchange distribution network; and $0.9 million for loss on the
disposal and impairment of equipment in the Water segment.On a pro forma
fully taxed basis, net loss from continuing operations was ($0.02) per share
for the three months ended June 30, 2014 compared to a ($0.04) loss for the
same period in the prior year (see financial tables for details).

Prudential Credit Facility

As previously announced, on June 20, 2014 the Company entered into a new $35.0
million credit facility with Prudential Insurance Company of America
consisting of a $15.0 million revolving credit facility and $20.0 million in
term notes. Interest rates on the new credit facility reflect a significant
reduction from the rates on the Company's prior debt and are expected to
result in a decrease in annual interest expense of approximately $2.0 million.

Guidance

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
to $11.1 to $11.6 million compared to its prior guidance of $10.9 to $11.4
million.

The Company expects third quarter 2014 net sales of $26.0 to $28.0 million and
third quarter 2014 adjusted EBITDA of $3.6 to $4.0 million.

Conference Call and Webcast

The Company will host a conference call to discuss these matters at 4:30 p.m.
ET today, August 5, 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
August 19, 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 the Company's
financial guidance, its expectations related to costs associated with the
transition of its distribution system, and the Company's belief that its new
credit facility will result in savings of $2.0 million in interest expense
annually and allow for future growth.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 strategic alliance
agreement with DS Services of America, Inc., significant additional costs in
connection with the transition of its distribution system to DS Services, 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 Services of America, Inc.), 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 facility, the failure of lenders to honor their
commitments under the Company's credit facility, 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 and impairment of property and equipment and other.Pro forma
fully taxed net loss from continuing operations is defined as loss from
continuing operations before income taxes less non-cash, stock-based
compensation expense, loss on disposal and impairment of property and
equipment, debt refinancing costs 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.

                          FINANCIAL TABLES TO FOLLOW

Primo Water Corporation
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
                                                                
                                 Three months ended    Six months ended
                                 June 30,              June 30,
                                 2014       2013       2014        2013
                                                                
Net sales                         $26,853  $23,849  $50,382   $46,177
Operating costs and expenses:                                    
Cost of sales                     20,091    17,948    37,433     34,988
Selling, general and              4,417     3,971     8,258      7,773
administrative expenses
Non-recurring costs               894       81        2,719      94
Depreciation and amortization     2,757     2,765     5,501      5,529
Loss on disposal and impairment   889       42        1,024      76
of property and equipment
Total operating costs and         29,048    24,807    54,935     48,460
expenses
Loss from operations              (2,195)   (958)     (4,553)    (2,283)
Interest expense and other, net   3,977     1,178     5,253      2,222
Loss from continuing operations   (6,172)   (2,136)   (9,806)    (4,505)
Loss from discontinued operations (234)     (136)     (353)      (360)
Net loss                          $(6,406) $(2,272) $(10,159) $(4,865)
                                                                
Basic and diluted loss per common                                
share:
Loss from continuing operations   $(0.25)  $(0.09)  $(0.41)   $(0.19)
Loss from discontinued operations (0.01)    (0.01)    (0.01)     (0.01)
Net loss                          $(0.26)  $(0.10)  $(0.42)   $(0.20)
                                                                
Basic and diluted weighted        24,233    23,891    24,155     23,840
average common shares outstanding
                                                                
                                                                

Primo Water Corporation
Segment Information
(Unaudited; in thousands)
                                                                
                                   Three months ended   Six months ended
                                   March 31,            June 30,
                                   2014       2013      2014       2013
Segment net sales                                                
Water                               $17,100  $16,232 $32,992  $31,142
Dispensers                          9,753     7,617    17,390    15,035
Total net sales                     $26,853  $23,849 $50,382  $46,177
                                                                
Segment income (loss) from                                       
operations
Water                               5,422     4,737    10,361    8,804
Dispensers                          402       90       731       254
Corporate                           (3,479)   (2,897)  (6,401)   (5,642)
Non-recurring costs                 (894)     (81)     (2,719)   (94)
Depreciation and amortization       (2,757)   (2,765)  (5,501)   (5,529)
Loss on disposal and impairment of  (889)     (42)     (1,024)   (76)
property and equipment
                                   $(2,195) $(958)  $(4,553) $(2,283)
                                                                


Primo Water Corporation
Condensed Consolidated Balance Sheets
(in thousands, except par value data)
                                                                
                                                     June 30,  December 31,
                                                     2014        2013
                                                     (unaudited) 
ASSETS                                                           
Current assets:                                                  
Cash                                                  $427      $394
Accounts receivable, net                              10,283     7,614
Inventories                                           7,805      6,346
Prepaid expenses and other current assets             2,724      1,499
Total current assets                                  21,239     15,853
                                                                
Bottles, net                                          4,455      4,104
Property and equipment, net                           35,532     38,634
Intangible assets, net                                10,268     10,872
Other assets                                          896        1,508
Total assets                                          $72,390   $70,971
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                             
Accounts payable                                      $18,313   $10,943
Accrued expenses and other current liabilities        3,856      3,472
Current portion of capital leases and notes payable   86         16
Total current liabilities                             22,255     14,431
                                                                
Long-term debt, capital leases and notes payable, net 24,790     22,654
of current portion
Liabilities of disposal group, net of current         2,328      2,330
portion, and other long-term liabilities
Total liabilities                                     49,373     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, 24,415 and 24,076 shares issued and       24         24
outstanding at June 30, 2014 and December 31, 2013,
respectively
Additional paid-in capital                            274,580    273,379
Common stock warrants                                 8,833      8,420
Accumulated deficit                                   (259,996)  (249,837)
Accumulated other comprehensive loss                  (424)      (430)
Total stockholders' equity                            23,017     31,556
Total liabilities and stockholders' equity            $72,390   $70,971
                                                                


Primo Water Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
                                                                 
                                                    Six months ended June 30,
                                                    2014          2013
Cash flows from operating activities:                             
Net loss                                             $(10,159)   $(4,865)
Less: Loss from discontinued operations              (353)        (360)
Loss from continuing operations                      (9,806)      (4,505)
Adjustments to reconcile net loss to net cash                     
provided by operating activities:
Depreciation and amortization                        5,501        5,529
Loss on disposal and impairment of property and      1,024        76
equipment
Stock-based compensation expense                     897          623
Non-cash interest expense                            2,721        610
Issuance of DS Services' common stock warrant        589          –
Other                                                (181)        (1)
Changes in operating assets and liabilities:                      
Accounts receivable                                  (2,442)      343
Inventories                                          (1,472)      909
Prepaid expenses and other assets                    (234)        (39)
Accounts payable                                     7,920        3,077
Accrued expenses and other liabilities               511          (877)
Net cash provided by operating activities            5,028        5,745
                                                                 
Cash flows from investing activities:                             
Purchases of property and equipment                  (2,853)      (1,930)
Purchases of bottles, net of disposals               (1,864)      (1,327)
Proceeds from the sale of property and equipment     124          2
Additions to and acquisitions of intangible assets   (12)         (38)
Net cash used in investing activities                (4,605)      (3,293)
                                                                 
Cash flows from financing activities:                             
Borrowings under Revolving Credit Facilities         31,653       42,368
Payments under Revolving Credit Facilities           (30,198)     (47,493)
Borrowings under Term loans                          22,500       3,000
Payments under Term loans                            (23,499)     –
Note payable and capital lease payments              (75)         (8)
Debt issuance costs                                  (605)        (546)
Stock option and employee stock purchase activity,   50           16
net
Net cash used in financing activities                (174)        (2,663)
                                                                 
Net increase (decrease) in cash                      249          (211)
Cash, beginning of year                              394          234
Effect of exchange rate changes on cash              (29)         (35)
Cash (used in) provided by discontinued operations                
from:
Operating activities                                 (187)        233
Cash (used in) provided by discontinued operations   (187)        233
Cash, end of period                                  $427        $221
                                                                 


Primo Water Corporation
Non-GAAP EBITDA and Adjusted EBITDA Reconciliation
(Unaudited; in thousands)
                                                                
                                  Three months ended    Six months ended
                                  June 30,              June 30,
                                  2014       2013       2014       2013
Loss from continuing operations    $(6,172) $(2,136) $(9,806) $(4,505)
Depreciation and amortization      2,757     2,765     5,501     5,529
Interest expense and other, net    3,977     1,178     5,253     2,222
EBITDA                             562       1,807     948       3,246
Non-cash, stock-based compensation 609       298       897       623
expense
Non-recurring costs                894       81        2,719     94
Loss on disposal and impairment of 922       122       1,108     238
property and equipment and other
Adjusted EBITDA                    $2,987   $2,308   $5,672   $4,201
                                                                


Primo Water Corporation
Pro forma fully taxed net loss from continuing operations
(Unaudited; in thousands, except per share amounts)
                                                                
                                  Three months ended    Six months ended
                                  June 30,              June 30,
                                  2014       2013       2014       2013
                                                                
Loss from continuing operations    $(6,172) $(2,136) $(9,806) $(4,505)
Non-cash, stock-based compensation 609       298       897       623
expense
Non-recurring costs                894       81        2,719     94
Loss on disposal and impairment of 889       42        1,024     76
property and equipment
Debt refinancing costs             2,848     –         2,848     –
Pro forma effect of full income    354       652       881       1,410
tax
Non-GAAP net loss                  $(578)   $(1,063) $(1,437) $(2,302)
                                                                
Basic and diluted non-GAAP net     $(0.02)  $(0.04)  $(0.06)  $(0.10)
loss per share
                                                                
Basic and diluted shares used to
compute non-GAAP net loss per      24,233    23,891    24,155    23,840
share
                                                                

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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