þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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30-0278688
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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104 Cambridge Plaza Drive, Winston-Salem, NC
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27104
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(Address of principal executive office)
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(Zip code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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$0.001 Par Value Common Stock
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The NASDAQ Stock Market LLC
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Large accelerated filer
o
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Accelerated filer
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Non-accelerated filer
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(Do not check if smaller reporting company)
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Smaller reporting company
þ
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PART 1
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1
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1
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15
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31
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32
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32
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32
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PART II
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33
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34
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35
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46
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47
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74
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74
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74
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PART III
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75
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75
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75
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75
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75
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PART IV
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76
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80
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Business
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·
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Environmental Awareness.
Both our Exchange and Refill services incorporate the reuse of existing bottles, recycle water bottles when their lifecycle is complete and reduce landfill waste and fossil fuel usage compared to alternative methods of bottled water consumption.
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·
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Value.
We provide consumers the opportunity for cost savings when consuming our bottled water compared to both single-serve bottled water and typical home and office delivery services. Our water dispensers are sold at attractive retail prices in order to enhance consumer awareness and adoption of our Exchange and Refill services, increase household penetration and drive sales of our purified and filtered water.
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·
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Convenience.
Our Exchange and Refill services and water dispensers are available at major retail locations in the United States and Canada. In addition, our Exchange and Refill services provide consumers the convenience of either exchanging empty bottles and purchasing full bottles or refilling the empty bottles at any participating retailer.
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·
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Taste.
We have dedicated significant time and effort to develop our water purification process and formulate the proprietary blend of mineral ingredients included in our Primo purified water offered through our Exchange service. We believe that Primo purified water has a silky smooth taste profile.
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·
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Health and Wellness.
As part of a desire to live a healthier lifestyle, we believe that consumers are increasingly focused on drinking more water relative to consumption of other beverages. As we raise our brand awareness, we believe consumers will recognize that our water bottle exchange and refill services are an effective option for their water consumption needs.
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Retail Category
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Major Accounts
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Home Centers / Hardware Stores
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Lowe’s Home Improvement, Ace Hardware, True Value
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Mass Merchants
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Walmart, Target, Kmart, Meijer
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Grocery Stores
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Kroger, Food Lion, Safeway, Sobeys, H-E-B, Hy-Vee
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Membership Warehouses
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Sam’s Club, Costco
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Drug Stores
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Walgreens
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Office retail
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Office Depot
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·
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federal laws, such as the US Federal Food, Drug and Cosmetic Act, the Canadian Food and Drug Act and the US Occupational Safety and Health Act;
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·
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customs and foreign trade laws and regulations;
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state and provincial consumer protection laws;
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·
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federal, state, provincial and local environmental, health and safety laws;
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laws governing equal employment opportunity and workplace activities; and
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·
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various other federal, state, provincial and local statutes and regulations.
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Risk Factors
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·
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expand the number of retail store locations in which our products and services are offered;
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enhance our operating infrastructure;
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·
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acquire new businesses, products or technologies; or
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·
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otherwise respond to competitive pressures.
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·
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increased publicity that changes public or regulatory perception regarding packaging that uses BPA, so that significant numbers of consumers stop purchasing products that are packaged in polycarbonate plastic;
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the emergence of new scientific evidence that suggests that the low doses of BPA to which consumers may be exposed when using polycarbonate plastic is unsafe;
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interpretations of existing evidence by the FDA or other regulatory agencies that lead to prohibitions on the use of polycarbonate plastic as packaging for consumable products;
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the listing of BPA by California’s Office of Environmental Health Hazard Assessment on the state’s Proposition 65 list, which would require us to label our products with information about BPA content and could obligate us to evaluate the levels of exposure to BPA associated with the use of our products; and
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·
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the inability of sellers of consumable products to find an adequate supply of alternative packaging if polycarbonate plastic containing BPA becomes an undesirable or prohibited packaging material.
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quarterly fluctuations in our operating results;
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·
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changes in investors’ and analysts’ perception of the business risks and conditions of our business;
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our ability to meet the earnings estimates and other performance expectations of financial analysts or investors;
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unfavorable commentary or downgrades of our stock by equity research analysts; and
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general economic or political conditions.
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·
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authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;
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·
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eliminate the ability of our stockholders to act by written consent in most circumstances;
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eliminate the ability of our stockholders to remove a member of our Board of Directors without cause;
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eliminate the ability of our stockholders to call a special meeting of the stockholders;
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establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;
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provide that the Board of Directors is expressly authorized to make, alter or repeal our amended and restated bylaws; and
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establish a classified board of directors the members of which serve staggered three-year terms.
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incur additional indebtedness;
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make restricted payments (including paying dividends on, redeeming or repurchasing capital stock);
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make certain expenditures, investments or acquisitions;
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create liens on our assets to secure debt;
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make certain prepayments without penalties;
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engage in certain types of transactions with affiliates;
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apply the proceeds of certain debt and equity financing transactions at our discretion;
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engage in sale-and-leaseback or similar transactions; and
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transfer or sell assets, merge, liquidate or wind-up.
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Unresolved Staff Comments
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Properties
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Legal Proceedings
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Mine Safety Disclosures
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Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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High
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Low
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|||||||
Year ended December 31, 2013
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||||||||
Fourth Quarter
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$ | 3.25 | $ | 2.17 | ||||
Third Quarter
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$ | 2.96 | $ | 1.67 | ||||
Second Quarter
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$ | 2.07 | $ | 1.05 | ||||
First Quarter
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$ | 1.30 | $ | 0.98 | ||||
High
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Low
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|||||||
Year ended December 31, 2012
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||||||||
Fourth Quarter
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$ | 1.30 | $ | 0.69 | ||||
Third Quarter
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$ | 1.75 | $ | 1.05 | ||||
Second Quarter
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$ | 1.93 | $ | 1.10 | ||||
First Quarter
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$ | 3.45 | $ | 1.93 |
Selected Financial Data
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Years ended December 31,
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||||||||||||||||||||
2013
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2012
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2011
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2010
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2009
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||||||||||||||||
(in thousands, except per share data)
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||||||||||||||||||||
Consolidated statements of operations data:
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||||||||||||||||||||
Net sales
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$ | 91,209 | $ | 91,479 | $ | 83,062 | $ | 44,607 | $ | 46,981 | ||||||||||
Operating costs and expenses:
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||||||||||||||||||||
Cost of sales
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68,367 | 70,081 | 63,201 | 34,213 | 38,771 | |||||||||||||||
Selling, general and administrative expenses
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15,151 | 17,708 | 18,206 | 12,621 | 9,922 | |||||||||||||||
Non-recurring costs
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777 | 743 | 2,091 | 2,491 | – | |||||||||||||||
Depreciation and amortization
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11,333 | 11,102 | 8,863 | 4,759 | 4,205 | |||||||||||||||
Goodwill and other impairments
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– | 82,013 | – | – | – | |||||||||||||||
Total operating costs and expenses
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95,628 | 181,647 | 92,361 | 54,084 | 52,898 | |||||||||||||||
Loss from operations
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(4,419 | ) | (90,168 | ) | (9,299 | ) | (9,477 | ) | (5,917 | ) | ||||||||||
Interest expense and other, net
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4,425 | 4,043 | 1,690 | 3,416 | 2,257 | |||||||||||||||
Loss from continuing operations before income taxes
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(8,844 | ) | (94,211 | ) | (10,989 | ) | (12,893 | ) | (8,174 | ) | ||||||||||
Income tax (benefit) provision
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- | (961 | ) | 961 | – | – | ||||||||||||||
Loss from continuing operations
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(8,844 | ) | (93,250 | ) | (11,950 | ) | (12,893 | ) | (8,174 | ) | ||||||||||
Loss from discontinued operations, net of income taxes
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(1,862 | ) | (17,779 | ) | (2,429 | ) | - | (3,650 | ) | |||||||||||
Net loss
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(10,706 | ) | (111,029 | ) | (14,379 | ) | (12,893 | ) | (11,824 | ) | ||||||||||
Preferred dividends, beneficial conversion and warrant modification charges
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– | – | – | 9,831 | 3,042 | |||||||||||||||
Net loss attributable to common shareholders
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$ | (10,706 | ) | $ | (111,029 | ) | $ | (14,379 | ) | $ | (22,724 | ) | $ | (14,866 | ) | |||||
Basic and diluted loss per common share:
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||||||||||||||||||||
Loss from continuing operations attributable to common shareholders
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$ | (0.37 | ) | $ | (3.93 | ) | $ | (0.55 | ) | $ | (5.81 | ) | $ | (7.72 | ) | |||||
Loss from discontinued operations attributable to common shareholders
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(0.08 | ) | (0.75 | ) | (0.11 | ) | – | (2.51 | ) | |||||||||||
Net loss attributable to common shareholders
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$ | (0.45 | ) | $ | (4.68 | ) | $ | (0.66 | ) | $ | (5.81 | ) | $ | (10.23 | ) | |||||
Basic and diluted weighted average common shares outstanding
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23,935 | 23,725 | 21,652 | 3,910 | 1,453 |
As of December 31,
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||||||||||||||||||||
2013
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2012
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2011
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2010
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2009
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||||||||||||||||
Consolidated balance sheet data:
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||||||||||||||||||||
Cash
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$ | 394 | $ | 234 | $ | 751 | $ | 443 | – | |||||||||||
Total assets
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70,971 | 81,775 | 184,449 | 139,611 | 22,368 | |||||||||||||||
Current portion of long-term debt
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16 | 15 | 14,514 | 11 | 426 | |||||||||||||||
Long-term debt, net of current maturities
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22,654 | 21,251 | 44 | 17,945 | 14,403 | |||||||||||||||
Other long-term obligations
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330 | 352 | 4,710 | 748 | 1,048 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Years Ended December 31,
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||||||||
2013
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2012
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|||||||
Consolidated statements of operations data:
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||||||||
Net sales
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$ | 91,209 | $ | 91,479 | ||||
Operating costs and expenses:
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||||||||
Cost of sales
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68,367 | 70,081 | ||||||
Selling, general and administrative expenses
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15,151 | 17,708 | ||||||
Non-recurring costs
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777 | 743 | ||||||
Depreciation and amortization
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11,333 | 11,102 | ||||||
Goodwill and other impairments
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– | 82,013 | ||||||
Total operating costs and expenses
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95,628 | 181,647 | ||||||
Loss from operations
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(4,419 | ) | (90,168 | ) | ||||
Interest expense and other, net
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4,425 | 4,043 | ||||||
Loss from continuing operations before income taxes
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(8,844 | ) | (94,211 | ) | ||||
Income tax benefit
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– | (961 | ) | |||||
Loss from continuing operations
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(8,844 | ) | (93,250 | ) | ||||
Loss from discontinued operations
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(1,862 | ) | (17,779 | ) | ||||
Net loss
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$ | (10,706 | ) | $ | (111,029 | ) |
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Consolidated statements of operations data:
|
||||||||
Net sales
|
100.0 | % | 100.0 | % | ||||
Operating costs and expenses:
|
||||||||
Cost of sales
|
75.0 | 76.6 | ||||||
Selling, general and administrative expenses
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16.6 | 19.4 | ||||||
Non-recurring costs
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0.9 | 0.8 | ||||||
Depreciation and amortization
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12.4 | 12.1 | ||||||
Goodwill and other impairments
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– | 89.7 | ||||||
Total operating costs and expenses
|
104.9 | 198.6 | ||||||
Loss from operations
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(4.8 | ) | (98.6 | ) | ||||
Interest expense and other, net
|
4.9 | 4.4 | ||||||
Loss from continuing operations before income taxes
|
(9.7 | ) | (103.0 | ) | ||||
Income tax provision
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– | (1.1 | ) | |||||
Loss from continuing operations
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(9.7 | ) | (101.9 | ) | ||||
Loss from discontinued operations
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(2.0 | ) | (19.4 | ) | ||||
Net loss
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(11.7 | %) | (121.3 | %) |
Years Ended December 31,
|
||||||||
2013
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2012
|
|||||||
Segment net sales
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||||||||
Water
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$ | 63,828 | $ | 62,667 | ||||
Dispensers
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27,381 | 28,812 | ||||||
Total net sales
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$ | 91,209 | $ | 91,479 | ||||
Segment income (loss) from operations
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||||||||
Water
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$ | 17,591 | $ | 16,477 | ||||
Dispensers
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827 | (1,319 | ) | |||||
Corporate
|
(10,727 | ) | (11,468 | ) | ||||
Non-recurring costs
|
(777 | ) | (743 | ) | ||||
Depreciation and amortization
|
(11,333 | ) | (11,102 | ) | ||||
Goodwill and other impairments
|
– | (82,013 | ) | |||||
Loss from operations
|
$ | (4,419 | ) | $ | (90,168 | ) |
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Net cash provided by operating activities
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$ | 6.6 | $ | 5.9 | ||||
Net cash used in investing activities
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$ | (7.3 | ) | $ | (5.9 | ) | ||
Net cash provided by financing activities
|
$ | 0.9 | $ | 5.1 |
Years ended
|
||||||||
December 31,
|
||||||||
2013
|
2012
|
|||||||
Loss from continuing operations
|
$ | (8,844 | ) | $ | (93,250 | ) | ||
Depreciation and amortization
|
11,333 | 11,102 | ||||||
Interest expense and other, net
|
4,425 | 4,043 | ||||||
Income tax benefit
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– | (961 | ) | |||||
EBITDA
|
6,914 | (79,066 | ) | |||||
Goodwill and other impairments
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– | 82,013 | ||||||
Non-cash, stock-based compensation expense
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1,034 | 1,252 | ||||||
Non-recurring costs
|
777 | 743 | ||||||
Loss on disposal of assets and other
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342 | 509 | ||||||
Adjusted EBITDA
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$ | 9,067 | $ | 5,451 |
Quantitative and Qualitative Disclosure About Market Risk
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Financial Statements and Supplementary Data
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Page
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Management's Report on Internal Control Over Financial Reporting
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48
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Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
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49
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Consolidated Balance Sheets as of December 31, 2013 and 2012
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50
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Consolidated Statements of Operations for the years ended December 31, 2013 and 2012
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51
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Consolidated Statements of Comprehensive Loss for the years ended December 31, 2013 and 2012
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52
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Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2013 and 2012
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53
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Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012
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54
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Notes to Consolidated Financial Statements
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55
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December 31,
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December 31,
|
|||||||
2013
|
2012
|
|||||||
ASSETS
|
|
|
||||||
Current assets:
|
||||||||
Cash
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$ | 394 | $ | 234 | ||||
Accounts receivable, net
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7,614 | 9,894 | ||||||
Inventories
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6,346 | 7,572 | ||||||
Prepaid expenses and other current assets
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1,274 | 812 | ||||||
Current assets of disposal group held for sale
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225 | 3,041 | ||||||
Total current assets
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15,853 | 21,553 | ||||||
Bottles, net
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4,104 | 3,838 | ||||||
Property and equipment, net
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38,634 | 41,947 | ||||||
Intangible assets, net
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10,872 | 12,477 | ||||||
Other assets
|
1,508 | 1,960 | ||||||
Total assets
|
$ | 70,971 | $ | 81,775 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 10,943 | $ | 11,455 | ||||
Accrued expenses and other current liabilities
|
3,380 | 4,305 | ||||||
Current portion of capital leases and notes payable
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16 | 15 | ||||||
Current liabilities of disposal group held for sale
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92 | 2,784 | ||||||
Total current liabilities
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14,431 | 18,559 | ||||||
Long-term debt, capital leases and notes payable, net of current portion
|
22,654 | 21,251 | ||||||
Other long-term liabilities
|
330 | 352 | ||||||
Liabilities of disposal group held for sale, net of current portion
|
2,000 | – | ||||||
Total liabilities
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39,415 | 40,162 | ||||||
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, 24,076 and 23,772 shares issued and outstanding at December 31, 2013 and 2012, respectively
|
24 | 24 | ||||||
Additional paid-in capital
|
273,379 | 272,336 | ||||||
Common stock warrants
|
8,420 | 8,420 | ||||||
Accumulated deficit
|
(249,837 | ) | (239,131 | ) | ||||
Accumulated other comprehensive loss
|
(430 | ) | (36 | ) | ||||
Total stockholders’ equity
|
31,556 | 41,613 | ||||||
Total liabilities and stockholders’ equity
|
$ | 70,971 | $ | 81,775 |
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Net sales
|
$ | 91,209 | $ | 91,479 | ||||
Operating costs and expenses:
|
||||||||
Cost of sales
|
68,367 | 70,081 | ||||||
Selling, general and administrative expenses
|
15,151 | 17,708 | ||||||
Non-recurring costs
|
777 | 743 | ||||||
Depreciation and amortization
|
11,333 | 11,102 | ||||||
Goodwill and other impairments
|
– | 82,013 | ||||||
Total operating costs and expenses
|
95,628 | 181,647 | ||||||
Loss from operations
|
(4,419 | ) | (90,168 | ) | ||||
Interest expense and other, net
|
4,425 | 4,043 | ||||||
Loss from continuing operations before income taxes
|
(8,844 | ) | (94,211 | ) | ||||
Income tax benefit
|
– | (961 | ) | |||||
Loss from continuing operations
|
(8,844 | ) | (93,250 | ) | ||||
Loss from discontinued operations
|
(1,862 | ) | (17,779 | ) | ||||
Net loss
|
$ | (10,706 | ) | $ | (111,029 | ) | ||
Basic and diluted loss per common share:
|
||||||||
Loss from continuing operations
|
$ | (0.37 | ) | $ | (3.93 | ) | ||
Loss from discontinued operations
|
(0.08 | ) | $ | (0.75 | ) | |||
Net loss
|
$ | (0.45 | ) | $ | (4.68 | ) | ||
Basic and diluted weighted average common shares outstanding
|
23,935 | 23,725 |
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Net loss
|
$ | (10,706 | ) | $ | (111,029 | ) | ||
Other comprehensive (income) loss:
|
||||||||
Foreign currency translation adjustments, net
|
(394 | ) | 484 | |||||
Comprehensive loss
|
$ | (11,100 | ) | $ | (110,545 | ) |
Common Stock
|
Additional
Paid-in
|
Common
Stock
|
Accumulated
Other
|
Accumulated
|
Total
Stockholders’
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Warrants
|
Income
|
Deficit
|
Equity
|
||||||||||||||||||||||
Balance, December 31, 2011
|
23,658 | $ | 24 | $ | 271,220 | $ | 7,007 | $ | (520 | ) | $ | (128,102 | ) | $ | 149,629 | |||||||||||||
Employee stock compensation plans, net
|
114 | – | 1,290 | – | – | – | 1,290 | |||||||||||||||||||||
Issuance of common stock, net of issuance costs
|
– | – | (174 | ) | – | – | – | (174 | ) | |||||||||||||||||||
Issuance and modification of warrant
|
– | – | – | 1,413 | – | – | 1,413 | |||||||||||||||||||||
Net loss
|
– | – | – | – | – | (111,029 | ) | (111,029 | ) | |||||||||||||||||||
Other comprehensive income
|
– | – | – | – | 484 | – | 484 | |||||||||||||||||||||
Balance, December 31, 2012
|
23,772 | $ | 24 | $ | 272,336 | $ | 8,420 | $ | (36 | ) | $ | (239,131 | ) | $ | 41,613 | |||||||||||||
Employee stock compensation plans, net
|
304 | – | 1,047 | – | – | – | 1,047 | |||||||||||||||||||||
Issuance of common stock, net of issuance costs
|
– | – | (4 | ) | – | – | – | (4 | ) | |||||||||||||||||||
Net loss
|
– | – | – | – | – | (10,706 | ) | (10,706 | ) | |||||||||||||||||||
Other comprehensive loss
|
– | – | – | – | (394 | ) | – | (394 | ) | |||||||||||||||||||
Balance, December 31, 2013
|
24,076 | $ | 24 | $ | 273,379 | $ | 8,420 | $ | (430 | ) | $ | (249,837 | ) | $ | 31,556 |
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Cash flows from operating activities:
|
|
|
||||||
Net loss
|
$ | (10,706 | ) | $ | (111,029 | ) | ||
Less: Loss from discontinued operations
|
(1,862 | ) | (17,779 | ) | ||||
Loss from continuing operations
|
(8,844 | ) | (93,250 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
11,333 | 11,102 | ||||||
Stock-based compensation expense
|
1,034 | 1,252 | ||||||
Non-cash interest expense
|
1,162 | 2,002 | ||||||
Deferred income tax expense
|
– | (961 | ) | |||||
Goodwill impairment
|
– | 82,013 | ||||||
Other
|
(6 | ) | 263 | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
2,464 | 2,253 | ||||||
Inventories
|
1,205 | (1,257 | ) | |||||
Prepaid expenses and other assets
|
(308 | ) | (100 | ) | ||||
Accounts payable
|
(437 | ) | 943 | |||||
Accrued expenses and other liabilities
|
(970 | ) | 1,602 | |||||
Net cash provided by operating activities
|
6,633 | 5,862 | ||||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(4,793 | ) | (4,038 | ) | ||||
Purchases of bottles, net of disposals
|
(2,507 | ) | (1,291 | ) | ||||
Proceeds from the sale of property and equipment
|
38 | 81 | ||||||
Additions to and acquisitions of intangible assets
|
(45 | ) | (663 | ) | ||||
Net cash used in investing activities
|
(7,307 | ) | (5,911 | ) | ||||
Cash flows from financing activities:
|
||||||||
Borrowings under revolving credit facilities
|
91,135 | 46,194 | ||||||
Payments under revolving credit facilities
|
(95,067 | ) | (53,617 | ) | ||||
Borrowings under Comvest Term loans
|
5,500 | 15,150 | ||||||
Note payable and capital lease payments
|
(15 | ) | (14 | ) | ||||
Debt issuance costs
|
(797 | ) | (2,203 | ) | ||||
Proceeds from sale of common stock, net of issuance costs
|
(4 | ) | (491 | ) | ||||
Stock option and employee stock purchase activity, net
|
130 | 39 | ||||||
Net cash provided by financing activities
|
882 | 5,058 | ||||||
Net increase in cash
|
208 | 5,009 | ||||||
Cash, beginning of year
|
234 | 751 | ||||||
Effect of exchange rate changes on cash
|
(104 | ) | 9 | |||||
Cash provided by (used in) discontinued operations from:
|
||||||||
Operating activities
|
56 | (5,226 | ) | |||||
Investing activities
|
– | (309 | ) | |||||
Cash provided by (used in) discontinued operations
|
56 | (5,535 | ) | |||||
Cash, end of period
|
$ | 394 | $ | 234 |
1.
|
Description of Business and Significant Accounting Policies
|
Beginning Balance
|
Amounts Charged or (Credited) to Expense
|
Deductions
|
Ending Balance
|
|||||||||||||
Year ended December 31, 2013
|
$ | 792 | (275 | ) | (196 | ) | $ | 321 | ||||||||
Year ended December 31, 2012
|
$ | 471 | 410 | (89 | ) | $ | 792 |
2.
|
Goodwill and Other Impairments
|
Water
|
||||
Balance at December 31, 2011
|
$ | 78,823 | ||
Goodwill impairment
|
(79,146 | ) | ||
Effect of foreign currency translation
|
323 | |||
Balance at December 31, 2012
|
$ | – |
3.
|
Intangible Assets
|
2014
|
1,222 | |||
2015
|
1,006 | |||
2016
|
871 | |||
2017
|
852 | |||
2018
|
848 | |||
Thereafter
|
5,843 | |||
Total
|
$ | 10,642 |
4.
|
Omnifrio Acquisition and Discontinued Operations
|
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
|
|
|||||||
Net sales
|
$ | 2,706 | $ | 363 | ||||
Operating costs and expenses:
|
||||||||
Cost of sales
|
3,020 | 3,491 | ||||||
Selling, general and administrative
|
479 | 1,600 | ||||||
Other operating income
|
– | (2,457 | ) | |||||
Depreciation and amortization
|
– | 650 | ||||||
Goodwill and other impairments
|
1,069 | 14,742 | ||||||
Loss on disposal of fixed assets
|
– | 116 | ||||||
Total operating costs and expenses
|
4,568 | 18,142 | ||||||
Loss from discontinued operations
|
$ | (1,862 | ) | $ | (17,779 | ) |
5.
|
Bottles
|
2013
|
2012
|
|||||||
Cost
|
$ | 4,535 | $ | 4,439 | ||||
Less accumulated depreciation
|
(431 | ) | (601 | ) | ||||
$ | 4,104 | $ | 3,838 |
6.
|
Property and Equipment
|
2013
|
2012
|
|||||||
Leasehold improvements
|
$ | 87 | $ | 87 | ||||
Machinery and equipment
|
8,347 | 8,046 | ||||||
Vending equipment
|
24,083 | 21,757 | ||||||
Racks and display panels
|
33,562 | 32,452 | ||||||
Office furniture and equipment
|
234 | 234 | ||||||
Software and computer equipment
|
3,972 | 3,738 | ||||||
Equipment not in service
|
1,525 | 1,396 | ||||||
71,810 | 67,708 | |||||||
Less accumulated depreciation and amortization
|
(33,176 | ) | (25,761 | ) | ||||
$ | 38,634 | $ | 41,947 |
7.
|
Accrued Expenses and Other Current Liabilities
|
2013
|
2012
|
|||||||
Accrued payroll and related items
|
$ | 335 | $ | 351 | ||||
Accrued severance
|
164 | 363 | ||||||
Accrued professional and other expenses
|
1,405 | 1,905 | ||||||
Accrued interest
|
229 | 219 | ||||||
Accrued sales tax payable
|
217 | 351 | ||||||
Customer bottle deposits
|
708 | 773 | ||||||
Other
|
322 | 343 | ||||||
$ | 3,380 | $ | 4,305 |
8.
|
Debt, Capital Leases and Notes Payable
|
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Senior revolving credit facility
|
$ | 3,145 | $ | 7,077 | ||||
Comvest Term Loans, net of discount
|
19,496 | 14,145 | ||||||
Notes payable and capital leases
|
29 | 44 | ||||||
22,670 | 21,266 | |||||||
Less current portion
|
(16 | ) | (15 | ) | ||||
Long-term debt, notes payable and
capital leases, net of current portion
|
$ | 22,654 | $ | 21,251 |
2014
|
$ | 16 | ||
2015
|
3,156 | |||
2016
|
21,001 | |||
2017
|
– | |||
$ | 24,173 | |||
Less: amounts representing interest
|
(1 | ) | ||
$ | 24,172 |
9.
|
Stockholders’ Equity
|
Warrants
|
Weighted
Average
Exercise Price
|
Weighted Average Remaining Life (Years)
|
||||||||||
Warrants outstanding, December 31, 2011
|
871 | $ | 12.23 |
|
||||||||
Granted
|
1,731 | $ | 1.28 | |||||||||
Warrants outstanding, December 31, 2012
|
2,602 | $ | 4.95 | 6.34 | ||||||||
Warrants outstanding, December 31, 2013
|
2,602 | $ | 4.95 | 5.34 |
10.
|
Stock-Based Compensation
|
2013
|
2012
|
||
Expected life of options in years
|
6.3
|
|
5.5 - 6.3
|
Risk-free interest rate
|
1.1% - 2.0%
|
0.8% - 1.0%
|
|
Expected volatility
|
47.0%
|
|
46.0% - 48.0%
|
Dividend yield
|
0.0%
|
0.0%
|
Options
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining Life (Years)
|
Aggregate Intrinsic Value
|
|||||||||||||
Options outstanding, December 31, 2012
|
1,350 | $ | 3.93 |
|
|
|||||||||||
Granted
|
250 | $ | 2.07 |
|
|
|||||||||||
Exercised
|
(53 | ) | $ | 1.26 |
|
|
||||||||||
Forfeited
|
(160 | ) | $ | 4.27 |
|
|
||||||||||
Options outstanding, December 31, 2013
|
1,387 | $ | 3.66 | 8.0 | $ | 1,355 | ||||||||||
Options vested and expected to vest, December 31, 2013
|
1,289 | $ | 3.79 | 7.9 | $ | 1,248 | ||||||||||
Options exercisable, December 31, 2013
|
595 | $ | 5.89 | 6.9 | $ | 492 |
Number of
Shares
|
Weighted Average
Grant Date Price
Per Share
|
|||||||
Unvested at December 31, 2012
|
173 | $ | 5.49 | |||||
Granted
|
80 | $ | 1.44 | |||||
Vested
|
(189 | ) | $ | 4.09 | ||||
Forfeited
|
(1 | ) | $ | 12.45 | ||||
Unvested at December 31, 2013
|
63 | $ | 4.36 |
11.
|
Commitments and Contingencies
|
2014
|
$ | 412 | ||
2015
|
142 | |||
2016
|
53 | |||
2017
|
37 | |||
2018
|
37 | |||
Thereafter
|
81 | |||
Total
|
$ | 762 |
12.
|
Income Taxes
|
2013
|
2012
|
|||||||
Federal statutory taxes
|
34.0 | % | 34.0 | % | ||||
State income taxes, net of federal tax benefit
|
3.8 | % | 4.0 | % | ||||
Foreign taxes less than the domestic rate
|
(0.4 | %) | (1.2 | %) | ||||
Permanent differences
|
(0.2 | %) | 0.0 | % | ||||
Change in valuation allowance
|
(27.6 | %) | (34.8 | %) | ||||
Changes in rates
|
(9.1 | %) | 0.0 | % | ||||
Other
|
(0.5 | %) | (1.0 | %) | ||||
0.0 | % | 1.0 | % |
2013
|
2012
|
|||||||
Deferred tax assets:
|
||||||||
Federal net operating loss carryforward
|
$ | 40,308 | $ | 34,868 | ||||
State loss carryforward
|
3,943 | 3,860 | ||||||
Goodwill
|
24,528 | 27,961 | ||||||
Other intangible assets
|
3,651 | 3,844 | ||||||
Allowance for bad debts
|
533 | 637 | ||||||
Stock-based compensation
|
1,473 | 1,214 | ||||||
Accrued expenses
|
62 | 140 | ||||||
Inventory
|
75 | 93 | ||||||
Fixed assets
|
662 | 77 | ||||||
Other
|
1,076 | 941 | ||||||
Total gross deferred tax assets
|
76,311 | 73,635 | ||||||
Deferred tax liabilities:
|
||||||||
Fixed assets
|
- | |||||||
Goodwill
|
- | |||||||
Total gross deferred tax liabilities
|
- | |||||||
Valuation allowance
|
(76,311 | ) | (73,635 | ) | ||||
Total net deferred liability
|
$ | - | $ | - |
13.
|
Fair Value Measurements
|
•
|
Level 1 — quoted prices in active markets for identical assets and liabilities.
|
•
|
Level 2 — observable inputs other than quoted prices in active markets for identical assets and liabilities.
|
•
|
Level 3 — unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.
|
Fair value measurements
using signficant unobservable inputs (Level 3)
|
||||
Description
|
Omnifrio Milestone
payments
|
|||
Balance at December 31, 2011
|
$ | 2,559 | ||
Change in value of milestones, included in loss from discontinued operations
|
(2,559 | ) | ||
Balance at December 31, 2012
|
$ | – | ||
Change in value of milestones, included in loss from discontinued operations
|
$ | – | ||
Balance at December 31, 2013
|
$ | – |
14.
|
Segments
|
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Segment net sales
|
||||||||
Water
|
$ | 63,828 | $ | 62,667 | ||||
Dispensers
|
27,381 | 28,812 | ||||||
$ | 91,209 | $ | 91,479 | |||||
Segment income (loss) from operations
|
||||||||
Water
|
$ | 17,591 | $ | 16,477 | ||||
Dispensers
|
827 | (1,319 | ) | |||||
Corporate
|
(10,727 | ) | (11,468 | ) | ||||
Non-recurring costs
|
(777 | ) | (743 | ) | ||||
Depreciation and amortization
|
(11,333 | ) | (11,102 | ) | ||||
Goodwill and other impairments
|
– | (82,013 | ) | |||||
$ | (4,419 | ) | $ | (90,168 | ) | |||
Depreciation and amortization expense:
|
||||||||
Water
|
$ | 10,057 | $ | 9,777 | ||||
Dispensers
|
575 | 633 | ||||||
Corporate
|
701 | 692 | ||||||
$ | 11,333 | $ | 11,102 | |||||
Capital expenditures:
|
||||||||
Water
|
$ | 6,964 | $ | 4,315 | ||||
Dispensers
|
62 | 910 | ||||||
Corporate
|
274 | 104 | ||||||
$ | 7,300 | $ | 5,329 |
At December 31,
|
||||||||
Identifiable assets:
|
2013
|
2012
|
||||||
Water
|
$ | 58,057 | $ | 65,483 | ||||
Dispensers
|
9,757 | 9,490 | ||||||
Corporate
|
2,932 | 3,761 | ||||||
Assets of disposal group held for sale
|
225 | 3,041 | ||||||
$ | 70,971 | $ | 81,775 |
15.
|
Supplemental Cash Flow Information
|
Year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Cash paid for interest
|
$ | 3,278 | $ | 1,841 | ||||
Noncash investing activities:
|
||||||||
Accrued capital expenditures
|
$ | 1,313 | $ | 1,090 |
16.
|
Employee Retirement Savings Plan
|
17.
|
Subsequent Events
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Controls and Procedures
|
Other Information
|
Directors, Executive Officers and Corporate Governance
|
Executive Compensation
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Certain Relationships and Related Transactions, and Director Independence
|
Principal Accountant Fees and Services
|
Exhibits and Financial Statement Schedules
|
a)
|
Financial Information
|
|
|
(1)
|
Financial Statements: See “Index to Consolidated
Financial Statements” in Part II, Item 8 of this
Form 10-K.
|
|
||
|
(2)
|
Financial Statement Schedule: Information required by this item is included within the consolidated financial statements
|
|
(3)
|
Exhibits
|
|
||
|
|
See (b) below.
|
b)
|
Exhibits
|
|
|
|
See Exhibit Index on page 78.
|
Exhibit
Number
|
Description
|
3.1
|
Sixth Amended and Restated Certificate of Incorporation of Primo Water Corporation (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-173554) filed on May 31, 2011)
|
3.2
|
Amended and Restated Bylaws of Primo Water Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed November 16, 2010)
|
4.1
|
Specimen Certificate representing shares of common stock of Primo Water Corporation (incorporated by reference to Exhibit 4.1 to Amendment No. 5 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed August 11, 2010)
|
4.2
|
Form of Indenture relating to the issuance from time to time in one or more series of debentures, notes, bonds or other evidences of indebtedness (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-3 (File No. 333-178820) filed on December 21, 2011)
|
10.1
|
Form of Subordinated Convertible Debt – Common Stock Purchase Warrant, dated as of December 30, 2009 (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed April 26, 2010)
|
10.2
|
2004 Stock Plan (incorporated by reference to Exhibit 10.15 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed April 26, 2010)*
|
10.3
|
2010 Omnibus Long-Term Incentive Plan (“2010 Omnibus Plan”) (incorporated by reference to Exhibit 10.16 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed April 26, 2010)*
|
10.4
|
Form of Option Agreement under 2010 Omnibus Plan (incorporated by reference to Exhibit 10.17 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed April 26, 2010)*
|
10.5
|
Form of Restricted Stock Award Agreement under 2010 Omnibus Plan (incorporated by reference to Exhibit 10.18 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed April 26, 2010)*
|
10.6
|
2010 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed April 26, 2010)*
|
10.7
|
Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed August 12, 2011)*
|
10.8
|
Form of Indemnification Agreement for Directors (incorporated by reference to Exhibit 10.26 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed April 26, 2010)*
|
10.9
|
Form of Amended and Restated Series B Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.43 to Amendment No. 7 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed October 6, 2010)
|
10.10
|
Form of Amended and Restated Series C Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.44 to Amendment No. 7 to the Company’s Registration Statement on Form S-1 (Registration No. 333-165452) filed October 6, 2010)
|
10.11
|
Registration Rights Agreement dated November 10, 2010 between the Company and Culligan International Company (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 16, 2010)
|
10.12
|
Asset Purchase Agreement dated March 8, 2011 by and among the Company, Omnifrio Beverage Company, LLC and the other parties thereto (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed March 9, 2011)
|
10.13
|
Form of Restricted Stock Unit Award Agreement under 2010 Omnibus Plan (incorporated by reference to Exhibit 10.30 to the Company’s Form 10-K filed March 30, 2011)*
|
10.14
|
Registration Rights Agreement dated April 11, 2011 between the Company and Omnifrio Beverage Company, LLC (incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K filed April 12, 2011)
|
10.15
|
Loan and Security Agreement dated April 30, 2012 by and among the Company, certain subsidiaries of the Company party thereto, the lenders party thereto and TD Bank, N.A., as arranger and syndication agent and bookrunner for the lenders thereunder (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed May 2, 2012)
|
10.16
|
Credit and Security Agreement dated as of April 30, 2012 by and among the Company, certain subsidiaries of the Company party thereto and Comvest Capital II, L.P. (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed May 2, 2012)
|
10.17
|
Term Note dated as of April 30, 2012 by and among the Company, certain subsidiaries of the Company party thereto and Comvest Capital II, L.P. (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed May 2, 2012)
|
10.18
|
Form of Warrant to Purchase Common Stock dated as of April 30, 2012 (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed May 2, 2012)
|
10.19
|
Registration Rights Agreement dated as of April 30, 2012 by and among the Company and certain holders of warrants issued by the Company on April 30, 2012 (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed May 2, 2012)
|
10.20
|
Amended and Restated 2010 Omnibus Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2012) *
|
10.21
|
Amendment No. 1 to 2010 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2012) *
|
10.22
|
First Amendment to Credit and Security Agreement dated as of November 6, 2012 by and among the Company, certain subsidiaries of the Company party thereto and Comvest Capital II, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed November 8, 2012)
|
10.23
|
First Amendment to Warrant dated as of November 6, 2012 by and between the Company and Comvest Capital II, L.P. (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed November 8, 2012)
|
10.24
|
Amendment No. 1 to Loan and Security Agreement and Consent dated as of February 21, 2013 between the Company and TD Bank, N.A., as agent for the lenders thereunder (incorporated by reference to Exhibit 99.1 to the Company’s Form 10-K filed March 15, 2013)
|
10.25
|
Primo Water Corporation Value Creation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 14, 2013)*
|
10.26
|
Primo Water Corporation 2013 Annual Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed August 14, 2013)*
|
10.27
|
Amended and Restated Employment Agreement dated as of June 10, 2013 between the Company and Billy D. Prim (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed June 14, 2013)*
|
10.28
|
Amended and Restated Employment Agreement dated as of June 10, 2013 between the Company and Mark Castaneda (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed June 14, 2013)*
|
10.29
|
Employment Agreement dated as of June 10, 2013 between the Company and Matthew T Sheehan (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed June 14, 2013)*
|
*
|
Indicates management contract or compensatory plan or arrangement
.
|
†
|
Confidential treatment has been granted with respect to portions of this exhibit, indicated by asterisks, which have been filed separately with the Securities and Exchange Commission.
|
PRIMO WATER CORPORATION
|
||
Dated: March 17, 2014
|
By:
|
/s/ Billy D. Prim
|
Billy D. Prim
|
||
Chairman and Chief Executive Officer
|
Signature
|
Capacity
|
Date
|
||
/s/ Billy D. Prim
|
Chairman and Chief Executive Officer
|
March 17, 2014
|
||
Billy D. Prim
|
(Principal Executive Officer)
|
|||
/s/ Mark Castaneda
|
Chief Financial Officer (Principal
|
March 17, 2014
|
||
Mark Castaneda
|
Financial Officer)
|
|||
/s/ David J. Mills
|
Vice President of Finance (Principal Accounting Officer)
|
March 17, 2014
|
||
David J. Mills
|
||||
/s/ Richard A. Brenner
|
Director
|
March 17, 2014
|
||
Richard A. Brenner
|
||||
/s/ Jack C. Kilgore
|
Director
|
March 17, 2014
|
||
Jack C. Kilgore
|
||||
/s/ Malcolm McQuilkin
|
Director
|
March 17, 2014
|
||
Malcolm McQuilkin
|
||||
/s/ David L. Warnock
|
Director
|
March 17, 2014
|
||
David L. Warnock
|
||||
/s/ Susan E. Cates
|
Director
|
March 17, 2014
|
||
Susan E. Cates
|
January 1, 2014
|
Warrant Number DSW-1
|
|
(A)
|
If to the Company:
|
|
Primo Water Corporation
|
|
104 Cambridge Plaza Drive
|
|
Winston-Salem, NC 27104
|
|
Attention: Chief Executive Officer
|
|
Email: bprim@primowater.com
|
|
With a copy to:
|
|
K&L Gates LLP
|
|
4350 Lassiter at North Hills Avenue
|
|
Suite 300
|
|
Raleigh, North Carolina 27609
|
|
Attention: D. Scott Coward, Esq.
|
|
Email:
scott.coward@klgates.com
|
|
(B)
|
If to the Holder:
|
|
DS Waters of America, Inc.
|
|
5660 New Northside Drive, Suite 500
|
|
Atlanta, GA 30328
|
|
Attention: Chief Executive Officer
|
|
Email: tharrington@water.com
|
|
With a copy to:
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DS Waters of America, Inc.
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5660 New Northside Drive, Suite 500
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Atlanta, GA 30328
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Attention: Chief Legal Officer
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Email: rowens@water.com
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PRIMO WATER CORPORATION
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By:
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/s/ Billy D. Prim
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Name: Billy D. Prim
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Title: CEO
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$
2,500,000
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January 13, 2014
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PRIMO WATER CORPORATION
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By:
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/s/ Mark Castaneda
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Name:
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Mark Castaneda
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Title:
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Chief Financial Officer
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PRIMO PRODUCTS, LLC
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By:
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/s/ Mark Castaneda
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Name:
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Mark Castaneda
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Title:
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Chief Financial Officer
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PRIMO DIRECT, LLC
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By:
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/s/ Mark Castaneda
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Name:
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Mark Castaneda
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Title:
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Chief Financial Officer
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PRIMO REFILL, LLC
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By:
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/s/ Mark Castaneda
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Name:
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Mark Castaneda
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Title:
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Chief Financial Officer
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PRIMO ICE, LLC
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By:
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/s/ Mark Castaneda
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Name:
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Mark Castaneda
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Title:
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Chief Financial Officer
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·
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All full-time employees of the Company hired before the first day of the last calendar quarter of the Plan Year shall be eligible to be selected by the Committee to participate in the Plan for such Plan Year.
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·
|
Participation in the Plan in one Plan Year does not guarantee participation in a later Plan Year.
|
|
·
|
The Committee may make a determination with respect to an employee’s eligibility or ineligibility to participate in the Plan at any time without prior notice;
provided
,
however
, that no later than 90 days after the beginning of a Plan Year, the Committee will determine which Company employees are likely to be “covered employees” within the meaning of Code Section 162(m)(3), as qualified by Section 12.4 of the Omnibus Plan (“
Covered Employees
”), for the calendar year in which awards for the Plan Year will be paid. Awards for Covered Employees are subject to special terms and conditions, as noted in the Plan.
|
|
·
|
No later than 90 days after the beginning of a Plan Year, the Committee will establish in writing the (1) objective performance criteria, targeted level of performance, and formula for calculating awards applicable for the Plan Year by adopting a new
Appendix A
to the Plan, and (2) formula for calculating the award for each individual Covered Employee by adopting a new
Appendix B
to the Plan.
|
|
·
|
The performance criteria used to determine awards for Covered Employees shall be established in accordance with Sections 12.2.1 and 12.2.2 of the Omnibus Plan.
|
|
·
|
The Committee may adopt more than one performance criteria, performance level, and award formula for a given Plan Year.
|
|
·
|
The Committee may change the performance criteria, performance levels, and award formulas for a given Plan Year at any time;
provided
,
however
, that, with respect to Covered Employees, any such adjustments may not be made after the first 90 days of the Plan Year if the effect would be to potentially increase the amount of incentive compensation earned under a Covered Employee’s applicable individual award formula. Further, with respect to Covered Employees, the Committee may specify that any one or more of the following items will be excluded for the purposes of measuring a specified performance goal, so long as such exclusion(s) are specified in advance during the first 90 days of the Plan Year and set forth in writing on
Appendix B
: the impact of charges for restructuring, discontinued operations, extraordinary items, and other unusual non-recurring items, and the cumulative effects of tax or accounting changes (each as defined by generally accepted accounting principles and as identified in the Company’s financial statements or other SEC filings).
|
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·
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Awards will be calculated after year-end financial results are known, generally after completion of the audited financial statements.
|
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·
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Prior to payment of any awards to Covered Employees, the Committee shall certify in writing that the performance criteria and targeted level of performance have been satisfied for the Plan Year.
|
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·
|
With respect to employees selected to participate in the Plan other than Covered Employees, individual awards issued under the Plan are based on Company, team and employee specific performance. The amount and form of a participant’s award, if any, and the performance conditions applicable to the award will be recommended by the CEO and finally determined and approved by Committee in its sole discretion.
|
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·
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With respect to each Covered Employee, his or her individual award amount will be based solely his or her individual award formula set forth on
Appendix B
;
provided
,
however
, that the Committee in its sole discretion may reduce (but in no case increase) such amount for the Covered Employee based on Company, team and employee specific performance.
|
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·
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Awards under the Plan may be made in cash, restricted stock/restricted stock units, stock appreciation rights, and/or options, or any combination thereof, in the sole discretion of the Committee. Any awards paid in restricted stock/restricted stock units, stock appreciation rights, and/or options (“
equity awards
”) will be granted pursuant to the Omnibus Plan, and may be subject to other terms and conditions, as described below. In this regard, with respect to any Covered Employee, the Committee may determine to deliver the amount of the Covered Employee’s individual award in the form of an equity award, subject to the following provisions:
|
|
o
|
If and to the extent the Committee determines to deliver all or a portion of a Covered Employee’s award in the form of restricted stock/restricted stock units, the whole number of such restricted stock shares/units shall be determined by dividing the dollar value of the portion of the award to be delivered in the form of restricted stock shares/units by the closing price of the Company’s common stock on the trading day prior to the award date, and rounding down to the next whole share/unit.
|
|
o
|
If and to the extent the Committee determines to deliver all or a portion of a Covered Employee’s award in the form of stock options or stock appreciation rights, such stock options or stock appreciation rights will be granted in a manner such that they qualify as performance based compensation for purposes of Section 162(m) of the Code.
|
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·
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All awards are dependent on the Company being in compliance (including via waiver) with all applicable loan agreements, as such may be amended.
|
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·
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The Committee shall review and approve equity awards at its first meeting following the calculation of the award.
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·
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Equity awards shall be subject to the terms of the Omnibus Plan and the terms of an award agreement between the Company and the participant.
|
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·
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Equity awards may be subject to additional conditions or vesting requirements, including continued periods of service beyond the performance period, in the sole discretion of the Committee.
|
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·
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All equity awards made under this Plan shall be valued for such purpose at the closing price on the trading day prior to the award date. Options will be valued using a Black-Scholes model, consistent with the Company’s accounting practices.
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·
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A participant who leaves the Company voluntarily, is dismissed for Cause (as defined in the Omnibus Plan), or is otherwise terminated by the Company at any time prior to payment shall forfeit all rights to his/her current-year award.
|
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·
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With respect to Plan participants other than Covered Employees and notwithstanding the immediately preceding bullet point, a participant who separates employment because of death, Disability, retirement in good standing or Change in Control (“Disability” and “Change in Control” have the same meanings as set forth in the Omnibus Plan) shall remain eligible for consideration for a current-year award, at the sole discretion of the Committee. Further, in the event of a participant’s termination in connection with a Change in Control or retirement from the Company in good standing prior to the end of a fiscal year, the Committee in its sole discretion may award the participant a full or pro-rata share of his or her current-year award. In the case of a participant’s death, any payments shall be made to the participant’s estate. Upon any separation as described above, any and all awards for the current year shall be at the sole discretion of the Committee.
|
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·
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With respect to Covered Employees, an award may be granted following a separation of employment before the end of the Plan Year, so long as the amount of such award is based on (i) the performance criteria, performance levels, and award formulas for the Plan Year as approved during the first 90 days of the Plan Year and (ii) the Company’s actual performance during the Plan Year against the performance goals, as certified by the Committee;
provided
,
however
, that upon a separation of employment due to death, Disability, or a Change in Control of the Company, the amount of any such award may be based on other criteria determined by the Committee, such as the target amount of such award.
|
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·
|
Treatment upon separation of employment of any equity awards granted as a result of participation in the Plan shall be subject to the terms of the Omnibus Plan and the applicable award agreement.
|
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·
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Nothing contained in this Plan shall give any employee the right to be retained in the employment of the Company or effect the right of the Company to relocate, change positions, or dismiss any employee, in its sole discretion.
|
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·
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The Committee reserves the right, in its sole discretion, to make adjustments to the Plan or to individual awards when it believes the integrity, purpose and fairness of the Plan would be better served, subject to the limitations in the Plan on making adjustments with respect to Covered Employees. Any decisions of the Committee shall be conclusive and binding on all parties.
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·
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It is intended that the Plan be ongoing, however, it may be necessary for the Board to amend or terminate the Plan at any time without prior notification.
|
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·
|
The Plan and any payments provided hereunder are intended to comply with, or be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended from time to time (including any valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder) (“
Section 409A
”). The Plan shall in all respects be interpreted, operated, and administered in accordance with this intent. Payments provided under the Plan may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption, including to the maximum extent possible, exemptions for separation pay due to an involuntary separation from service and/or short-term deferrals. Any payments provided under the Plan to be made upon a termination of service that constitute deferred compensation subject to Section 409A shall only be made if such termination of service constitutes a “separation from service” under Section 409A. Each installment payment provided under the Plan shall be treated as a separate identified payment for purposes of Section 409A. The Company makes no representations or warranties that the payments provided under the Plan comply with, or are exempt from, Section 409A, and in no event shall the Company be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by a participant on account of non-compliance with Section 409A. If a participant is a “specified employee” under Section 409A at the time of the participant’s termination of service, any payments to be made upon a termination of service that constitute deferred compensation subject to Section 409A and that are scheduled to be made within six months following the participant’s termination date shall be delayed, without interest, and paid in a lump sum on the earlier of (i) the first payroll date to occur following the six-month anniversary of the participant’s termination date, or (ii) the participant’s death, and any payments otherwise scheduled to be made thereafter shall be made in accordance with their original schedule.
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·
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The Company shall have the authority, duty, and power to withhold from any award under this Plan the amount of any applicable federal, state, and local tax required to be withheld by the Company pursuant to any applicable laws or regulations.
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Name of Subsidiary
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State/Province of Incorporation
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Primo Products, LLC
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North Carolina
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Primo Direct, LLC
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North Carolina
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Primo Refill, LLC
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North Carolina
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Primo Ice, LLC
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North Carolina
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Primo Refill Canada Corporation
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British Columbia, Canada
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1.
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I have reviewed this annual report on Form 10-K of Primo Water Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Billy D. Prim
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Billy D. Prim
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Chairman and Chief Executive Officer
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1.
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I have reviewed this annual report on Form 10-K of Primo Water Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Mark Castaneda
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Mark Castaneda
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Chief Financial Officer
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Billy D. Prim
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/s/ Mark Castaneda
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Billy D. Prim
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Mark Castaneda
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Chairman and Chief Executive Officer
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Chief Financial Officer
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March 17, 2014
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March 17, 2014
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