Primo Water Announces Results for the First Quarter Ended March 31, 2013 WINSTON-SALEM, N.C., May 14, 2013 (GLOBE NEWSWIRE) -- Primo Water Corporation (Nasdaq:PRMW), a leading provider of multi-gallon purified bottled water, self-serve filtered drinking water and water dispensers, today announced financial results for the first quarter ended March 31, 2013. Business Highlights: oQ1 sales increased 12.8% to $22.3 million compared to the prior year driven by strong Dispenser segment sales growth. oTotal adjusted EBITDA for Q1 increased 57.9% to $1.9 million compared to $1.2 million in Q1 of the prior year. oWater dispenser unit sell-thru to consumers increased 11.6% to 104,200 units for Q1 compared to Q1 of the prior year. oWater gross margin improved sequentially to 32.3% in Q1 of 2013 from 30.9% in Q4 2012. oGenerated $4.0 million in cash flow from operations and $2.6 million in free cash flow during the quarter compared to $1.1 million and $0.2 million in the prior year's first quarter, respectively. "We exceeded our expectations for sales and operating results in the first quarter of 2013 and reported our fifth consecutive quarter of positive adjusted EBITDA as we focused on execution and cost improvements across our core businesses," commented Billy D. Prim, Primo Water's President and Chief Executive Officer. "We are optimistic about our growth opportunities in 2013 as we further expand our distribution network while optimizing our corporate expense structure to realize additional operating efficiencies, improve cash flow and adjusted EBITDA." First Quarter Results Total net sales increased 12.8% to $22.3 million compared to $19.8 million in the first quarter of 2012. The increase in net sales was driven by a $2.6 million increase in Dispenser sales. Dispenser segment sales for the first quarter of 2013 increased 53.7% to $7.4 million compared to $4.8 million in the first quarter of 2012. The increase was due to the increase in the number of retail locations offering dispensers, increased sell thru of dispenser units and better than expected dispenser sell-in orders as retailers pulled orders forward to the first quarter. Dispenser unit sales to retailers increased by 19.1% for the first quarter compared to the same period in the prior year. The dispenser unit sales to consumers increased 11.6% for the first quarter compared to the same period in the prior year. This represents thirteen consecutive quarters of positive quarter-over-quarter growth in consumer purchases. Sales increased at a greater level than unit sales due to the increase in sales mix for higher priced dispensers and a price increase implemented last year. The Company believes that increased water dispenser penetration will lead to increased recurring Water sales. Water segment net sales were essentially flat at $14.9 million for the first quarter compared to the prior year. The first quarter is a seasonally slower period for water sales and the Company believes first quarter 2013 sales were also negatively impacted by unfavorable weather.Sales in the Water segment consist of sales of multi-gallon purified bottled water ("Exchange") and self-serve filtered drinking water vending services ("Refill").Water sales were impacted by a 4.0% decline in Refill sales, primarily due to lower empty bottles sales and unfavorable weather conditions. The decrease in Refill sales was offset by an increase of 2.1% in Exchange sales driven bysame-store unit growth of 12.1% forU.S. Exchange services compared to the first quarter of 2012. The following table sets forth information regarding locations where the Company's dispensers and water are sold as well as certain sales information. 1Q13 1Q12 % Change Total locations (thousands) 24.3 24.1 0.8% Dispenser locations (thousands) 8.1 7.4 9.5% Dispenser units sell-in to retail (thousands) 88.9 74.7 19.1% Dispenser units sell-thru (thousands) 104.2 93.3 11.6% Water Locations (thousands) 16.2 16.7 (2.4%) Gross margin percentage decreased to 23.7% for the first quarter from 26.6% for the first quarter of 2012. The decrease was primarily the result of a higher mix of lower-margin Dispensers segment sales. Gross margin for the Dispenser segment increased to 6.3% from 1.0% for the prior year, primarily due to retail price increases that were initiated during the third quarter of 2012. Gross margin for the Water segment decreased to 32.3% for the first quarter compared to 34.9% in the same period in the prior year. The decrease was due to a greater mix of lower-margin Exchange net sales as well as slight decreases in gross margin percentages for Exchange and Refill. Selling, general and administrative ("SG&A") expenses decreased 15.8% to $3.8 million for the first quarter of 2013 from $4.6 million for the first quarter of 2012. In addition, as a percentage of net sales, SG&A decreased to 17.2% for the first quarter of 2013 from 23.0% for the first quarter of 2012. Cash flow from operations increased 279% to $4.0 million from $1.1 million in the first quarter of 2012.The increase in cash flow from operations resulted in free cash flow, defined as net cash provided by operating activities less net cash used in investing activities, of $2.6 million during the first quarter of 2013.The free cash flow allowed the Company to pay down $2.0 million of borrowings outstanding under its senior revolving credit facility. Adjusted EBITDA increased 57.9% to $1.9 million from $1.2 million in the first quarter of 2012.The net loss from continuing operations for the first quarter of 2013 was $(2.4) million or $(0.10) per share, compared to $(3.1) million or $(0.13) per share for the first quarter of the prior year.On a pro forma fully taxed basis, net loss from continuing operations was $(1.0) million or $(0.04) per share, compared to $(1.1) million or $(0.05) per share for the first quarter of 2013 and 2012, respectively. Guidance The Company reiterates its full year 2013 guidance for net sales to increase 2% to 4% or in the range of $93.3 to $95.2 million and full year adjusted EBITDA is expected to range between $9.2 and $9.4 million. The Company continues to expect Water segment revenue to increase 5% to 7% to $65.8 to $67.1 million. The Company expects total second quarter 2013 sales in the range of $21.0 to $22.0 million and adjusted EBITDA in the range of $2.0 to $2.2 million or an increase of 54% to 70% over the second quarter of prior year. Conference Call and Webcast The Company will host a conference call to discuss these results at 4:30 p.m. ET today, May 14, 2013.Participants from the Company will be Billy D. Prim, Chief Executive Officer, Mark Castaneda, Chief Financial Officer, and Matt Sheehan, Chief Operating Officer. The call will be broadcast live over the Internet hosted at the Investor Relations section of Primo Water's website at www.primowater.com, and will be archived online through May 28, 2013.In addition, listeners may dial (866) 712-2329in North America, and international listeners may dial (253) 237-1244. About Primo Water Corporation Primo Water Corporation (Nasdaq:PRMW) is a leading provider of multi-gallon purified bottled water, self-serve filtered drinking water and water dispensers sold through major retailers throughout the United States and Canada. Learn more about Primo Water at www.primowater.com. The Primo Water Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11942 Forward-Looking Statements Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the meaning of the applicable securities laws and regulations. Generally, these statements include our financial guidance and 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 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, changes in the Company's relationships with its independent bottlers, distributors and suppliers, the entry of a competitor with greater resources into the marketplace and competition and other business conditions in the water and water dispenser industries in general, the Company's experiencing product liability, product recall or higher than anticipated rates of warranty expense or sales returns associated with product quality or safety issues, the loss of key Company personnel, changes in the regulatory framework governing the Company's business, the Company's inability to efficiently and effectively integrate acquired businesses with the Company's historical business, the Company's inability to efficiently expand operations and capacity to meet growth, the Company's inability to develop, introduce and produce new product offerings within the anticipated timeframe or at all, the Company's inability to comply with its covenants in its credit facilities, the failure of lenders to honor their commitments under the Company's credit facilities, as well as other risks described more fully in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K filed on March 22, 2013 and its subsequent filings under the Securities Exchange Act of 1934. Forward-looking statements reflect management's analysis as of the date of this press release. The Company does not undertake to revise these statements to reflect subsequent developments, other than in its regular, quarterly earnings releases. Use of Non-U.S. GAAP Financial Measures To supplement its financial statements, the Company provides investors with information related to adjusted EBITDA, free cash flow 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 earnings (loss) from continuing operations before depreciation and amortization; interest expense and other, net; income tax provision; non-cash, stock-based compensation expense; non-recurring and acquisition-related costs; and loss on disposal of assets and other.Free cash flow is defined as net cash provided by operating activities less net cash used in investing actives.Pro forma fully taxed net loss from continuing operations is defined as loss from continuing operations before income taxes less amortization of intangible assets; non-cash, stock-based compensation expense; non-recurring and acquisition related 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 U.S. GAAP. Adjusted EBITDA excludes significant expenses that are required by U.S. GAAP to be recorded in the Company's financial statements and is subject to inherent limitations. Primo Water Corporation Consolidated Statements of Operations (Unaudited; in thousands, except per share amounts) Three months ended March 31, 2013 2012 Net sales $22,328 $19,801 Operating costs and expenses: Cost of sales 17,039 14,528 Selling, general and administrative expenses 3,836 4,554 Non-recurring and acquisition-related costs 13 26 Depreciation and amortization 2,765 2,396 Total operating costs and expenses 23,653 21,504 Loss from operations (1,325) (1,703) Interest expense and other, net 1,043 904 Loss from continuing operations before income taxes (2,368) (2,607) Income tax provision -- 527 Loss from continuing operations (2,368) (3,134) Loss from discontinued operations, net of income taxes (225) (730) Net loss $(2,593) $(3,864) Basic and diluted loss per common share: Loss from continuing operations $(0.10) $(0.13) Loss from discontinued operations (0.01) (0.03) Net loss $(0.11) $(0.16) Basic and diluted weighted average common shares 23,789 23,675 outstanding Primo Water Corporation Pro forma fully taxed net loss from continuing operations (Unaudited; in thousands, except per share amounts) Three months ended March 31, 2013 2012 Loss from continuing operations $(2,368) $(3,134) Income tax (benefit) provision -- 527 Loss from continuing operations before income taxes (2,368) (2,607) Amortization of intangible assets 365 317 Non-cash, stock-based compensation expense 325 411 Non-recurring and acquisition-related costs 13 26 Pro forma effect of full income tax 633 704 Non-GAAP net loss $(1,032) $(1,149) Basic and Diluted non-GAAP net loss per share $(0.04) $(0.05) Basic and diluted shares used to compute non-GAAP net 23,789 23,675 loss per share Primo Water Corporation Segment Information (Unaudited; in thousands) Three months ended March 31, 2013 2012 Segment revenues Water $14,910 $14,974 Dispensers 7,418 4,827 Total revenue 22,328 19,801 Segment income (loss) from operations Water 3,953 4,001 Dispensers 165 (482) Corporate (2,665) (2,800) Adjustments: Non-cash, stock-based compensation expense 325 411 Loss on disposal of assets and other 115 69 Adjusted EBITDA $1,893 $1,199 Primo Water Corporation Consolidated Balance Sheets (in thousands, except par value data) March 31, December 31, 2013 2012 (unaudited) ASSETS Current assets: Cash $215 $234 Accounts receivable, net 9,362 9,894 Inventories 5,750 7,572 Prepaid expenses and other current assets 1,086 812 Current assets of disposal group held for sale 2,285 3,041 Total current assets 18,698 21,553 Bottles, net 3,885 3,838 Property and equipment, net 40,673 41,947 Intangible assets, net 12,063 12,477 Other assets 2,711 1,960 Total assets $78,030 $81,775 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $11,766 $11,455 Accrued expenses and other current liabilities 4,321 4,305 Current portion of capital leases and notes payable 15 15 Current liabilities of disposal group held for sale 1,017 2,784 Total current liabilities 17,119 18,559 Long-term debt, capital leases and notes payable, net 19,384 21,251 of current portion Other long-term liabilities 316 352 Liabilities of disposal group held for sale, net of 2,000 – current portion Total liabilities 38,819 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, 23,826 and 23,772 shares issued and 24 24 outstandingat March 31, 2013 and December 31, 2012, respectively Additional paid-in capital 272,650 272,336 Common stock warrants 8,420 8,420 Accumulated deficit (241,724) (239,131) Accumulated other comprehensive loss (159) (36) Total stockholders' equity 39,211 41,613 Total liabilities and stockholders' equity $78,030 $81,775 Primo Water Corporation Consolidated Statements of Cash Flows (in thousands) Three months ended March 31, 2013 2012 Cash flows from operating activities: Net loss $(2,593) $(3,864) Less: Loss from discontinued operations (225) (730) Loss from continuing operations (2,368) (3,134) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 2,765 2,396 Stock-based compensation expense 325 411 Non-cash interest expense 305 675 Deferred income tax expense – 527 Bad debt expense (131) (69) Other 37 (9) Changes in operating assets and liabilities: Accounts receivable 632 575 Inventories 1,818 1,475 Prepaid expenses and other assets 128 (549) Accounts payable 443 (446) Accrued expenses and other liabilities 36 (800) Net cash provided by operating activities 3,990 1,052 Cash flows from investing activities: Purchases of property and equipment (687) (1,041) Purchases of bottles, net of disposals (709) 216 Proceeds from the sale of property and equipment 1 6 Additions to and acquisitions of intangible (25) (47) assets Net cash used in investing activities (1,420) (866) Cash flows from financing activities: Borrowings under revolving credit facilities 19,955 500 Payments under revolving credit facilities (21,987) (340) Note payable and capital lease payments (4) (4) Debt issuance costs (11) (498) Stock option and employee stock purchase (12) (8) activity, net Net cash used in financing activities (2,059) (350) Net increase (decrease) in cash 511 (164) Cash, beginning of year 234 751 Effect of exchange rate changes on cash (20) (40) Cash used in discontinued operations from: Operating activities (510) (168) Cash used in discontinued operations (510) (168) Cash, end of period $215 $379 Primo Water Corporation EBITDA and Adjusted EBITDA Reconciliation (Unaudited; in thousands, except per share amounts) Three months ended March 31, 2013 2012 Loss from continuing operations $(2,368) $(3,134) Depreciation and amortization 2,765 2,396 Interest expense and other, net 1,043 904 Income tax provision – 527 EBITDA 1,440 693 Non-cash, stock-based compensation expense 325 411 Non-recurring and acquisition-related costs 13 26 Loss on disposal of assets and other 115 69 Adjusted EBITDA $1,893 $1,199 CONTACT: Primo Water Corporation Mark Castaneda, Chief Financial Officer (336) 331-4000 ICR Inc. John Mills Katie Turner (646) 277-1228 Primo Water Corporation Logo
Primo Water Announces Results for the First Quarter Ended March 31, 2013
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