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8-K - FORM 8-K - Primo Water Corp | c16828e8vk.htm |
Exhibit 99.1
Contact:
Primo Water Corporation
Mark Castaneda, Chief Financial Officer
(336) 331-4000
Primo Water Corporation
Mark Castaneda, Chief Financial Officer
(336) 331-4000
ICR Inc.
John Mills
Katie Turner
(646) 277-1228
John Mills
Katie Turner
(646) 277-1228
Primo Water Announces Results for the First Quarter Ended March 31, 2011
WINSTON-SALEM, N.C., May 10, 2011 Primo Water Corporation (Nasdaq: PRMW), a rapidly growing
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, today announced
financial results for the first quarter ended March 31, 2011.
Business Highlights
| Record first quarter sales increased 94% compared to first quarter of prior year,
exceeding Company guidance |
||
| First quarter of 2011 GAAP EPS of ($0.11) and non-GAAP pro forma fully-taxed EPS of
breakeven, in-line with Company guidance |
||
| Exchange services same-store unit sales accelerated to 6% year-over-year for the first
quarter of 2011 compared to 5% in the fourth quarter of 2010 |
||
| Record number of installations, resulting in 14,600 locations for the Water segment |
||
| Announced the acquisitions of the Canada Bulk Water Exchange Business and the Omnifrio
Single-Serve Beverage Business |
First Quarter Results
For the first quarter of 2011, net sales increased 94% to $17.1 million from $8.8 million in the
first quarter of 2010, ahead of the Companys prior net sales guidance of $15.9 to $16.3 million.
The first quarter results include the impact of the Refill Business, which was acquired on November
10, 2010, and the Canada Bulk Water Exchange Business, which was acquired on March 8, 2011.
The GAAP net loss for the first quarter of 2011 was ($2.1) million or ($0.11) per share, compared
to ($3.1) million or ($2.15) per share in the same period in the prior year. In addition, for the
first quarter of 2011 non-GAAP pro forma fully-taxed net income was approximately breakeven and the
Company reported non-GAAP adjusted EBITDA of $2.0 million. The Company does not expect to pay U.S. income
taxes in the near future as it has sufficient net operating loss carryforwards to offset taxable
income.
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Sales from our Water segment (Water) consist of sales of multi-gallon purified bottled water
(exchange services) and self-serve filtered water vending services (refill services). Water net
sales for the first quarter of 2011 increased 122% to $13.1 million compared to $5.9 million in the
first quarter of 2010. The sales improvement was partially due to a 12% increase in sales of
exchange services driven by a 12% increase in 5 gallon equivalent units sold to 1.2 million
compared to the same period of 2010, excluding the Canada Bulk Water Exchange Business. Exchange
services same-store unit sales increased 6% in the first quarter of 2011 compared to the first
quarter of 2010, which represents a sequential acceleration from the fourth quarter of 2010
same-store unit growth of 5%. In addition, the Refill Business and Canada Bulk Water Exchange
Business acquisitions accounted for approximately $6.4 million and $0.2 million, respectively, in
net sales in the first quarter of 2011. At March 31, 2011, Water services were offered in the
United States and Canada at approximately 14,600 retail locations, representing a record number of
locations installed in a quarter as well as exchange locations acquired as part of the Canada Bulk
Water Exchange Business.
The Companys water dispenser (Product) sales for the first quarter of 2011 increased 37% to $4.0
million compared to $2.9 million in the first quarter of 2010. The increase is due primarily to the
addition of several new water dispenser models, which began shipping in the fourth quarter of 2010.
Dispenser unit sales at retail to end consumers increased 8% for the first quarter of 2011
compared to 2010.
Gross profit for the first quarter of 2011 increased to $5.0 million compared to a gross profit of
$1.9 million in the first quarter of 2010. The gross profit margin increased to 29.3% compared to
21.6% in the first quarter of 2010. The improvement in gross profit margin is primarily the result
of an increased mix of higher margin Water segment sales. Water segment sales represented 76.7% of
total sales during the quarter compared to 67.1% of sales in the first quarter of 2010.
Selling, general and administrative (SG&A) expenses were $4.0 million or 23.7% of net sales for
the first quarter of 2011, compared to $2.7 million or 31.0% of net sales in the first quarter of
2010. The increase is the result of increased headcount necessary to operate as a public company,
additional costs related to the recent acquisitions and the costs of operating duplicate
back-office operations following the acquisitions. SG&A decreased as a percent of net sales, a
trend the Company expects to continue as it reduces duplicate costs related to the Refill Business
acquisition and leverages SG&A expenses with increased sales growth.
We accomplished significant milestones in the first quarter including the addition of a record
number of new locations, two acquisitions and progress on the integration of our Refill Business
acquisition, commented Billy D. Prim, Primo Waters President & CEO. I am very proud of our
organization and our ability to deliver strong growth in the quarter as we execute on our long-term
strategic goals. We further strengthened our position for many years of profitable growth.
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Second Quarter and Full Year 2011 Guidance
The Company expects total sales in the second quarter of 2011 to double compared to the second
quarter of 2010, or result in the range of $24.0 to $25.5 million. The Company expects to end the
second quarter of 2011 with between 15,600 and 16,100 retail locations for its Water segment. The
Company expects to achieve second quarter GAAP earnings (loss) per diluted share in the range of
($0.03) to $0.02, non-GAAP pro forma fully-taxed earnings per diluted share of $0.04 to $0.08, GAAP
operating income of breakeven to $1.2 million and non-GAAP adjusted EBITDA in the range of $3.7 to
$4.7 million. The adjustments from the GAAP to non-GAAP measures consist of adjustments related to
non-cash stock-based compensation, non-recurring acquisition-related costs, amortization of
intangible assets, pro forma effect of expected acquisition synergies and the impact of applying
full income tax rates.
For 2011, the Company continues to expect sales to increase 260% to 275% compared to 2010, or in
the range of $116 to $123 million, which includes the impact of acquisitions. Primo expects to end
the year with between 18,700 and 19,700 retail locations for its Water segment. The Company also
expects to achieve full year 2011 GAAP earnings per diluted share of $0.06 to $0.15, non-GAAP pro
forma fully-taxed earnings per diluted share of $0.16 to $0.24, GAAP income from operations in the
range of $5.0 to $7.3 million and non-GAAP adjusted EBITDA in the range of $16.5 to $19.5 million.
The adjustments from the GAAP to non-GAAP measures consist of adjustments related to non-cash
stock-based compensation, non-recurring acquisition-related costs, amortization of intangible
assets, pro forma effect of expected acquisition synergies and the impact of applying full income
tax rates.
Mr. Prim concluded, We are well positioned to capitalize on the growing healthy, sustainable and
value-conscious consumer lifestyle trends as we continue to add retail locations with the right
product mix.
Primo Water intends to continue to execute on its three long-term strategies:
| Increase retail locations to
40,000 - 50,000; |
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| Increase same-store sales of water by selling innovative beverage dispensers, which it
believes will lead to greater household penetration; and |
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| Pursue strategic acquisitions. |
Conference Call
The Company will hold a conference call today, Tuesday, May 10, 2011 at 4:30 p.m. The call will be
broadcast live over the Internet, hosted at the Investor Relations section of Primo Waters website
at www.primowater.com, and will be archived online through May 24, 2011. In addition, listeners
may dial (866) 712-2329 in North America, and international listeners may dial (253) 237-1244.
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About Primo Water Corporation
Primo Water Corporation is a rapidly growing 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. The Companys products provide an environmentally friendly, economical,
convenient and healthy solution for consuming purified water.
Forward-Looking Statements
Certain statements contained herein (including our second quarter and full year 2011 guidance) are
not based on historical fact and are forward-looking statements within the meaning of the
applicable securities laws and regulations. Generally, these statements can be identified by the
use of words such as anticipate, believe, could, estimate, expect, feel, forecast,
intend, may, plan, potential, project, should, would,will, and similar expressions
intended to identify forward-looking statements, although not all forward-looking statements
contain these identifying words. Owing to the uncertainties inherent in forward-looking statements,
actual results could differ materially from those stated here. Factors that could cause actual
results to differ materially from those in the forward-looking statements include, but are not
limited to, the loss of major retail customers of the Company or the reduction in volume of
purchases by major retail customers, lower than anticipated consumer and retailer acceptance of the
Companys exchange and refill services and its water dispensers, changes in the Companys
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 industry in general, the Companys experiencing product liability,
product recall and higher than anticipated rates of warranty expense or sales returns associated
with a product quality or safety issue, the loss of key Company personnel, changes in the
regulatory framework governing the Companys business, the Companys inability to efficiently and
effectively integrate the recently acquired businesses with the Companys historical business, the
Companys inability to efficiently expand operations and capacity to meet growth, the Companys
inability to introduce and produce new product offerings, and the failure of lenders to honor their
commitments under the Companys credit facility, as well as other risks described more fully in the
Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30,
2011. Forward-looking statements reflect managements analysis as of the date of this press
release. The Company does not undertake to revise these statements to reflect subsequent
developments, other than in its regular, quarterly earnings releases.
Use of Non-GAAP Financial Measures
To supplement its financial statements, the Company also provides investors with information
related to non-GAAP pro forma fully-taxed net income (loss) per basic and diluted share and
adjusted EBITDA, which are both non-GAAP financial measures. The Company believes these non-GAAP
measures provide useful information to management and investors regarding certain financial and
business trends relating to its financial condition and results of operations. Management uses
these non-GAAP measures to compare the Companys performance to that of prior periods for trend
analyses and planning purposes. These measures are also presented to the Companys board of
directors.
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Non-GAAP pro forma fully-taxed loss per share consists of loss from operations before income taxes
plus non-cash stock-based compensation expense, non-recurring acquisition-related costs,
amortization expense related to intangible assets, the pro forma effect of expected acquisition
synergies and the pro forma effect of applying full income tax rates divided by the weighted
average number of shares of common stock outstanding during each period. Primo believes non-GAAP
pro forma fully-taxed net loss per share is useful to an investor because it is widely used to
measure a Companys operating performance.
EBITDA consists of the net earnings (loss) from continuing operations before income taxes plus
depreciation and amortization, interest expense and the provision for income taxes. Adjusted EBITDA
consists of EBITDA adjusted for non-cash stock-based compensation expense, acquisition-related
costs, and pro forma effect of expected acquisition synergies. The Company uses adjusted EBITDA as
a measure of operating performance because it assists management in comparing performance on a
consistent basis, as it removes from operating results the impact of the Companys capital
structure, non-cash charges and non-recurring acquisition-related costs. The Company believes
adjusted EBITDA is useful to an investor in evaluating the Companys operating performance because
it is widely used to measure a Companys operating performance without regard to items such as
depreciation and amortization, which can vary depending upon accounting methods and the book value
of assets, and presents a meaningful measure of corporate performance exclusive of the Companys
capital structure, and the method by which assets were acquired. Primo also uses adjusted EBITDA
for purposes of determining executive and senior management incentive compensation as well as for
determining covenant compliance under its credit agreement.
These non-GAAP measures should not be considered a substitute for, or superior to, financial
measures calculated in accordance with generally accepted accounting principles in the United
States (GAAP). These non-GAAP financial measures exclude significant expenses and income that are
required by GAAP to be recorded in the Companys financial statements and are subject to inherent
limitations.
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Primo Water Corporation
Consolidated Balance Sheets
(in thousands, except par value data)
Consolidated Balance Sheets
(in thousands, except par value data)
December 31, | March 31, | |||||||
2010 | 2011 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash |
$ | 443 | $ | 1,073 | ||||
Accounts receivable, net |
6,605 | 9,297 | ||||||
Inventories |
3,651 | 5,006 | ||||||
Prepaid expenses and other current assets |
1,838 | 1,827 | ||||||
Total current assets |
12,537 | 17,203 | ||||||
Bottles, net |
2,505 | 2,965 | ||||||
Property and equipment, net |
34,890 | 37,490 | ||||||
Intangible assets, net |
11,039 | 11,980 | ||||||
Goodwill |
77,415 | 81,341 | ||||||
Other assets |
1,225 | 1,149 | ||||||
Total assets |
$ | 139,611 | $ | 152,128 | ||||
Liabilities and stockholders equity (deficit) |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 4,547 | 10,834 | |||||
Accrued expenses and other current liabilities |
2,923 | 4,514 | ||||||
Current portion of long-term debt, capital leases and notes payable |
11 | 11 | ||||||
Total current liabilities |
7,481 | 15,359 | ||||||
Long-term debt, capital leases and notes payable, net of current portion |
17,945 | 20,613 | ||||||
Other long-term liabilities |
748 | 938 | ||||||
Total liabilities |
26,174 | 36,910 | ||||||
Commitments and contingencies |
||||||||
Stockholders (deficit) equity |
||||||||
Common stock, $0.001 par value 70,000 shares authorized,
19,021 and 19,362 shares issued and outstanding
at December 31, 2009 and 2010, respectively |
19 | 19 | ||||||
Preferred
stock, $0.001 par value 65,000 shares authorized none
issued and outstanding |
| | ||||||
Additional paid-in capital |
220,125 | 223,532 | ||||||
Common stock warrants |
6,966 | 6,966 | ||||||
Accumulated deficit |
(113,723 | ) | (115,836 | ) | ||||
Accumulated other comprehensive income |
50 | 537 | ||||||
Total stockholders (deficit) equity |
113,437 | 115,218 | ||||||
Total liabilities and stockholders (deficit) equity |
$ | 139,611 | $ | 152,128 | ||||
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Primo Water Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Three months ended | ||||||||
March 31, | ||||||||
2010 | 2011 | |||||||
Net sales |
$ | 8,829 | $ | 17,139 | ||||
Operating costs and expenses: |
||||||||
Cost of sales |
6,922 | 12,113 | ||||||
Selling, general and administrative expenses |
2,733 | 4,059 | ||||||
Acquisition-related costs |
| 703 | ||||||
Depreciation and amortization |
995 | 1,901 | ||||||
Total operating costs and expenses |
10,650 | 18,776 | ||||||
Loss from operations |
(1,821 | ) | (1,637 | ) | ||||
Interest expense |
(698 | ) | (287 | ) | ||||
Other expense, net |
(22 | ) | | |||||
Loss from operations before income taxes |
(2,541 | ) | (1,924 | ) | ||||
Provision for income taxes |
| 190 | ||||||
Net loss |
(2,541 | ) | (2,114 | ) | ||||
Preferred dividends, beneficial conversion and warrant modification charges |
(582 | ) | | |||||
Net loss attributable to common shareholders |
$ | (3,123 | ) | $ | (2,114 | ) | ||
Basic and diluted loss per common share: |
||||||||
Net loss attributable to common shareholders |
$ | (2.15 | ) | (0.11 | ) | |||
Basic and diluted weighted average common shares outstanding |
1,453 | 19,115 | ||||||
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Primo Water Corporation and Subsidiaries
Non-GAAP Reconciliation
(Unaudited; in thousands, except per share amounts)
Non-GAAP Reconciliation
(Unaudited; in thousands, except per share amounts)
Three months ended | ||||||||
March 31, | ||||||||
2010 | 2011 | |||||||
Net loss attributable to common shareholders |
$ | (3,123 | ) | $ | (2,114 | ) | ||
Preferred dividends, beneficial conversion and warrant modification charges |
582 | |||||||
Net loss |
(2,541 | ) | (2,114 | ) | ||||
Depreciation and amortization |
995 | 1,901 | ||||||
Interest expense |
698 | 287 | ||||||
Provision for income taxes |
| 190 | ||||||
EBITDA |
(848 | ) | 264 | |||||
Non-cash, stock-based compensation expense |
158 | 188 | ||||||
Acquisition-related costs |
| 703 | ||||||
Pro forma effect of expected acquisition synergies |
| 837 | ||||||
Adjusted EBITDA |
$ | (690 | ) | $ | 1,992 | |||
Net loss attributable to common shareholders |
$ | (3,123 | ) | $ | (2,114 | ) | ||
Preferred dividends, beneficial conversion and warrant modification charges |
582 | | ||||||
Provision for income taxes |
| 190 | ||||||
Loss from operations before income taxes |
(2,541 | ) | (1,924 | ) | ||||
Non-cash, stock-based compensation expense |
158 | 188 | ||||||
Acquisition-related costs |
| 703 | ||||||
Amortization of intangible assets |
70 | 228 | ||||||
Pro forma effect of expected acquisition synergies |
| 837 | ||||||
Pro forma effect of full income tax |
856 | (12 | ) | |||||
Non-GAAP net loss |
$ | (1,457 | ) | $ | 20 | |||
Basic and Diluted non-GAAP net loss per share |
$ | (1.00 | ) | $ | | |||
Basic and diluted shares used to compute non-GAAP net income per share |
1,453 | 19,115 | ||||||
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