Attached files
| file | filename |
|---|---|
| 8-K - PRIMO WATER CORP 8-K 11-6-2014 - Primo Water Corp | form8k.htm |
Exhibit 99.1
Contact:
Primo Water Corporation
Mark Castaneda, Chief Financial Officer
(336) 331-4000
ICR Inc.
John Mills
Katie Turner
(646) 277-1228
Primo Water Announces Third Quarter Results
Company Achieves Profitability, Raises Fiscal 2014 Guidance and
Provides Initial Fiscal 2015 Guidance
WINSTON-SALEM, N.C., November 6, 2014 -- Primo Water Corporation (Nasdaq: PRMW), a leading provider of multi-gallon purified bottled water, self-service refill water and water dispensers, today announced financial results for the third quarter ended September 30, 2014.
Third Quarter Business Highlights:
| · | Company achieves profitability for Q3, reporting earnings per share of $0.01 compared to a loss per share of ($0.09) |
| · | Net sales increased 3.4% to $26.4 million driven by a 7.5% improvement in Water segment net sales |
| · | Water segment net sales increase driven by 10.5% U.S. Exchange same-store unit growth |
| · | Water segment gross margin percentage improved to 37.1% from 33.7% driven by lower supply chain costs |
| · | Dispenser unit sales to consumers increased 12.7% to a record 131,000 units |
| · | Adjusted EBITDA increased 34.7% to $4.0 million from $3.0 million |
(All comparisons above are with respect to the third quarter of 2013)
“We are very pleased with our third quarter results and achieving profitability for the first time in Company history. These results demonstrate our ability to increase sales and leverage the business to improve our gross margins and adjusted EBITDA,” commented Billy D. Prim, Primo Water’s Chief Executive Officer. “Achieving profitability was a major milestone for us. Now, we believe our team can further scale our business and continue to grow our cash flow to enhance long term shareholder value.”
Third Quarter Results
Net sales increased 3.4% to $26.4 million for the third quarter from $25.5 million for the third quarter of 2013, driven by an increase in the Water segment sales, partially offset by a decrease in Dispenser segment sales.
Water segment net sales increased 7.5% to $18.9 million for the third quarter compared to $17.5 million for the third quarter of 2013. Sales in the Water segment consist of the sale of multi-gallon purified bottled water (“Exchange”) and self-service refill water service (“Refill”). The increase in Water net sales was primarily due to a 10.5% same-store unit growth in U.S. Exchange compared to the third quarter of 2013.
The decrease in the Dispenser segment net sales is due primarily to the timing of shipments to major retailers as some delayed shipments to future quarters. Dispenser’s unit sell-thru to end consumers increased 12.7% to approximately 131,000 for the third quarter of 2014.
Gross margin percentage increased to 28.8% for the third quarter from 25.8% for the third quarter of 2013 primarily due to the 340 basis point improvement in Water segment gross margin percentage to 37.1% driven by lower supply chain costs.
Selling, general and administrative (“SG&A”) expenses increased 7.3% to $4.1 million for the third quarter of 2014 from $3.8 million for the third quarter of 2013. The increase was primarily due to higher non-cash stock compensation expense compared to the prior year. Interest expense decreased 53.0% to $0.5 million for the third quarter of 2014 from $1.1 million for the third quarter of 2013, due primarily to more favorable borrowing rates under the new credit facility entered into on June 20, 2014 compared to the prior credit facility.
Adjusted EBITDA increased 34.7% to $4.0 million from $3.0 million for the third quarter of 2013 driven by the net sales and gross margin improvements previously mentioned. The U.S. GAAP net income (loss) from continuing operations for the third quarter of 2014 was $0.3 million, or $0.01 per share, compared to ($1.6) million, or ($0.07) per share, for the third quarter of the prior year. On a pro forma fully taxed basis, net income (loss) from continuing operations was $0.02 per share for the three months ended September 30, 2014 compared to ($0.03) for the same period in the prior year (see financial tables for details).
2
Guidance
The Company increased its full year 2014 guidance for net sales to $102.0 to $104.0 million compared to prior guidance of $98.0 to $102.0 million. The Company also increased its full year 2014 guidance for adjusted EBITDA to $11.7 to $12.2 million compared to its prior guidance of $11.1 to $11.6 million.
The Company is also providing its initial guidance for fiscal 2015 with net sales expected in the range of $111.0 to $115.0 million and adjusted EBITDA of $14.2 to $15.5 million.
Conference Call and Webcast
The Company will host a conference call to discuss these matters at 4:30 p.m. ET today, November 6, 2014. Participants from the Company will be Billy D. Prim, Chief Executive Officer, Matt Sheehan, President and Chief Operating Officer, and Mark Castaneda, Chief Financial 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 November 20, 2014. In addition, listeners may dial (866) 712-2329 in North America, and international listeners may dial (253) 237-1244.
About Primo Water Corporation
Primo Water Corporation (Nasdaq: PRMW) is a leading provider of multi-gallon purified bottled water, self-service refill water and water dispensers sold through major retailers throughout the United States and Canada. Learn more about Primo Water at www.primowater.com.
3
Forward-Looking Statements
Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the meaning of the applicable securities laws and regulations. Generally, these statements include the Company’s financial guidance and its belief that it can further scale its business and continue to grow cash flow to enhance long-term shareholder value. These statements can otherwise be identified by the use of words such as "anticipate," "believe," "could," "estimate," "expect," "feel," "forecast," "intend," "may," "plan," "potential," "project," "should," "would,” “will,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those stated herein. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the failure to achieve the incremental net sales or reduced distribution costs associated with strategic alliance agreement with DS Services of America, Inc. (“DS Services”), significant additional costs in connection with the transition of the Company’s distribution system to DS Services, the loss of major retail customers of the Company or the reduction in volume or change in timing of purchases by major retail customers, lower than anticipated consumer and retailer acceptance of and demand for the Company's Exchange and Refill services and its water dispensers, adverse changes in the Company's relationships with its independent bottlers, distributors and suppliers (including as a result of the Company’s entering into the strategic alliance agreement with DS Services), the entry of a competitor with greater resources into the marketplace, 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 expand operations and capacity to meet growth, the Company's inability to develop, introduce and produce new product offerings within the anticipated timeframe or at all, the Company’s inability to comply with its covenants in its credit facility, the failure of lenders to honor their commitments under the Company's credit facility, as well as other risks described more fully in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K filed on March 17, 2014 and its subsequent filings under the Securities Exchange Act of 1934. Forward-looking statements reflect management's analysis as of the date of this press release. The Company does not undertake to revise these statements to reflect subsequent developments, other than in its regular, quarterly earnings releases or as otherwise required by applicable securities laws.
4
Use of Non-U.S. GAAP Financial Measures
To supplement its financial statements, the Company provides investors with information related to adjusted EBITDA and pro forma fully taxed net income (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 income (loss) from continuing operations before depreciation and amortization; interest expense; non-cash, stock-based compensation expense; non-recurring costs; and loss on disposal and impairment of property and equipment and other. Pro forma fully taxed net income (loss) from continuing operations is defined as income (loss) from continuing operations less non-cash, stock-based compensation expense: non-recurring costs; loss on disposal and impairment of property and equipment and debt refinancing costs as adjusted on a pro forma basis for the full effect of income taxes. The Company believes these non-U.S. GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. Management uses these non-U.S. GAAP financial measures to compare the Company's performance to that of prior periods for trend analyses and planning purposes. These non-U.S. GAAP financial measures are also presented to the Company’s board of directors and adjusted EBITDA is used in its credit agreements.
Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. These non-U.S. GAAP measures exclude significant expenses that are required by U.S. GAAP to be recorded in the Company's financial statements and is subject to inherent limitations.
FINANCIAL TABLES TO FOLLOW
5
Primo Water Corporation
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
|
Three months ended
|
Nine months ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||
|
Net sales
|
$
|
26,374
|
$
|
25,519
|
$
|
76,756
|
$
|
71,696
|
||||||||
|
Operating costs and expenses:
|
||||||||||||||||
|
Cost of sales
|
18,777
|
18,936
|
56,210
|
53,924
|
||||||||||||
|
Selling, general and administrative expenses
|
4,089
|
3,812
|
12,348
|
11,585
|
||||||||||||
|
Non-recurring costs
|
54
|
96
|
2,773
|
190
|
||||||||||||
|
Depreciation and amortization
|
2,593
|
3,050
|
8,094
|
8,579
|
||||||||||||
|
Loss on disposal and impairment of property and equipment
|
58
|
61
|
1,081
|
137
|
||||||||||||
|
Total operating costs and expenses
|
25,571
|
25,955
|
80,506
|
74,415
|
||||||||||||
|
Income (loss) from operations
|
803
|
(436
|
)
|
(3,750
|
)
|
(2,719
|
)
|
|||||||||
|
Interest expense
|
537
|
1,138
|
5,790
|
3,359
|
||||||||||||
|
Income (loss) from continuing operations
|
266
|
(1,574
|
)
|
(9,540
|
)
|
(6,078
|
)
|
|||||||||
|
Loss from discontinued operations
|
(49
|
)
|
(511
|
)
|
(401
|
)
|
(872
|
)
|
||||||||
|
Net income (loss)
|
$
|
217
|
$
|
(2,085
|
)
|
$
|
(9,941
|
)
|
$
|
(6,950
|
)
|
|||||
|
Basic earnings (loss) per common share:
|
||||||||||||||||
|
Income (loss) from continuing operations
|
$
|
0.01
|
$
|
(0.07
|
)
|
$
|
(0.39
|
)
|
$
|
(0.25
|
)
|
|||||
|
Loss from discontinued operations
|
(0.00
|
)
|
(0.02
|
)
|
(0.02
|
)
|
(0.04
|
)
|
||||||||
|
Net income (loss)
|
$
|
0.01
|
$
|
(0.09
|
)
|
$
|
(0.41
|
)
|
$
|
(0.29
|
)
|
|||||
|
Diluted earnings (loss) per common share:
|
||||||||||||||||
|
Income (loss) from continuing operations
|
$
|
0.01
|
$
|
(0.07
|
)
|
$
|
(0.39
|
)
|
$
|
(0.25
|
)
|
|||||
|
Loss from discontinued operations
|
(0.00
|
)
|
(0.02
|
)
|
(0.02
|
)
|
(0.04
|
)
|
||||||||
|
Net income (loss)
|
$
|
0.01
|
$
|
(0.09
|
)
|
$
|
(0.41
|
)
|
$
|
(0.29
|
)
|
|||||
|
Weighted average shares used in computing earnings (loss) per share
|
||||||||||||||||
|
Basic
|
24,457
|
24,019
|
24,257
|
23,901
|
||||||||||||
|
Diluted
|
25,809
|
24,019
|
24,257
|
23,901
|
||||||||||||
6
Primo Water Corporation
Segment Information
(Unaudited; in thousands)
|
Three months ended
|
Nine months ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||
|
Segment net sales
|
||||||||||||||||
|
Water
|
$
|
18,860
|
$
|
17,544
|
$
|
51,851
|
$
|
48,686
|
||||||||
|
Dispensers
|
7,514
|
7,975
|
24,905
|
23,010
|
||||||||||||
|
Total net sales
|
$
|
26,374
|
$
|
25,519
|
$
|
76,756
|
$
|
71,696
|
||||||||
|
Income (loss) from operations
|
||||||||||||||||
|
Water
|
6,279
|
4,985
|
16,640
|
13,789
|
||||||||||||
|
Dispensers
|
319
|
447
|
1,049
|
701
|
||||||||||||
|
Corporate
|
(3,090
|
)
|
(2,661
|
)
|
(9,491
|
)
|
(8,303
|
)
|
||||||||
|
Non-recurring costs
|
(54
|
)
|
(96
|
)
|
(2,773
|
)
|
(190
|
)
|
||||||||
|
Depreciation and amortization
|
(2,593
|
)
|
(3,050
|
)
|
(8,094
|
)
|
(8,579
|
)
|
||||||||
|
Loss on disposal and impairment of property and equipment
|
(58
|
)
|
(61
|
)
|
(1,081
|
)
|
(137
|
)
|
||||||||
|
$
|
803
|
$
|
(436
|
)
|
$
|
(3,750
|
)
|
$
|
(2,719
|
)
|
||||||
7
Primo Water Corporation
Condensed Consolidated Balance Sheets
(in thousands, except par value data)
|
September 30,
|
December 31,
|
|||||||
|
2014
|
2013
|
|||||||
|
(unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash
|
$
|
707
|
$
|
394
|
||||
|
Accounts receivable, net
|
8,920
|
7,614
|
||||||
|
Inventories
|
7,530
|
6,346
|
||||||
|
Prepaid expenses and other current assets
|
2,169
|
1,499
|
||||||
|
Total current assets
|
19,326
|
15,853
|
||||||
|
Bottles, net
|
4,121
|
4,104
|
||||||
|
Property and equipment, net
|
34,836
|
38,634
|
||||||
|
Intangible assets, net
|
9,849
|
10,872
|
||||||
|
Other assets
|
894
|
1,508
|
||||||
|
Total assets
|
$
|
69,026
|
$
|
70,971
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$
|
11,547
|
$
|
10,943
|
||||
|
Accrued expenses and other current liabilities
|
4,107
|
3,472
|
||||||
|
Current portion of capital leases and notes payable
|
103
|
16
|
||||||
|
Total current liabilities
|
15,757
|
14,431
|
||||||
|
Long-term debt, capital leases and notes payable, net of current portion
|
27,718
|
22,654
|
||||||
|
Liabilities of disposal group, net of current portion, and other long-term liabilities
|
2,328
|
2,330
|
||||||
|
Total liabilities
|
45,803
|
39,415
|
||||||
|
Commitments and contingencies
|
||||||||
|
Stockholders’ equity:
|
||||||||
|
Preferred stock, $0.001 par value - 10,000 shares authorized, none issued and outstanding
|
–
|
–
|
||||||
|
Common stock, $0.001 par value - 70,000 shares authorized, 24,530 and 24,076 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively
|
25
|
24
|
||||||
|
Additional paid-in capital
|
274,868
|
273,379
|
||||||
|
Common stock warrants
|
8,745
|
8,420
|
||||||
|
Accumulated deficit
|
(259,778
|
)
|
(249,837
|
)
|
||||
|
Accumulated other comprehensive loss
|
(637
|
)
|
(430
|
)
|
||||
|
Total stockholders’ equity
|
23,223
|
31,556
|
||||||
|
Total liabilities and stockholders’ equity
|
$
|
69,026
|
$
|
70,971
|
||||
8
Primo Water Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
|
Nine months ended September 30,
|
||||||||
|
2014
|
2013
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$
|
(9,941
|
)
|
$
|
(6,950
|
)
|
||
|
Less: Loss from discontinued operations
|
(401
|
)
|
(872
|
)
|
||||
|
Loss from continuing operations
|
(9,540
|
)
|
(6,078
|
)
|
||||
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
8,094
|
8,579
|
||||||
|
Loss on disposal and impairment of property and equipment
|
1,081
|
137
|
||||||
|
Stock-based compensation expense
|
1,364
|
819
|
||||||
|
Non-cash interest expense
|
2,744
|
882
|
||||||
|
Issuance of DS Services' common stock warrant
|
589
|
–
|
||||||
|
Other
|
(162
|
)
|
53
|
|||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
(1,074
|
)
|
1,952
|
|||||
|
Inventories
|
(1,224
|
)
|
715
|
|||||
|
Prepaid expenses and other assets
|
(87
|
)
|
(211
|
)
|
||||
|
Accounts payable
|
882
|
3,870
|
||||||
|
Accrued expenses and other liabilities
|
466
|
(1,641
|
)
|
|||||
|
Net cash provided by operating activities
|
3,133
|
9,077
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment
|
(3,817
|
)
|
(3,745
|
)
|
||||
|
Purchases of bottles, net of disposals
|
(1,993
|
)
|
(1,904
|
)
|
||||
|
Proceeds from the sale of property and equipment
|
572
|
2
|
||||||
|
Additions to and acquisitions of intangible assets
|
(30
|
)
|
(43
|
)
|
||||
|
Net cash used in investing activities
|
(5,268
|
)
|
(5,690
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Borrowings under Revolving Credit Facilities
|
40,553
|
68,062
|
||||||
|
Payments under Revolving Credit Facilities
|
(36,198
|
)
|
(73,899
|
)
|
||||
|
Borrowings under Term loans
|
22,500
|
3,000
|
||||||
|
Payments under Term loans
|
(23,499
|
)
|
–
|
|||||
|
Note payable and capital lease payments
|
(113
|
)
|
(11
|
)
|
||||
|
Debt issuance costs
|
(625
|
)
|
(689
|
)
|
||||
|
Stock option and employee stock purchase activity, net
|
119
|
82
|
||||||
|
Net cash provided by (used in) financing activities
|
2,737
|
(3,455
|
)
|
|||||
|
Cash (used in) provided by operating activities of discontinued operations
|
(231
|
)
|
189
|
|||||
|
Effect of exchange rate changes on cash
|
(58
|
)
|
(47
|
)
|
||||
|
Net increase in cash
|
313
|
74
|
||||||
|
Cash, beginning of year
|
394
|
234
|
||||||
|
Cash, end of period
|
$
|
707
|
$
|
308
|
||||
9
Primo Water Corporation
Non-GAAP EBITDA and Adjusted EBITDA Reconciliation
(Unaudited; in thousands)
|
Three months ended
|
Nine months ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||
|
Income (loss) from continuing operations
|
$
|
266
|
$
|
(1,574
|
)
|
$
|
(9,540
|
)
|
$
|
(6,078
|
)
|
|||||
|
Depreciation and amortization
|
2,593
|
3,050
|
8,094
|
8,579
|
||||||||||||
|
Interest expense
|
537
|
1,138
|
5,790
|
3,359
|
||||||||||||
|
EBITDA
|
3,396
|
2,614
|
4,344
|
5,860
|
||||||||||||
|
Non-cash, stock-based compensation expense
|
467
|
196
|
1,364
|
819
|
||||||||||||
|
Non-recurring costs
|
54
|
96
|
2,773
|
190
|
||||||||||||
|
Loss on disposal and impairment of property and equipment and other
|
92
|
69
|
1,199
|
307
|
||||||||||||
|
Adjusted EBITDA
|
$
|
4,009
|
$
|
2,975
|
$
|
9,680
|
$
|
7,176
|
||||||||
10
Pro Forma Fully Taxed Net Income (Loss) From Continuing Operations Reconciliation
(Unaudited; in thousands, except per share amounts)
|
Three months ended
|
Nine months ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||
|
Income (loss) from continuing operations
|
$
|
266
|
$
|
(1,574
|
)
|
$
|
(9,540
|
)
|
$
|
(6,078
|
)
|
|||||
|
Non-cash, stock-based compensation expense
|
467
|
196
|
1,364
|
819
|
||||||||||||
|
Non-recurring costs
|
54
|
96
|
2,773
|
190
|
||||||||||||
|
Loss on disposal and impairment of property and equipment
|
58
|
61
|
1,081
|
137
|
||||||||||||
|
Debt refinancing costs
|
–
|
–
|
2,848
|
–
|
||||||||||||
|
Pro forma effect of full income tax
|
(321
|
)
|
464
|
560
|
1,874
|
|||||||||||
|
Pro forma fully taxed net income (loss) from continuing operations
|
$
|
524
|
$
|
(757
|
)
|
$
|
(914
|
)
|
$
|
(3,058
|
)
|
|||||
|
Pro forma fully taxed earnings (loss) from continuing operations per common share:
|
||||||||||||||||
|
Basic
|
$
|
0.02
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
$
|
(0.13
|
)
|
|||||
|
Diluted
|
$
|
0.02
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
$
|
(0.13
|
)
|
|||||
|
Weighted average shares used in computing earnings (loss) per share:
|
||||||||||||||||
|
Basic
|
24,457
|
24,019
|
24,257
|
23,901
|
||||||||||||
|
Diluted
|
25,809
|
24,019
|
24,257
|
23,901
|
||||||||||||
11