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Primo Water Announces Fourth Quarter and Fiscal Year Financial Results

Record Net Sales of $127.0 Million and Adjusted EBITDA of $18.1 Million Exceed Company Guidance

Company Provides Fiscal 2016 Outlook

WINSTON-SALEM, N.C., March 08, 2016 (GLOBE NEWSWIRE) -- Primo Water Corporation (Nasdaq:PRMW), a leading provider of multi-gallon purified bottled water, self-service refill water and water dispensers, today announced financial results for the fourth quarter and fiscal year ended December 31, 2015.

Fourth Quarter Business Highlights:

  • Net sales increased 6.5% to $31.5 million
  • Water segment net sales increased 14.7% to $22.4 million driven by U.S. Exchange same-store sales growth of 9.2%
  • Adjusted EBITDA increased 44.9% to $4.8 million
  • EPS from continuing operations of $0.01 per diluted share compared to a loss of $(0.14) per diluted share
  • Pro forma adjusted earnings from continuing operations of $0.04 per diluted share up from earnings of $0.01 per diluted share


Fiscal Year Business Highlights:

  • Net sales increased 19.4% to a record $127.0 million, exceeding Company guidance
  • Water segment net sales increased 25.6% to a record $89.6 million driven by U.S. Exchange same-store sales growth of 9.4%
  • Adjusted EBITDA increased 39.6% to a record high $18.1 million, exceeding Company guidance
  • EPS from continuing operations of $0.08 per diluted share compared to a loss of $(0.54) per diluted share
  • Pro forma adjusted earnings from continuing operations of $0.20 per diluted share compared to a loss of $(0.05) per diluted share


(All comparisons above are with respect to the fourth quarter or fiscal year of 2014)

“We are very pleased with our record finish to 2015. Our team continued to drive household penetration with record sell-thru of our dispensers for the year, which in turn, led to strong same store sales growth and increases in our water sales ahead of our expectations,” commented Billy D. Prim, Primo Water’s Chief Executive Officer. “This topline momentum helped drive leverage across our business model resulting in strong margin expansion, profitability above our expectations and solid free cash flow generation. As we enter 2016 we are well positioned to build upon this momentum with consumers, who are increasingly seeking safe, convenient drinking water sources.”

Fourth Quarter Results

Net sales increased 6.5% to $31.5 million from $29.6 million in the prior year quarter, driven by an increase in Water segment net sales.

Water segment net sales increased 14.7% to $22.4 million from $19.5 million in the prior year quarter. The increase in Water net sales was primarily due to a 23.7% increase in U.S. Exchange sales, which was driven by same-store unit growth of 9.2% compared to the prior year quarter. Dispenser segment net sales decreased 9.6% to $9.1 million from $10.1 million in the prior year quarter, primarily due to the high level of shipments to retailers in the fourth quarter of 2014 as a result of the timing of inventory replenishments. Dispenser sell-thru to consumers increased 19.9% compared to prior year to 125,000 units.

Gross margin percentage increased to 29.0% from 24.8% in the prior year quarter due primarily to the change in mix of products sold and improved supply chain costs. Selling, general and administrative (“SG&A”) expenses decreased to $5.1 million from $6.6 million in the prior year quarter due primarily to elevated non-cash stock compensation expense in the prior year related to performance-based stock awards.

Adjusted EBITDA increased 44.9% to $4.8 million from $3.3 million in the prior year quarter, driven by the increase in net sales and margin expansion. The U.S. GAAP net income from continuing operations increased to $0.3 million, or $0.01 per diluted share, from a loss of $3.5 million, or $(0.14) per diluted share, in the prior year quarter. Pro forma adjusted earnings from continuing operations was $1.3 million, or $0.04 per diluted share up from $0.3 million, or $0.01 per diluted share, in the prior year quarter.

Fiscal Year Results

Net sales increased 19.4% to $127.0 million from $106.3 million in the prior year, driven by an increase in Water segment net sales.

Water segment net sales increased 25.6% to $89.6 million from $71.3 million in the prior year. The increase in Water net sales was primarily due to a 44.0% increase in U.S. Exchange sales, which was driven by same-store unit growth of 9.4% compared to the prior year as well as additional locations. Dispenser segment net sales increased 6.8% to $37.4 million from $35.0 million in the prior year quarter, driven by a 5.8% increase in dispenser unit sales to retailers. Dispenser sell-thru to consumers of increased to a record 519,000, an increase of 9.7% compared to prior year.

Gross margin percentage increased to 27.2% from 26.2% in the prior year primarily as a result of a change in the mix of products sold. SG&A expenses were essentially flat at $19.1 million. Excluding non-cash stock compensation expense, SG&A as a percentage of net sales decreased to 13.0% from 14.1% in the prior year.

Adjusted EBITDA increased 39.6% to $18.1 million from $13.0 million in the prior year, driven by the increase in net sales in both the Water and Dispenser segments. The U.S. GAAP net income from continuing operations increased to $2.2 million, or $0.08 per diluted share, from a loss of $13.1 million, or $(0.54) per diluted share, in the prior year. Pro forma adjusted earnings from continuing operations was $5.5 million, or $0.20 per diluted share compared to a loss of $1.2 million, or $(0.05) per diluted share, in the prior year.

2016 Outlook

For fiscal 2016 the Company expects net sales of $132.0 to $134.0 million and adjusted EBITDA of $21.3 to $22.2 million.

The Company expects first quarter 2016 net sales of $30.3 to $31.0 million and adjusted EBITDA of $4.4 to $4.8 million.

Conference Call and Webcast

The Company will host a conference call to discuss these matters at 4:30 p.m. ET today, March 8, 2016. 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 March 22, 2016. 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.

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. These statements include the Company’s financial guidance and the expectation that its momentum will create further growth opportunities in the exchange and refill businesses. 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, adverse changes in the Company's relationships with its independent bottlers, distributors and suppliers, 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 products and 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 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, significant liabilities or costs associated with litigation or other legal proceedings, 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 16, 2015 and its subsequent filings under the Securities Exchange Act of 1934. Forward-looking statements reflect management's analysis as of the date of this press release. The Company does not undertake to revise these statements to reflect subsequent developments, other than in its regular, quarterly earnings releases or as otherwise required by applicable securities laws.

Use of Non-U.S. GAAP Financial Measures

To supplement its financial statements, the Company provides investors with information related to adjusted EBITDA and pro forma 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 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. 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 are subject to inherent limitations.

FINANCIAL TABLES TO FOLLOW


Primo Water Corporation
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Three Months Ended Years Ended
December 31, December 31,
2015 2014 2015 2014
Net sales $31,476 $29,566 $126,951 $106,322
Operating costs and expenses:
Cost of sales 22,356 22,242 92,476 78,452
Selling, general and administrative expenses 5,137 6,621 19,128 18,969
Non-recurring costs 167 108 275 2,881
Depreciation and amortization 3,008 2,561 10,432 10,655
Loss on disposal and impairment of property and equipment 82 1,023 500 2,104
Total operating costs and expenses 30,750 32,555 122,811 113,061
Income (loss) from operations 726 (2,989) 4,140 (6,739)
Interest expense, net 473 535 1,987 6,325
Income (loss) from continuing operations 253 (3,524) 2,153 (13,064)
Loss from discontinued operations (209) (2) (296) (403)
Net income (loss) $44 $(3,526) $1,857 $(13,467)
Basic earnings (loss) per common share:
Income (loss) from continuing operations $0.01 $(0.14) $0.08 $(0.54)
Loss from discontinued operations (0.01) (0.00) (0.01) (0.01)
Net income (loss) $0.00 $(0.14) $0.07 $(0.55)
Diluted earnings (loss) per common share:
Income (loss) from continuing operations $0.01 $(0.14) $0.08 $(0.54)
Loss from discontinued operations (0.01) (0.00) (0.01) (0.01)
Net income (loss) $0.00 $(0.14) $0.07 $(0.55)
Weighted average shares used in computing earnings (loss) per share
Basic 25,779 24,582 25,190 24,339
Diluted 28,866 24,582 27,001 24,339
Primo Water Corporation
Segment Information
(Unaudited; in thousands)
Three Months Ended Years Ended
December 31, December 31,
2015 2014 2015 2014
Segment net sales
Water $22,384 $19,509 $89,623 $71,360
Dispensers 9,092 10,057 37,328 34,962
Total net sales $31,476 $29,566 $126,951 $106,322
Segment income (loss) from operations
Water 7,665 5,947 28,835 22,585
Dispensers 424 402 1,851 1,452
Corporate (4,106) (5,646) (15,339) (15,136)
Non-recurring costs (167) (108) (275) (2,881)
Depreciation and amortization (3,008) (2,561) (10,432) (10,655)
Loss on disposal and impairment of property and equipment (82) (1,023) (500) (2,104)
$726 $(2,989) $4,140 $(6,739)


Primo Water Corporation
Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except par value data)
December 31, December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $1,826 $495
Accounts receivable, net 11,098 9,010
Inventories 7,092 6,826
Prepaid expenses and other current assets 529 1,279
Total current assets 20,545 17,610
Bottles, net 3,688 3,574
Property and equipment, net 31,997 34,235
Intangible assets, net 8,074 9,452
Other assets 569 877
Total assets $64,873 $65,748
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,994 $12,499
Accrued expenses and other current liabilities 3,748 4,343
Current portion of capital leases and notes payable 172 106
Total current liabilities 15,914 16,948
Long-term debt, capital leases and notes payable, net of current portion 20,289 24,210
Liabilities of disposal group, net of current portion, and other long-term liabilities 2,535 2,316
Total liabilities 38,738 43,474
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, 25,810 and 24,642 shares issued and outstanding at December 31, 2015 and 2014, respectively 26 25
Additional paid-in capital 281,476 277,708
Common stock warrants 7,492 8,659
Accumulated deficit (261,447) (263,304)
Accumulated other comprehensive loss (1,412) (814)
Total stockholders’ equity 26,135 22,274
Total liabilities and stockholders’ equity $64,873 $65,748


Primo Water Corporation
Consolidated Statements of Cash Flows
(Unaudited; in thousands)
Years Ended December 31,
2015 2014 2013
Cash flows from operating activities:
Net income (loss)$1,857 $(13,467) $(10,706)
Less: Loss from discontinued operations (296) (403) (1,862)
Income (loss) from continuing operations 2,153 (13,064) (8,844)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 10,432 10,655 11,333
Loss on disposal and impairment of property and equipment 500 2,104 126
Stock-based compensation expense 2,601 4,023 1,034
Non-cash interest expense 110 2,776 1,162
Issuance of DS Services' common stock warrant 589
Realized foreign currency exchange loss and other, net 387 (62) (132)
Changes in operating assets and liabilities:
Accounts receivable (2,303) (1,228) 2,464
Inventories (306) (528) 1,205
Prepaid expenses and other assets 655 90 (308)
Accounts payable (420) 2,299 (437)
Accrued expenses and other liabilities (255) 769 (970)
Net cash provided by operating activities 13,554 8,423 6,633
Cash flows from investing activities:
Purchases of property and equipment (5,354) (5,449) (4,793)
Purchases of bottles, net of disposals (2,488) (2,473) (2,507)
Proceeds from the sale of property and equipment 108 727 38
Additions to and acquisitions of intangible assets (16) (33) (45)
Net cash used in investing activities (7,750) (7,228) (7,307)
Cash flows from financing activities:
Borrowings under Revolving Credit Facilities 27,000 48,353 91,135
Payments under Revolving Credit Facilities (31,000) (47,498) (95,067)
Borrowings under Term loans 22,500 5,500
Payments under Term loans (23,499)
Note payable and capital lease payments (203) (147) (15)
Stock option and employee stock purchase activity, net 159 198 (801)
Debt issuance costs and other (640) 130
Net cash (used in) provided by financing activities (4,044) (733) 882
Cash used in operating activities of discontinued operations (154) (259) 56
Effect of exchange rate changes on cash and cash equivalents (275) (102) (104)
Net increase in cash and cash equivalents 1,331 101 160
Cash and cash equivalents, beginning of year 495 394 234
Cash and cash equivalents, end of period$1,826 $495 $394


Primo Water Corporation
Non-GAAP EBITDA and Adjusted EBITDA Reconciliation
(Unaudited; in thousands)
Three Months Ended
December 31, Years Ended December 31,
2015 2014 2015 2014
Income (loss) from continuing operations $253 $(3,524) $2,153 $(13,064)
Depreciation and amortization 3,008 2,561 10,432 10,655
Interest expense, net 473 535 1,987 6,325
EBITDA 3,734 (428) 14,572 3,916
Non-cash, stock-based compensation expense 751 2,660 2,601 4,023
Non-recurring costs 167 108 275 2,881
Loss on disposal and impairment of property and equipment and other 106 945 645 2,145
Adjusted EBITDA $4,758 $3,285 $18,093 $12,965


Primo Water Corporation
Pro Forma Net Income (Loss) From Continuing Operations Reconciliation
(Unaudited; in thousands, except per share amounts)
Three Months Ended Years Ended
December 31, December 31,
2015 2014 2015 2014
Income (loss) from continuing operations $253 $(3,524) $2,153 $(13,064)
Non-cash, stock-based compensation expense 751 2,660 2,601 4,023
Non-recurring costs 167 108 275 2,881
Loss on disposal and impairment of property and equipment 82 1,023 500 2,104
Debt refinancing costs 2,848
Pro forma net income (loss) from continuing operations $1,253 $267 $5,529 $(1,208)
Pro forma earnings (loss) from continuing operations per share:
Basic $0.05 $0.01 $0.22 $(0.05)
Diluted $0.04 $0.01 $0.20 $(0.05)
Weighted average shares used in computing earnings (loss) per share:
Basic 25,779 24,582 25,190 24,339
Diluted 28,866 24,582 27,001 24,339


Contact: Primo Water Corporation Mark Castaneda, Chief Financial Officer (336) 331-4000 ICR Inc. Katie Turner Hunter Wells (646) 277-1228

Source:Primo Water Corporation