Primo Water Corporation
Aug 2, 2016

Primo Water Announces Second Quarter Financial Results

Record Results Exceeding Company Guidance

Provides Outlook for the Third Quarter and

Raises Full Year Outlook for Fiscal 2016

WINSTON-SALEM, N.C., Aug. 02, 2016 (GLOBE NEWSWIRE) -- Primo Water Corporation (Nasdaq:PRMW) today reported financial results for the second quarter ended June 30, 2016.

Second Quarter Business Highlights:

(All comparisons above are with respect to the second quarter of 2015)

"We experienced another quarter of strong water sales as we continue to benefit from a larger base of households using dispensers," commented Billy D. Prim, Primo Water's Chief Executive Officer. "Our record top-line drove gross margin expansion through greater leverage of our supply chain costs and resulted in record adjusted EBITDA that was above our expectations for the second quarter. We are very pleased with our team's execution and are excited about the opportunities ahead as we continue to deliver on our key strategic initiatives."

Second Quarter Results

Net sales increased 6.1% to $34.4 million from $32.4 million in the prior year quarter, driven by an increase in Water segment net sales.

Water segment net sales increased 9.8% to $24.3 million from $22.1 million in the prior year quarter.  The increase in Water net sales was primarily due to increases of 13.2% and 5.3% in U.S. Exchange and U.S. Refill, respectively.  U.S. Exchange was driven by an acceleration in same-store unit growth to 9.7% compared to the prior year quarter.  Dispenser segment net sales decreased 1.8% to $10.1 million from $10.3 million in the prior year quarter due to the timing of orders from major retailers. 

Gross margin percentage increased to 30.3% from 25.3% in the prior year quarter due to continued improvement in supply chain costs in both the Water and Dispenser segments.  Selling, general and administrative expenses increased to $4.8 million from $4.3 million in the prior year quarter. 

The U.S. GAAP net income increased to $2.3 million, or $0.08 per diluted share, from $0.7 million, or $0.03 per diluted share, in the prior year quarter.

Adjusted EBITDA increased 39.1% to $6.2 million from $4.4 million in the prior year quarter, driven by the increase in net sales and gross margin expansion.  Pro forma adjusted earnings from continuing operations was $3.2 million, or $0.11 per diluted share, up from $1.4 million, or $0.05 per diluted share, in the prior year quarter.

Outlook

The Company raised its full year 2016 outlook for net sales to $132.2 to $134.3 million and adjusted EBITDA to $21.9 to $22.6 million.

The Company expects third quarter 2016 net sales of $33.9 to $34.9 million and adjusted EBITDA of $5.9 to $6.3 million.

Conference Call and Webcast

The Company will host a conference call to discuss these matters at 4:30 p.m. ET today, August 2, 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 August 16, 2016.  In addition, for the live broadcast 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 North America's leading single source provider of multi-gallon purified bottled water, self-service refill water and water dispensers sold through major retailers throughout the United States and Canada.  For more information and to learn more about Primo Water, please visit our website 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 9, 2016 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 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 from continuing operations before depreciation and amortization; interest expense, net; non-cash, stock-based compensation expense; non-recurring costs; and loss on disposal of property and equipment and other.   Pro forma net income from continuing operations is defined as income from continuing operations less non-cash stock-based compensation expense, non-recurring costs and loss on disposal of property and equipment.   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 Six months ended 
   June 30, June 30, 
    2016  2015   2016  2015  
         
 Net sales $  34,385 $  32,399  $  66,681 $  61,612  
 Operating costs and expenses:       
 Cost of sales    23,968    24,205     46,915    45,761  
 Selling, general and administrative expenses    4,778    4,345     9,807    9,010  
 Non-recurring costs    232    34     438    56  
 Depreciation and amortization    2,421    2,468     4,829    5,053  
 Loss on disposal of property and equipment    219    86     412    151  
 Total operating costs and expenses    31,618    31,138     62,401    60,031  
 Income from operations    2,767    1,261     4,280    1,581  
 Interest expense, net    489    504     959    1,023  
 Income from continuing operations     2,278    757     3,321    558  
 Loss from discontinued operations    (13)   (31)    (25)   (69) 
 Net income  $  2,265 $  726  $  3,296 $  489  
         
 Basic earnings per common share:       
 Income from continuing operations $  0.08 $  0.03  $  0.12 $  0.02  
 Loss from discontinued operations    (0.00)   (0.00)    (0.00)   (0.00) 
 Net income $  0.08 $  0.03  $  0.12 $  0.02  
         
 Diluted earnings per common share:       
 Income from continuing operations $  0.08 $  0.03  $  0.11 $  0.02  
 Loss from discontinued operations    (0.00)   (0.00)    (0.00)   (0.00) 
 Net income $  0.08 $  0.03  $  0.11 $  0.02  
         
 Weighted average shares used in computing earnings per share:         
 Basic    28,826    24,990     27,644    24,837  
 Diluted    30,101    26,549     29,656    26,391  
         
         
         
 Primo Water Corporation 
 Segment Information 
 (Unaudited; in thousands) 
         
   Three months ended Six months ended 
   June 30, June 30, 
    2016  2015   2016  2015  
 Segment net sales       
 Water $  24,281 $  22,112  $  46,659 $  42,770  
 Dispensers    10,104    10,287     20,022    18,842  
 Total net sales $  34,385 $  32,399  $  66,681 $  61,612  
         
 Segment income from operations       
 Water    8,715    6,695     16,445    13,122  
 Dispensers    785    593     1,483    924  
 Corporate    (3,861)   (3,439)    (7,969)   (7,205) 
 Non-recurring costs    (232)   (34)    (438)   (56) 
 Depreciation and amortization    (2,421)   (2,468)    (4,829)   (5,053) 
 Loss on disposal of property and equipment    (219)   (86)    (412)   (151) 
   $  2,767 $  1,261  $  4,280 $  1,581  
         

 

       
 Primo Water Corporation 
 Condensed Consolidated Balance Sheets 
 (in thousands, except par value data) 
       
   June 30, December 31, 
    2016   2015  
   (unaudited)   
 ASSETS     
 Current assets:     
 Cash and cash equivalents $  1,557  $  1,826  
 Accounts receivable, net    15,869     11,098  
 Inventories    8,409     7,092  
 Prepaid expenses and other current assets    872     529  
 Total current assets    26,707     20,545  
       
 Bottles, net    3,915     3,688  
 Property and equipment, net    34,234     31,997  
 Intangible assets, net    7,819     8,074  
 Other assets    183     183  
 Total assets $  72,858  $  64,487  
       
 LIABILITIES AND STOCKHOLDERS' EQUITY     
 Current liabilities:     
 Accounts payable $  17,328  $  11,994  
 Accrued expenses and other current liabilities    2,924     3,748  
 Current portion of long-term debt and capital leases    4,262     172  
 Total current liabilities    24,514     15,914  
       
 Long-term debt and capital leases, net of current portion      
   and debt issuance costs    16,012     19,903  
 Liabilities of disposal group, net of current portion, and      
   other long-term liabilities    2,513     2,535  
 Total liabilities    43,039     38,352  
       
 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,     
   25,994 and 25,810 shares issued and outstanding      
   at June 30, 2016 and December 31, 2015, respectively    26     26  
 Additional paid-in capital    281,677     281,476  
 Common stock warrants    7,492     7,492  
 Accumulated deficit    (258,151)    (261,447) 
 Accumulated other comprehensive loss    (1,225)    (1,412) 
 Total stockholders' equity     29,819     26,135  
 Total liabilities and stockholders' equity $  72,858  $  64,487  
       

 

  
 Primo Water Corporation
 Consolidated Statements of Cash Flows
 (Unaudited; in thousands)
     
 Six Months Ended June 30, 
   2016   2015  
 Cash flows from operating activities:    
 Net income$  3,296  $  489  
 Less: Loss from discontinued operations   (25)    (69) 
 Income from continuing operations   3,321     558  
 Adjustments to reconcile net income to net cash    
   provided by operating activities:    
 Depreciation and amortization   4,829     5,053  
 Loss on disposal of property and equipment   412     151  
 Stock-based compensation expense   1,046     1,175  
 Non-cash interest expense   55     55  
 Realized foreign currency exchange loss and other, net   (172)    152  
 Changes in operating assets and liabilities:    
 Accounts receivable   (4,708)    (1,380) 
 Inventories   (1,290)    (1,903) 
 Prepaid expenses and other assets   (337)    340  
 Accounts payable   5,305     4,554  
 Accrued expenses and other liabilities   (675)    (238) 
 Net cash provided by operating activities   7,786     8,517  
      
 Cash flows from investing activities:    
 Purchases of property and equipment   (5,423)    (2,682) 
 Purchases of bottles, net of disposals   (1,329)    (1,361) 
 Proceeds from the sale of property and equipment   8     14  
 Additions to and acquisitions of intangible assets   (36)    (4) 
 Net cash used in investing activities   (6,780)    (4,033) 
      
 Cash flows from financing activities:    
 Borrowings under Revolving Credit Facility   20,900     13,100  
 Payments under Revolving Credit Facility   (20,900)    (15,100) 
 Note payable and capital lease payments   (143)    (69) 
 Stock option and employee stock purchase activity, net   (1,177)    39  
 Net cash used in financing activities   (1,320)    (2,030) 
      
 Cash used in operating activities of discontinued operations   (52)    (92) 
      
 Effect of exchange rate changes on cash and cash equivalents     97     (54) 
 Net (decrease) increase in cash and cash equivalents   (269)    2,308  
 Cash and cash equivalents, beginning of year   1,826     495  
 Cash and cash equivalents, end of period$  1,557  $  2,803  
      

 

           
 Primo Water Corporation 
 Non-GAAP EBITDA and Adjusted EBITDA Reconciliation 
 (Unaudited; in thousands) 
           
         
   Three months ended June 30, Six months ended June 30, 
    2016   2015   2016   2015  
 Income from continuing operations $  2,278  $  757  $  3,321  $  558  
 Depreciation and amortization    2,421     2,468     4,829     5,053  
 Interest expense, net    489     504     959     1,023  
 EBITDA    5,188     3,729     9,109     6,634  
 Non-cash, stock-based compensation expense    486     540     1,046     1,175  
 Non-recurring costs    232     34     438     56  
 Loss on disposal of property and equipment and other      257     129     491     231  
 Adjusted EBITDA $  6,163  $  4,432  $  11,084  $  8,096  
           

 

         
 Primo Water Corporation 
 Pro Forma Net Income From Continuing Operations Reconciliation 
 (Unaudited; in thousands, except per share amounts) 
         
   Three months ended Six months ended 
   June 30, June 30, 
    2016  2015   2016  2015  
         
 Income from continuing operations $  2,278 $  757  $  3,321 $  558  
 Non-cash, stock-based compensation expense    486    540     1,046    1,175  
 Non-recurring costs    232    34     438    56  
 Loss on disposal of property and equipment    219    86     412    151  
 Pro forma net income from continuing operations $  3,215 $  1,417  $  5,217 $  1,940  
         
 Pro forma earnings from continuing operations per share:       
 Basic $  0.11 $  0.06  $  0.19 $  0.08  
 Diluted $  0.11 $  0.05  $  0.18 $  0.07  
         
 Weighted average shares used in computing pro forma earnings per share:         
 Basic    28,826    24,990     27,644    24,837  
 Diluted    30,101    26,549     29,656    26,391  
         


Contact:
Primo Water Corporation
Mark Castaneda, Chief Financial Officer
(336) 331-4000

ICR Inc.
Katie Turner
Hunter Wells
(646) 277-1228