Primo Water reports Q1 net loss of US$3.8M, compared to year-ago loss of US$2.6M; net sales rise 5.4% to US$23.5M
Nevin Barich
WINSTON-SALEM, North Carolina
,
May 7, 2014
(press release)
–
Primo Water Corporation (PRMW), a leading provider of multi-gallon purified bottled water, self-service refill water and water dispensers, today announced financial results for the first quarter ended March 31, 2014.
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First Quarter Business Highlights:
Adjusted EBITDA increased 41.8% to $2.7 million compared to $1.9 million
Water segment net sales increased 6.6% to $15.9 million driven by 12.1% U.S. Exchange same-store unit growth
Water segment gross margin percentage improved to 35.6% from 32.3% driven by lower supply chain costs
(All comparisons above are compared to the first quarter of 2013.)
"We are pleased with our first quarter results with strong same-store sales growth and gross margin expansion driven by lower supply chain costs in our U.S. Exchange business," commented Billy D. Prim, Primo Water's Chief Executive Officer. "We continue to see strength in the trend of consumers adding water dispensers to their homes and choosing to purchase Primo Water at our customers' retail locations. We believe these trends will lead to continued top-line growth which should drive even stronger adjusted EBITDA improvements as we leverage our cost structure."
First Quarter Results
Net sales increased 5.4% to $23.5 million for the first quarter from $22.3 million for the first quarter of 2013. The improvement in net sales was due to increased sales for Water and Dispensers of $1.0 million and $0.2 million, respectively.
Water segment net sales increased 6.6% to $15.9 million for the first quarter compared to $14.9 million for the first 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 10.0% increase for U.S. Exchange sales driven by same-store unit growth of 12.1% for U.S. Exchange compared to the first quarter of 2013. In addition, Refill net sales improved 3.0% due primarily to strong bottle sales.
The increase in Dispenser segment net sales is due primarily to the timing of shipments to major retailers as they replenished inventory associated with consumer sell-thru. Dispenser unit sell-thru to end consumers increased 3.9% to approximately 112,000 for the first quarter of 2014.
Gross margin percentage increased to 26.3% for the first quarter from 23.7% for the first quarter of 2013 primarily due to the 330 basis point improvement in Water gross margin percentage, driven by the higher U.S. Exchange gross margin resulting from the strategic alliance agreement (the "DS Waters Agreement") with DS Waters of America, Inc. ("DS Waters"). Dispenser gross margin percentage also improved primarily due to a shift in sales mix to higher margin dispenser models.
Selling, general and administrative ("SG&A") expenses increased 3.6% to $4.0 million for the first quarter of 2014 from $3.8 million for the first quarter of 2013. As a percentage of net sales, however, SG&A decreased to 16.9% for the first quarter of 2014 from 17.2% for the first quarter of 2013.
Adjusted EBITDA increased 41.8% to $2.7 million from $1.9 million for the first quarter of 2013 driven by the net sales and gross margin improvements previously mentioned. The U.S. GAAP net loss from continuing operations for the first quarter of 2014 was ($3.6) million or ($0.15) per share, compared to ($2.4) million or ($0.10) per share for the first quarter of the prior year, due primarily to $1.8 million in non-recurring costs associated with the DS Waters Agreement, including a $0.6 million non-cash expense related to the common stock warrants issued to DS Waters.
Update on Strategic Alliance Agreement with DS Waters
As announced in November 2013, Primo has entered into an agreement with DS Waters, one of the nation's leading operators in the Home and Office Beverage Delivery market. Under the DS Waters Agreement, the responsibility for DS Waters' current five-gallon retail exchange customers, including account management, billing and collections will transition to Primo.
Over time DS Waters will become the primary bottling and distribution partner in the U.S. for Primo's Exchange services. Activities under the DS Waters Agreement are being phased in on a region-by-region basis. The transition of bottling and distribution responsibilities to DS Waters began on January 1, 2014 and is expected to be completed by December 31, 2015.
Guidance Increased
The Company reiterated its full year 2014 guidance for net sales of $98.0 to $102.0 million and increased its full year 2014 guidance for adjusted EBITDA of $10.9 to $11.4 million compared to its prior guidance of $10.6 to $11.1 million.
The Company expects second quarter 2014 net sales of $24.5 to $25.5 million and second quarter 2014 adjusted EBITDA of $2.7 to $2.9 million.
Conference Call and Webcast
The Company will host a conference call to discuss these matters at 4:30 p.m. ET today, May 7, 2014. Participants from the Company will be Billy D. Prim, Chief Executive Officer, Mark Castaneda, Chief Financial Officer, and Matt Sheehan, President and 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 21, 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 (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.
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