Primo Water Corporation (PRMW)

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Primo Water (PRMW)

Q1 2013 Earnings Call

May 14, 2013 4:30 pm ET


Billy D. Prim - Founder, Chairman, Chief Executive Officer and President

Matt Sheehan - Chief Operating Officer

Mark Castaneda - Chief Financial Officer, Secretary and Assistant Treasurer



Good day, ladies and gentlemen, and welcome to the Primo Water Corporation First Quarter 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Hunter Welles. Ma'am, you may begin.

Unknown Executive

Good afternoon, and welcome to Primo Water's first quarter of 2013 earnings conference call. On the call with me today are Billy Prim, President and Chief Executive Officer; and Mark Castaneda, Chief Financial Officer; and Matt Sheehan, Chief Operating Officer.

By now, everyone should have access to the release that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you've not received today's press release, it is available on the Investor Relations portion of Primo Water's website at This call is being webcast and a replay will be available on the company's website.

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The forward-looking statements should be considered with the meaning of the applicable securities laws and regulations regarding such statements.

Many factors can cause actual results to differ materially from those forward-looking statements, and we can give no assurance of their accuracy and Primo Water assumes no obligation to update them. We encourage participants to carefully read the section on forward-looking statements incorporated in the press release issued this afternoon and in all the documents that Primo Water filed with the SEC.

And now I would like to turn the call over to Primo Water's President and CEO, Billy Prim.

Billy D. Prim

Thank you, Hunter, and thank you for joining us in the call. I'm going to start out with a few comments on where we are in our core business and then turn the call over to Matt Sheehan, who will go a little deeper into our initiatives to drive operational excellence. Then Mark Castaneda will give you a first quarter 2013 financial recap and our outlook for the remainder of 2013.

We are off to a solid start in 2013 and pleased to report our fifth consecutive quarter of positive adjusted EBITDA as we exceeded our first quarter expectations. We continue to see the benefit from our strategic decision to discontinue the Flavorstation Sparkling business and focus on our core Water and Dispenser businesses.

In the first quarter, total sales were up 12.8% to $22.3 million and cash flow from operations increased to $4 million with $2.6 million in free cash flow after CapEx expenses, both record results for the company.

We are pleased with our consistent adjusted EBITDA performance, which increased 57% to $1.9 million from Q1 of last year. We will continue to focus on operating efficiencies across our core businesses to increase adjusted EBITDA throughout the remainder of the year. Our improvement in this metric will help us refinance our debt and lead to lower-cost capital long term.

Focusing on our first quarter sales results in a little more detail, dispensers were the real star of the quarter. Dispenser sales were up 54% to $7.4 million. We believe this is exciting growth as we increased the number of our dispensers and households across the nation, it will lead to reoccurring water sales in the future.

As for water, the bright spot was the U.S. Exchange business, which had the 12% same-store sale unit growth in the first quarter. Sales growth in the water segment was partially offset by both a mix change and our U.S. Exchange business, as well as softness in empty bottle sales in our Refill business. When combining these items, the Water sales were virtually flat.

In closing, we exceeded our expectations for sales and operating results across-the-board. We did this in a seasonally weak quarter that also included unfavorable weather conditions throughout the U.S. when compared to the prior year.

Regardless, we believe we are off to a great start, on track to meet our guidance and ready for the upcoming summer season.

With that brief overview, I'll turn it over to Matt Sheehan, our Chief Operating Officer.

Matt Sheehan

Thank you, Billy. I'd like to provide an update on our foundational execution plan we outlined for you last quarter.

We continue to strengthen our operational focus to support our future growth initiatives, all while operating on an efficient, productive and profitable business model. That said, our team continued to focus on 3 core elements: one is consumer and retailer focus; two, simplicity; three, analytics. We are pleased with the progress in these core initiatives to date.

On consumer and retailer focus, we're making improvements across many areas of the business. First, to better understand our reputation, we are beginning to survey our consumers and retailers. We believe this information will help us better understand the consumer and retailer needs and drive the business according to these insights. Keeping with the consumer, we continue to identify and execute our brand standards at retail, along with attachment strategies, that increase the percentage of people who buy our dispensers, as well as our water.

Moving to simplicity, we are increasingly focused on our core business segments, finding areas for greater efficiencies and refining some of our operational processes.

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