Primo Water Corporation (PRMW)

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Primo Water Corporation (PRMW)

Q4 2013 Earnings Conference Call

March 11, 2014 16:30 ET


Billy Prim - Chairman and Chief Executive Officer

Mark Castaneda - Chief Financial Officer

Matt Sheehan - President and Chief Operating Officer


Eric Wagoner - Source Capital

Robert Strauss - Gilford Securities



Good day, ladies and gentlemen and thank you for standing by and welcome to the Primo Water Corporation’s Fourth Quarter 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, today’s conference maybe recorded.

It’s now my pleasure to turn the floor over to (Hunter Walles). Please go ahead.

Unidentified Company Speaker

Good afternoon, and welcome to Primo Water’s fourth quarter and full year 2013 earnings conference call.

On the call today with me are Billy Prim, Chairman and Chief Executive Officer; Mark Castaneda, Chief Financial Officer; and Matt Sheehan, President and 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 have 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 within the meaning of the applicable securities laws and regulations regarding such statements. Many factors could 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 included in the press release issued this afternoon and in all documents that Primo Water files with the SEC.

And now, I’d like to turn the call over to Primo Water’s CEO, Billy Prim.

Billy Prim - Chairman and Chief Executive Officer

Thank you, Hunter and thank you for joining us on the call. I am going to start out with a few comments on our overall business and then turn the call over to Matt Sheehan, who will go a little deeper into our operational initiatives. Mark Castaneda will then give you our fourth quarter and fiscal year end results and the outlook for 2014.

We are pleased with our fourth quarter results as we continued to experience positive momentum across our business. The fourth quarter marked the eighth seventh consecutive quarter of adjusted EBITDA growth, which was a 70% increase to $1.9 million. For the full year 2013, we had adjusted EBITDA of $9.1 million, an increase of 66% over the prior year. The strong adjusted EBITDA was due to improved gross margins and operating efficiencies that enabled us to generate $6.6 million in cash flow from operations in 2013.

Our team has continued to improve the operational fundamentals of our core business. As we go into 2014, our company is well-positioned to execute our long-term growth strategies. These strategies are first to continue to scale through incremental revenue and operational improvements; second, to increase household penetration of our innovative water dispensers; third, to grow our points of refill and distribution to 50,000 to 60,000 locations; fourth, to refinance our debt and lower cost of capital; and lastly, to continue to drive the operational efficiencies of this business model. We believe that we can make improvements in all the five of these areas during 2014.

We believe the strategic alliance with DS Waters will bring lower distribution cost and add new locations in revenue. We expect the DS Waters transition will happen over a two-year period and we will continue to update you on our progress. We expect the CORT and Telemetry programs will continue to improve gross margins in our refill business. We also believe we will continue to drive more dispenser households, which in turn leads to more Primo Water users. As we continued to grow our adjusted EBITDA, we believe we can refinance our debt with lower cost of capital. All of these combined should drive earnings.

The water industry trends continued to be very favorable. People are sending traditional soda and looking for healthier lower calorie options and we have an offering that can fit most households. We do not see this trend slowing down. In fact, we believe it is accelerating. You can see that in our same-store unit sales which were up more than 10% in the U.S. Exchange business in 2013 compared to 2012. So to recap, we are pleased with the business momentum and believe we are better positioned than ever before with the right team and the right operational strategies and products to fully capitalize on the Primo business model.

With that brief overview, I will turn the call over to Matt Sheehan, our President and Chief Operating Officer.

Matt Sheehan - President and Chief Operating Officer

Thank you, Billy. Keeping our five long-term strategies in mind our scale, household penetration, growth, refinancing and efficiency, we are both proud and excited about our business. We are proud of what our team has done in 2013 to strengthen the very core of this business, sticking to our plan and achieving our targets. From that work, we are excited about our future as we turn to grow in 2014 and beyond. Today, I will first recap 2013 and then layout our approach for 2014.

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